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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q/A

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  
|   |  | For the quarterly period ended March 31,
    2004                                           
|  
|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 200
    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 Exchange
Act).     Yes o          No þ

As
of May 14, 2004, there were 4,642,553 shares of common
stock of T REIT, Inc. outstanding.



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T REIT, INC.

FORM 10-Q/A

For the Quarterly Period Ended March 31,
2004


INDEX

|                                 |  |                                                                                                                               |    |      |    | 
|-------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                 |  |                                                                                                                               |    | Page
|                                 |  |                                                                                                                               |    |     
|PART I FINANCIAL
    INFORMATION
|Item 1.                          |  | Financial Statements                                                                                                          |    |      | 2  | 
|                                 |  | Condensed Consolidated
    Balance Sheets as of March 31, 2004 and December 31,
    2003 (Unaudited)                          |    |      | 3  | 
|                                 |  | Condensed Consolidated
    Statements of Operations for the three month periods ended
    March 31, 2004 and 2003 (Unaudited) |    |      | 4  | 
|                                 |  | Condensed Consolidated
    Statement of Shareholders Equity for the three month
    period ended March 31, 2004 (Unaudited)  |    |      | 5  | 
|                                 |  | Condensed Consolidated
    Statements of Cash Flows for the three month periods ended
    March 31, 2004 and 2003 (Unaudited) |    |      | 6  | 
|                                 |  | Notes to Condensed
    Consolidated Financial Statements                                                                      |    |      | 7  | 
|Item 2.                          |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                                     |    |      | 23 | 
|Item 3.                          |  | Quantitative and Qualitative
    Disclosures About Market Risk                                                                |    |      | 30 | 
|Item 4.                          |  | Controls and Procedures                                                                                                       |    |      | 31 | 
|                                
|PART II OTHER
    INFORMATION   
|Item 1.                          |  | Legal Proceedings                                                                                                             |    |      | 31 | 
|Item 2.                          |  | Changes in Securities and
    Use of Proceeds                                                                                 |    |      | 32 | 
|Item 3.                          |  | Defaults Upon Senior
    Securities                                                                                           |    |      | 32 | 
|Item 4.                          |  | Submission of Matters to a
    Vote of Security Holders                                                                       |    |      | 32 | 
|Item 5.                          |  | Other Information                                                                                                             |    |      | 32 | 
|Item 6.                          |  | Exhibits and Reports on
    Form 8-K                                                                                          |    |      | 32 | 
|Signatures                       |  |                                                                                                                               | 35 |     
|EXHIBIT 31.1                    
|EXHIBIT 31.2                    
|EXHIBIT 32.1                    
|EXHIBIT 32.2                    



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EXPLANATORY NOTE

This amendment on Form 10-Q/A is being filed
to reflect the restatement of the Registrants condensed
consolidated financial statements as of and for the three month
period ended March 31, 2004. See Managements
Discussion and Analysis of Financial Condition and Results of
Operations, and the Condensed Consolidated Financial Statements,
including Note 16 to the Condensed Consolidated
Financial Statements for the impact of the restatement on
each period presented.

This amendment to the Companys Quarterly
Report on Form 10-Q of the Company for the quarterly period
ended March 31, 2004 filed with the Securities and Exchange
Commission on May 17, 2004 amends and restates only those
items of the previously filed Form 10-Q which have been
affected by the restatement, although all items of the
Form 10-Q are reproduced in this amendment. In order to
preserve the nature and character of the disclosures set forth
in such items as originally filed, no attempt has been made in
this amendment to modify or update such disclosures except as
required to reflect the effects of the restatement. For
additional information regarding the restatement, see
Note 16 to the Condensed Consolidated Financial
Statements included in Part I, Item 1.




PART I  FINANCIAL
INFORMATION






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

The accompanying March 31, 2004 and 2003
interim financial statements of the Company required to be filed
with this Form 10-Q/A Quarterly Report were prepared by
management without audit and commence on the following page,
together with the related notes to the condensed consolidated
financial statements. In the opinion of management, these
interim financial statements present fairly the financial
condition, results of operations and cash flows of the Company,
but should be read in conjunction with the consolidated
financial statements of the Company for the year ended
December 31, 2003 included in our Annual Report on
Form 10-K/A previously filed with the Securities and
Exchange Commission.

2



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T REIT, INC.



CONDENSED CONSOLIDATED BALANCE
SHEETS


(Unaudited)


|                                                                                                                                                                      |                                           |               |            |              |  |   |            |            | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------------- | ---------- | ------------ |  | - | ---------- | ---------- | 
|                                                                                                                                                                      |                                           | March 31,     |            | December 31,
|                                                                                                                                                                      |                                           | 2004          |            | 2003        
|                                                                                                                                                                      |                                           |               |            |             
|                                                                                                                                                                      |                                           | (As restated, |            |             
|                                                                                                                                                                      |                                           | see Note 16)  |            |             
|ASSETS                                                                                                                                                               
|Real estate investments:                                                                                                                                              |                                           |               |            |              |  |   |            |           
|                                                                                                                                                                      | Operating properties, net                 |               | $          | 26,848,000   |  |   | $          | 15,747,000 | 
|                                                                                                                                                                      | Investments in unconsolidated real estate |               |            | 19,189,000   |  |   |            | 19,331,000 | 
|                                                                                                                                                                      |                                           |               |            |              |  |   |            |           
|                                                                                                                                                                      |                                           |               | 46,037,000 |              |  |   | 35,078,000 |           
|Cash and cash equivalents                                                                                                                                             |                                           |               | 2,115,000  |              |  |   | 12,189,000 |           
|Investment in marketable securities                                                                                                                                   |                                           |               | 181,000    |              |  |   |           |           
|Accounts receivable, net                                                                                                                                              |                                           |               | 191,000    |              |  |   | 37,000     |           
|Accounts receivable from related parties                                                                                                                              |                                           |               | 494,000    |              |  |   | 538,000    |           
|Real estate deposits                                                                                                                                                  |                                           |               | 126,000    |              |  |   | 11,000     |           
|Other assets, net                                                                                                                                                     |                                           |               | 3,216,000  |              |  |   | 870,000    |           
|Note receivable                                                                                                                                                       |                                           |               | 9,345,000  |              |  |   | 647,000    |           
|                                                                                                                                                                      |                                           |               |            |              |  |   |            |           
|Total assets                                                                                                                                                          |                                           | $             | 61,705,000 |              |  | $ | 49,370,000 |           
|                                                                                                                                                                      |                                           |               |            |              |  |   |            |           
|LIABILITIES AND STOCKHOLDERS
    EQUITY                                                                                                                             
|Accounts payable and accrued liabilities                                                                                                                              |                                           | $             | 986,000    |              |  | $ | 1,635,000  |           
|Accounts payable due to related parties                                                                                                                               |                                           |               | 14,000     |              |  |   |           |           
|Distributions payable                                                                                                                                                 |                                           |               | 319,000    |              |  |   | 318,000    |           
|Security deposits and prepaid rent                                                                                                                                    |                                           |               | 421,000    |              |  |   | 59,000     |           
|Notes payable                                                                                                                                                         |                                           |               | 19,332,000 |              |  |   | 9,250,000  |           
|                                                                                                                                                                      |                                           |               |            |              |  |   |            |           
|                                                                                                                                                                      |                                           |               | 21,072,000 |              |  |   | 11,262,000 |           
|Commitments and contingencies                                                                                                                                         |                                           |               |            |              |  |   |            |           
|Minority interests                                                                                                                                                    |                                           |               | 2,139,000  |              |  |   |           |           
|Shareholders equity:                                                                                                                                                 |                                           |               |            |              |  |   |            |           
|Common stock, $.01 par value;
    10,000,000 shares authorized; 4,720,000 shares issued,
    4,646,000 shares outstanding at March 31, 2004 and
    December 31, 2003 |                                           |               | 47,000     |              |  |   | 47,000     |           
|Additional paid-in capital                                                                                                                                            |                                           |               | 41,265,000 |              |  |   | 41,265,000 |           
|Treasury stock, 74,000 shares at
    March 31, 2004 and December 31, 2003                                                                                             |                                           |               | (675,000   | )            |  |   | (675,000   | )         
|Distributions in excess of earnings                                                                                                                                   |                                           |               | (2,143,000 | )            |  |   | (2,529,000 | )         
|                                                                                                                                                                      |                                           |               |            |              |  |   |            |           
|Total shareholders equity                                                                                                                                            |                                           |               | 38,494,000 |              |  |   | 38,108,000 |           
|                                                                                                                                                                      |                                           |               |            |              |  |   |            |           
|Total liabilities and shareholders equity                                                                                                                            |                                           | $             | 61,705,000 |              |  | $ | 49,370,000 |           
|                                                                                                                                                                      |                                           |               |            |              |  |   |            |           

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

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T REIT, INC.



CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


(Unaudited)


|                                                                      |                                                                  |                            |           |         |  |   |           |         | 
|--------------------------------------------------------------------- | ---------------------------------------------------------------- | -------------------------- | --------- | ------- |  | - | --------- | ------- | 
|                                                                      |                                                                  |                           
|                                                                      |                                                                  | Three Months Ended        
|                                                                      |                                                                  | March 31,                 
|                                                                      |                                                                  |                           
|                                                                      |                                                                  | 2004                       |           | 2003   
|                                                                      |                                                                  |                            |           |        
|                                                                      |                                                                  |                           
|                                                                      |                                                                  | (As restated, see Note 16)
|Revenues                                                              |                                                                  |                            |           |         |  |   |           |        
|                                                                      | Rental income                                                    |                            | $         | 748,000 |  |   | $         | 234,000 | 
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|                                                                      |                                                                  |                            | 748,000   |         |  |   | 234,000   |        
|Expenses                                                              |                                                                  |                            |           |         |  |   |           |        
|                                                                      | Rental expenses                                                  |                            |           | 143,000 |  |   |           | 63,000  | 
|                                                                      | General and administrative                                       |                            |           | 93,000  |  |   |           | 112,000 | 
|                                                                      | Depreciation and amortization                                    |                            |           | 411,000 |  |   |           | 37,000  | 
|                                                                      | Interest (including amortization of deferred
    financing fees) |                            |           | 74,000  |  |   |           | 62,000  | 
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|                                                                      |                                                                  |                            | 721,000   |         |  |   | 274,000   |        
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|Income (loss) before other income and
    discontinued operations     |                                                                  |                            | 27,000    |         |  |   | (40,000   | )      
|Other income                                                          |                                                                  |                            |           |         |  |   |           |        
|                                                                      | Interest income                                                  |                            |           | 40,000  |  |   |           | 24,000  | 
|                                                                      | Dividend income                                                  |                            |           | 40,000  |  |   |           |        | 
|                                                                      | Gain on sale of marketable securities                            |                            |           | 47,000  |  |   |           |        | 
|                                                                      | Equity in earnings of unconsolidated real estate                 |                            |           | 265,000 |  |   |           | 558,000 | 
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|Income from continuing operations                                     |                                                                  |                            | 419,000   |         |  |   | 542,000   |        
|Discontinued operations:                                              |                                                                  |                            |           |         |  |   |           |        
|Gain (loss) on sale of real estate investments                        |                                                                  |                            | 822,000   |         |  |   | (191,000  | )      
|Income from discontinued operations 
    property held for sale, net |                                                                  |                            | 105,000   |         |  |   | 221,000   |        
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|                                                                      |                                                                  |                            | 927,000   |         |  |   | 30,000    |        
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|Income before minority interests                                      |                                                                  |                            | 1,346,000 |         |  |   | 572,000   |        
|Minority interests                                                    |                                                                  |                            | 5,000     |         |  |   |          |        
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|Net income                                                            |                                                                  | $                          | 1,341,000 |         |  | $ | 572,000   |        
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|Net income per common share:                                          |                                                                  |                            |           |         |  |   |           |        
|Basic and diluted:                                                    |                                                                  |                            |           |         |  |   |           |        
|                                                                      | Continuing operations                                            |                            | $         | 0.08    |  |   | $         | 0.11    | 
|                                                                      | Discontinued operations                                          |                            | $         | 0.20    |  |   | $         | 0.01    | 
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|Total net income per common share 
    basic and diluted             |                                                                  | $                          | 0.28      |         |  | $ | 0.12      |        
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|Weighted average common shares
    outstanding  basic and diluted    |                                                                  |                            | 4,646,000 |         |  |   | 4,696,000 |        
|                                                                      |                                                                  |                            |           |         |  |   |           |        
|Dividends declared per share                                          |                                                                  | $                          | 0.21      |         |  | $ | 0.21      |        
|                                                                      |                                                                  |                            |           |         |  |   |           |        

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

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T REIT, INC.



CONDENSED CONSOLIDATED STATEMENT OF
SHAREHOLDERS EQUITY


For the Three Months Ended March 31,
2004


|                                |  |             |           |            |  |         |        |               |  |              |            |       |  |   |          |   |  |   |            |   |  |   |            |  
|------------------------------- |  | ----------- | --------- | ---------- |  | ------- | ------ | ------------- |  | ------------ | ---------- | ----- |  | - | -------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                |  |            
|                                |  | (Unaudited)
|                                |  |             |           | Additional |  |         |        | Distributions |  |             
|                                |  | Number of   |           | Common     |  | Paid-in |        | Treasury      |  | in Excess of |            |      
|                                |  | Shares      |           | Stock      |  | Capital |        | Stock         |  | Earnings     |            | Total
|                                |  |             |           |            |  |         |        |               |  |              |            |      
|BALANCE  December 31,
    2003 |  |             | 4,646,000 |            |  | $       | 47,000 |               |  | $            | 41,265,000 |       |  | $ | (675,000 | ) |  | $ | (2,529,000 | ) |  | $ | 38,108,000 |  
|Net Income                      |  |             |          |            |  |         |       |               |  |              |           |       |  |   |         |   |  |   | 1,341,000  |   |  |   | 1,341,000  |  
|                                |  |             |           |            |  |         |        |               |  |              |            |       |  |   |          |   |  |   |            |   |  |   |            |  
|Comprehensive Income            |  |             |          |            |  |         |       |               |  |              |           |       |  |   |         |   |  |   |           |   |  |   | 1,341,000  |  
|Distributions                   |  |             |          |            |  |         |       |               |  |              |           |       |  |   |         |   |  |   | (955,000   | ) |  |   | (955,000   | )
|                                |  |             |           |            |  |         |        |               |  |              |            |       |  |   |          |   |  |   |            |   |  |   |            |  
|BALANCE  March 31,
    2004    |  |             | 4,646,000 |            |  | $       | 47,000 |               |  | $            | 41,265,000 |       |  | $ | (675,000 | ) |  | $ | (2,143,000 | ) |  | $ | 38,494,000 |  
|                                |  |             |           |            |  |         |        |               |  |              |            |       |  |   |          |   |  |   |            |   |  |   |            |  

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

5



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T REIT, INC



CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |            |            |  
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | -
|                                                                                               |                                                                                 |                                                        
|                                                                                               |                                                                                 | Three Months Ended                                     
|                                                                                               |                                                                                 | March 31,                                              
|                                                                                               |                                                                                 |                                                        
|                                                                                               |                                                                                 | 2004                                                    |             | 2003      
|                                                                                               |                                                                                 |                                                         |             |           
|                                                                                               |                                                                                 |                                                        
|                                                                                               |                                                                                 | (As restated,                                          
|                                                                                               |                                                                                 | see Note 16)                                           
|CASH FLOWS FROM OPERATING ACTIVITIES                                                           |                                                                                 |                                                         |             |            |            |   |            |           
|Net income                                                                                     |                                                                                 | $                                                       | 1,341,000   |            |            | $ | 572,000    |           
|Adjustments to reconcile net income to net cash
    provided by (used in) operating activities |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               | Distributions in excess of equity in earnings of
    unconsolidated real estate |                                                         |             | 601,000    |            |   |            | (224,000   | )         
|                                                                                               | Gain on sale of real estate investments                                         |                                                         |             | (822,000   | )          |   |            | 191,000    |           
|                                                                                               | (Gain) loss on sale of marketable securities                                    |                                                         |             | (47,000    | )          |   |            |           |           
|                                                                                               | Depreciation and amortization 
    continuing operations                       |                                                         |             | 375,000    |            |   |            | 37,000     |           
|                                                                                               | Depreciation and amortization 
    discontinued operations                     |                                                         |             | 17,000     |            |   |            | 171,000    |           
|                                                                                               | Amortization deferred financing costs and
    intangible assets                 |                                                         |             | 107,000    |            |   |            |           |           
|                                                                                               | Minority interests                                                              |                                                         |             | 5,000      |            |   |            |           |           
|Change in operating assets and liabilities:                                                    |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               | Accounts receivable                                                             |                                                         |             | (154,000   | )          |   |            | 18,000     |           
|                                                                                               | Accounts receivable from related parties                                        |                                                         |             | 715,000    |            |   |            | (79,000    | )         
|                                                                                               | Other assets                                                                    |                                                         |             | 386,000    |            |   |            | (661,000   | )         
|                                                                                               | Accounts payable and accrued liabilities                                        |                                                         |             | (558,000   | )          |   |            | 3,000      |           
|                                                                                               | Security deposits and prepaid rent                                              |                                                         |             | 360,000    |            |   |            | (35,000    | )         
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               |                                                                                 | Net cash provided by (used in) operating
    activities |             |            | 2,326,000  |   |            |            | (7,000     | )
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|CASH FLOWS FROM INVESTING ACTIVITIES                                                           |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               | Purchase of marketable securities                                               |                                                         |             | (2,369,000 | )          |   |            |           |           
|                                                                                               | Purchase of real estate operating properties                                    |                                                         |             | (5,927,000 | )          |   |            | (8,912,000 | )         
|                                                                                               | Purchase of land                                                                |                                                         |             | (1,619,000 | )          |   |            |           |           
|                                                                                               | Purchase of investments in unconsolidated real
    estate                       |                                                         |             |           |            |   |            | (5,025,000 | )         
|                                                                                               | Real estate property improvements                                               |                                                         |             | (39,000    | )          |   |            |           |           
|                                                                                               | Proceeds from disposition of property                                           |                                                         |             | 2,452,000  |            |   |            | 3,843,000  |           
|                                                                                               | Proceeds from sale of marketable securities                                     |                                                         |             | 2,235,000  |            |   |            |           |           
|                                                                                               | Net change in related party receivable/payable                                  |                                                         |             | (1,112,000 | )          |   |            | 2,000      |           
|                                                                                               | Real estate deposits                                                            |                                                         |             | (115,000   | )          |   |            | 3,354,000  |           
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               |                                                                                 | Net cash used in investing activities                   |             |            | (6,494,000 | ) |            |            | (6,738,000 | )
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|CASH FLOWS FROM FINANCING ACTIVITIES                                                           |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               | Borrowings under notes payable                                                  |                                                         |             |           |            |   |            | 5,000,000  |           
|                                                                                               | Principal payments on notes payable                                             |                                                         |             | (4,918,000 | )          |   |            | (2,952,000 | )         
|                                                                                               | Borrowings on line of credit                                                    |                                                         |             | 500,000    |            |   |            |           |           
|                                                                                               | Repayment on line of credit                                                     |                                                         |             | (500,000   | )          |   |            |           |           
|                                                                                               | Distributions paid                                                              |                                                         |             | (954,000   | )          |   |            | (964,000   | )         
|                                                                                               | Distribution to minority shareholders                                           |                                                         |             | (34,000    | )          |   |            |           |           
|                                                                                               | Deferred financing costs                                                        |                                                         |             |           |            |   |            | 123,000    |           
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               |                                                                                 | Net cash (used in) provided by financing
    activities |             |            | (5,906,000 | ) |            |            | 1,207,000  |  
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|NET DECREASE IN CASH AND CASH
    EQUIVALENTS                                                  |                                                                                 |                                                         | (10,074,000 | )          |            |   | (5,538,000 | )         
|CASH AND CASH EQUIVALENTS 
    beginning of period                                            |                                                                                 |                                                         | 12,189,000  |            |            |   | 6,129,000  |           
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|CASH AND CASH EQUIVALENTS  end of
    period                                                  |                                                                                 | $                                                       | 2,115,000   |            |            | $ | 591,000    |           
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
    INFORMATION:                                          |                                                                                 |                                                         |             |            |            |   |            |           
|Cash paid during the period for:                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               | Interest                                                                        |                                                         | $           | 199,000    |            |   | $          | 425,000    |           
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               | Income taxes                                                                    |                                                         | $           | 3,000      |            |   | $          | 13,000     |           
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|SUPPLEMENTAL DISCLOSURE OF NONCASH
    ACTIVITIES:                                             |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               | Note receivable due to sale of property                                         |                                                         | $           | 8,700,000  |            |   | $          |           |           
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           
|                                                                                               | Liabilities incurred with Company acquisition                                   |                                                         | $           | 18,364,000 |            |   | $          |           |           
|                                                                                               |                                                                                 |                                                         |             |            |            |   |            |           

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

6



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##### Table of Contents



T REIT, INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS


March 31, 2004


(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
Code). The Company is in the business of acquiring
existing office, industrial, retail and service properties
located in several states. As of March 31, 2004, the
Company owned real estate investments consisting of two
consolidated properties and interests in eight unconsolidated
properties. The Company acquires properties through its
operating partnership, T REIT, L.P., which is wholly owned by
the Company.

The Company is externally advised by an
affiliated company, 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 dated February 22, 2000, between the
Company and the Advisor is for a one-year term, subject to
successive renewals. (See Note 12).



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

The summary of significant accounting policies
presented below is designed to assist in understanding the
Companys condensed consolidated financial statements. Such
financial statements and accompanying notes are the
representations of Company management, who is responsible for
their integrity and objectivity. These accounting policies
conform to accounting principles generally accepted in the
United States of America (GAAP) in all material
respects, and have been consistently applied in preparing the
accompanying condensed consolidated financial statements.



| |                                                     
| | ----------------------------------------------------
| | Interim Financial Data and Basis of
    Presentation

The accompanying interim financial statements
have been prepared by the Companys management in
accordance with GAAP and in conjunction with the rules and
regulations of the Securities and Exchange Commission,
(SEC). Certain information and footnote disclosures
required for annual financial statements have been condensed or
excluded pursuant to SEC rules and regulations. Accordingly, the
interim financial statements do not include all of the
information and footnotes required by GAAP for complete
financial statements. The accompanying unaudited financial
statements reflect all adjustments, which are, in the
Companys opinion, of a normal recurring nature and
necessary for a fair presentation of the Companys
financial position, results of operations and cash flows for the
interim periods. Interim results of operations are not
necessarily indicative of the results to be expected for the
full year; such results may be less favorable. The accompanying
unaudited condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial
statements and the notes thereto included in the 2003 Annual
Report on Form 10-K/A as filed with the SEC.



| |                            
| | ---------------------------
| | Principles of Consolidation

The accompanying condensed consolidated financial
statements include the accounts of the Company and T REIT,
L.P., its wholly owned subsidiaries and all majority-owned
subsidiaries and affiliates over which the Company has financial
and operating control and variable interest entities
(VIEs) in which the Company has determined it is the
primary beneficiary are included in the condensed consolidated
financial statements. All significant intercompany balances and
transactions have been eliminated in consolidation and all
references to the Company include the Operating Partnership and
its subsidiaries. The Company accounts for all other
unconsolidated real estate investments using the equity method
of accounting. Accordingly, the Companys share of the
earnings of these real estate investments is included in
consolidated net income.

7



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In January 2003, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation
No. 46, Consolidation of Variable Interest
Entities (FIN 46). In December 2003, the
FASB issued FIN 46R, Consolidation of Variable
Interest Entities, which amended FIN 46. FIN 46R
was effective immediately for arrangements entered into after
January 31, 2003, and became effective during the first
quarter of 2004 for all arrangements entered into before
February 1, 2003. FIN 46R requires existing
unconsolidated VIEs to be consolidated by their primary
beneficiaries. The primary beneficiary of a VIE is the party
that absorbs a majority of the entitys expected losses or
receives a majority of its expected residual returns, or both,
as a result of holding variable interests, which are the
ownership interests, contractual interests, or other pecuniary
interests in an entity that change with changes in the fair
value of the entitys net assets excluding variable
interests. Prior to FIN 46R, the Company concluded an
entity in its consolidated financial statements only if it
controlled the entity through voting interests. The adoption and
application of FIN 46 and FIN 46R has not had a
material impact on the Companys condensed consolidated
financial statements.



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



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

Operating properties are held for investment and
carried at cost less accumulated depreciation and amortization.
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.

In the event that the carrying amount of a
property exceeds the sum of the undiscounted cash flows
(excluding interest) that are expected to result from the use
and eventual disposition of the property, the Company would
recognize an impairment loss to the extent the carrying amount
exceeded the fair value of the property. The Company estimates
the fair value using available market information or other
industry valuation techniques such as present value calculations.

Property acquisitions have been accounted for in
accordance with Statement of Financial Accounting Standards
No. 141, Business Combinations. The fair value
of the real estate acquired is allocated to the acquired
tangible assets, consisting of land, building and tenant
improvements, and identified intangible assets and liabilities,
consisting of the value of above-market and below-market leases,
other value of in-place leases and value of tenant
relationships, if any, based in each case on their fair values.

The fair value of the tangible assets of an
acquired property (which includes land, building and tenant
improvements) is determined by valuing the property as if it
were vacant, and the as-if-vacant value is then
allocated to land, building and tenant improvements based on the
Companys determination of the relative fair values of
these assets. Factors considered in performing these analyses
include an estimate of carrying costs during the expected
lease-up periods considering current market conditions and
insurance and other operating expenses during the expected
lease-up periods based on current market demand. The Company
also estimates costs to execute similar leases including leasing
commissions, concessions, legal and other related costs.

In allocating the fair value of the identified
intangible assets and liabilities of an acquired property,
above-market and below-market in-place lease values are recorded
based on the present value (using an interest rate which
reflects the risks associated with the leases acquired) of the
difference between (i) the contractual amounts to be paid
pursuant to the in-place leases and (ii) the Companys
estimate of fair

8



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

market lease rates for the corresponding in-place
leases, measured over a period equal to the remaining
non-cancellable term of the lease. The capitalized above-market
and below-market lease values are amortized into rental income
over the remaining non-cancellable terms of the respective
leases.



| |                       
| | ----------------------
| | 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 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;             
|
| |  | 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.



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

Variable interest investments in real estate that
do not meet consolidation criteria are reflected in the
financial statements using the equity method of accounting.



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

Certificates of deposit and short-term
investments with remaining maturities of three months or less
when acquired are considered cash equivalents.



| |                                     
| | ------------------------------------
| | Investments in Marketable Securities

Marketable securities are carried at fair value
and consist primarily of investments in marketable equity
securities of public REITs. The Company classifies its
marketable securities portfolio as available-for-sale. This
portfolio is continually monitored for differences between the
cost and estimated fair value of each security. If the Company
believes that a decline in the value of an equity security is
temporary in nature, it records the change in other
comprehensive income (loss) in shareholders equity. If the
decline is believed to be other than temporary, the equity
security is written down to the fair value and a realized loss
is recorded on the Companys statement of operations. There
was no realized gain/loss recorded by the Company due to the
write down in value for the periods ended March 31, 2004
and 2003. Managements assessment of a decline in value
includes, among other things, its current judgment as to the
financial position and future prospects of the entity that
issued the security. If that judgment changes in the future, the
Company may ultimately record a realized loss after having
initially concluded that the decline in value was temporary.



| |                                                                
| | ---------------------------------------------------------------
| | Allowance for Uncollectible Billed and
    Unbilled Receivables

Tenant receivables and unbilled deferred rent
receivables are carried net of the allowances for uncollectible
current tenant receivables and unbilled deferred rent.
Managements determination of the

9



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

adequacy of these allowances is based primarily
upon evaluations of historical loss experience, individual
tenant receivables considering the tenants financial
condition, security deposits, letters of credit, lease
guarantees and current economic conditions and other relevant
factors.



| |                             
| | ----------------------------
| | Concentration of Credit Risk

Financial instruments that potentially subject
the Company to a concentration of credit risk are primarily cash
and accounts receivable from tenants. Cash is generally placed
in money market accounts and the amount of credit exposure to
any one party is limited. The Company has cash in financial
institutions which is insured by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000 per
institution. At March 31, 2004 and December 31, 2003,
the Company had cash accounts in excess of FDIC insured limits.
Concentration of credit risk with respect to accounts receivable
from tenants is limited. The Company performs credit evaluations
of prospective tenants, and security deposits are obtained.

As of March 31, 2004, the Company has
investments in five properties located in the State of Texas,
two properties located in the State of California, two
properties located in the State of Nevada and one property
located in the State of Illinois. Accordingly, there is a
geographic concentration of risk subject to fluctuations in the
economy of each of these States. No single tenant accounted for
a significant portion of the Companys rental income.



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

The Company believes that the March 31, 2004
and December 31, 2003 interest rates associated with
mortgages payable approximate the market interest rates for
these types of debt instruments and as such, the carrying amount
of the mortgages payable approximate their fair value.

The carrying amount of cash and cash equivalents,
restricted cash, accounts receivable, notes receivable and
accounts payable and accrued liabilities, approximate fair value
because of the relatively short maturity of these instruments.



| |                                 
| | --------------------------------
| | Derivative Financial Instruments

The Company is exposed to the effect of interest
rate changes in the normal course of business. The Company
mitigates these risks by following established risk management
policies and procedures which include the periodic use of
derivatives. The Companys primary strategy in entering
into derivative contracts is to minimize the volatility that
changes in interest rates could have on its future cash flows.
The Company employs derivative instruments that are designated
as cash flow hedges, including interest rate swaps and caps, to
effectively convert a portion of its variable-rate debt to
fixed-rate debt. The Company does not enter into derivative
instruments for speculative purposes.



| |                     
| | --------------------
| | Real Estate Deposits

Real estate deposits are paid on properties the
Company is evaluating for purchase. Real estate deposits are
capitalized when paid and may become nonrefundable under certain
circumstances. When properties are acquired, the purchase price
is reduced by the amounts of deposits paid by the Company. At
March 31, 2004, all deposits are expected to be applied to
the acquisition of properties in subsequent periods.



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

Financing costs are included in other assets and
consist of loan fees and other loan costs. Loan fees and other
loan costs are amortized over the term of the respective loan.
Amortization of financing costs is included in interest expense.

10



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |              
| | -------------
| | Rental Income

Rental income is recognized when earned under
contractual lease agreements on a straight-line basis over the
associated lease term. Deferred rent receivable is included in
other assets in the condensed consolidated balance sheets.
Tenant reimbursement revenue, which is comprised of additional
amounts recoverable from tenants for common area maintenance
expenses and certain other recoverable expenses is recognized as
revenue in the period in which the related expenses are incurred.



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

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 Internal Revenue Code, to its shareholders, among other
requirements. If the Company fails to qualify as a REIT in any
taxable year, the Company will be subject to Federal income tax
on its taxable income at regular corporate tax rates. Although
the Company qualifies for taxation as a REIT, the Company may be
subject to certain state and local taxes on its income and
property and Federal income and excise taxes on its
undistributed income. The Company believes that it has met all
of the REIT distribution and technical requirements for the
three months ended March 31, 2004 and year ended
December 31, 2003 and was not subject to any federal income
taxes. Management intends to continue to adhere to these
requirements and maintain the Companys REIT status.



| |                     
| | --------------------
| | Comprehensive Income

The Company reports comprehensive income in
accordance with SFAS No. 30, Reporting Comprehensive
Income. This statement defines comprehensive income as the
changes in equity of an enterprise except those resulting from
stockholders transactions. Accordingly, comprehensive
income includes certain changes in equity that are excluded from
net income. There is no difference between net income and
comprehensive income for the periods ended March 31, 2004
and 2003.



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

The Company reports earnings per share pursuant
to Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share.
Basic earnings per share attributable for all periods presented
is computed by dividing the earnings to common shareholders by
the weighted average number of common shares outstanding during
the period. Potentially dilutive securities consist of 101,000
warrants at March 31, 2004 and December 31, 2003 and
485,000 and 165,000 stock options, respectively, which were
accounted for under the treasury stock method. The options and
warrants did not have a dilutive effect on earnings per share.



| |                 
| | ----------------
| | Use of Estimates

The preparation of the Companys financial
statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of
the assets and liabilities as of March 31, 2004 and
December 31, 2003 and the revenues and expenses for each of
the periods. Actual results could differ from those estimates.



| |              
| | -------------
| | Stock Options

The Company follows the disclosure only
provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for
Stock-Based Compensation, as amended by
SFAS No. 148. For employee compensatory stock options
that will eventually vest, compensation expense is recognized
during

11



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 (APB 25), Accounting
for Stock Issued to Employees. 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. Pursuant to SFAS No. 148,
the Company is required to disclose the effects on net income
and per share data as if the Company had elected to use the fair
value approach to account for its stock-based compensation plans.

|                                                       |  |                 |           |                 |  |   |         | 
|------------------------------------------------------ |  | --------------- | --------- | --------------- |  | - | ------- | 
|                                                       |  | Three Months    |           | Three Months   
|                                                       |  | Ended March 31, |           | Ended March 31,
|                                                       |  | 2004            |           | 2003           
|                                                       |  |                 |           |                
|Actual net income                                      |  | $               | 1,341,000 |                 |  | $ | 572,000 | 
|Pro forma compensation expense                         |  |                 | 36,000    |                 |  |   | 17,000  | 
|                                                       |  |                 |           |                 |  |   |         | 
|Pro forma net income                                   |  | $               | 1,305,000 |                 |  | $ | 555,000 | 
|                                                       |  |                 |           |                 |  |   |         | 
|Actual net income per share  basic and
    diluted    |  | $               | 0.28      |                 |  | $ | 0.12    | 
|                                                       |  |                 |           |                 |  |   |         | 
|Pro forma net income per share  basic
    and diluted |  | $               | 0.28      |                 |  | $ | 0.12    | 
|                                                       |  |                 |           |                 |  |   |         | 

This pro forma amount was determined by
estimating the fair value of each option beginning June 28,
2003, when shareholder approval of the option plans was
obtained, at $1.01 per option, using the Black-Scholes
option-pricing model, assuming an 8.25% dividend yield, a 3.83%
risk-free interest rate based on the 10-year U.S. Treasury
Bond, an expected life of 9.0 years, and a 10% expected
volatility rate.



| |         
| | --------
| | Segments

The Company utilizes one segment to report the
results of its financial operations.



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

The Companys real estate investments are
comprised of (i) consolidated properties excluding property
held for sale and (ii) investments in unconsolidated real
estate.



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

The Companys consolidated properties
consist of the following:

|                                  |  |                |            |                   |  |   |            |  
|--------------------------------- |  | -------------- | ---------- | ----------------- |  | - | ---------- | -
|                                  |  | March 31, 2004 |            | December 31, 2003
|                                  |  |                |            |                  
|Buildings and tenant improvements |  | $              | 21,190,000 |                   |  | $ | 15,160,000 |  
|Land                              |  |                | 6,238,000  |                   |  |   | 1,012,000  |  
|                                  |  |                |            |                   |  |   |            |  
|                                  |  |                | 27,428,000 |                   |  |   | 16,172,000 |  
|Less: accumulated depreciation    |  |                | (580,000   | )                 |  |   | (425,000   | )
|                                  |  |                |            |                   |  |   |            |  
|                                  |  | $              | 26,848,000 |                   |  | $ | 15,747,000 |  
|                                  |  |                |            |                   |  |   |            |  

At March 31, 2004, the Companys
consolidated properties consist of:



| |                                                         
| | --------------------------------------------------------
| | AmberOaks, Austin, Texas                                
| | University Heights Business Park,
    San Antonio, Texas

12



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |             
| | ------------
| | Acquisitions



| |                                 
| | --------------------------------
| | AmberOaks LP  Austin,
    Texas

On January 20, 2004, the Company, through
its wholly-owned subsidiary, TREIT  AmberOaks LP,
purchased a 75% undivided tenant-in-common interest in three
buildings at AmberOaks Corporate Center located in Austin, Texas
from an unaffiliated third party. Three unaffiliated entities
purchased the remaining 25% tenant-in-common interests in the
property. The total purchase price for this consolidated real
estate property was $22,965,000. The purchase was financed by
$15,000,000 in borrowings under a secured mortgage with North
Houston Bank. The mortgage requires interest only payments
through February 15, 2006 and, thereafter, principal and
interest payments through the maturity date of January 20,
2007 at the prime rate plus 1.0% subject to a floor of
5.5%. The seller paid a sales commission to Triple Net
Properties Realty, Inc. (Realty), which is solely
owned by Anthony W. Thompson, the Companys Chief Executive
Officer and President until his resignation effective
August 18, 2004 and Chairman of the Board of Directors an
affiliate of the Advisor of $585,000, or 2.5% of the purchase
price. AmberOaks is a three-building Class A office
portfolio totaling 206,000 square feet that is part of an
eight-building complex built during 1999-2001. An affiliate of
the Companys advisor purchased the remaining five
buildings.



| |                                                 
| | ------------------------------------------------
| | Land  Gateway Mall 
    Bismarck, North Dakota

On February 27, 2004, the Company purchased
43 acres of land, including 36 acres of land situated
under Gateway Mall from another unaffiliated third party for a
purchase price including closing costs of $1,631,000. Prior to
the land acquisition, the property had been subject to a ground
lease by Gateway Mall.



| |             
| | ------------
| | Dispositions



| |                                          
| | -----------------------------------------
| | Gateway Mall  Bismarck, North
    Dakota

On March 18, 2004, the Company sold Gateway
Mall to an unaffiliated third party for a purchase price of
$11,600,000. The sale of Gateway Mall included the underlying
36 acres of land. Net sales proceeds included cash of
$2,452,000 and a note receivable in the amount of $8,700,000.
The note is secured by a pledge agreement, bears interest at
6% per annum and is due June 14, 2004. In connection
with the sale of Gateway Mall, the Company repaid a note payable
secured by the property with an outstanding balance of
$4,876,000. At closing, the Company paid a real estate
commission to Triple Net Properties, Realty, Inc.
(Realty), an affiliate of the Advisor, of $339,000,
or 2.9% of the selling price.

13



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                              
| | ---------------------------------------------
| | 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, which are accounted
for under the equity method. The Company had the following
investments in unconsolidated real estate at March 31, 2004:

|                               |  |          |                  |                  |  |                      |       |   |  |   |            | 
|------------------------------ |  | -------- | ---------------- | ---------------- |  | -------------------- | ----- | - |  | - | ---------- | 
|Property                       |  | Location |                  | Percentage Owned |  | Companys Investment
|                               |  |          |                  |                  |  |                     
|Reno Trademark Building        |  |          | Reno, NV         |                  |  |                      | 40.00 | % |  | $ | 1,152,000  | 
|County Center Building         |  |          | Temecula, CA     |                  |  |                      | 16.00 | % |  |   | 438,000    | 
|City Center West A Building  |  |          | Las Vegas, NV    |                  |  |                      | 89.13 | % |  |   | 7,825,000  | 
|Pacific Corporate Park         |  |          | Lake Forest, CA  |                  |  |                      | 22.80 | % |  |   | 1,952,000  | 
|Congress Center                |  |          | Chicago, IL      |                  |  |                      | 10.22 | % |  |   | 4,741,000  | 
|Titan Building and Titan Plaza |  |          | San Antonio, TX  |                  |  |                      | 48.50 | % |  |   | 1,827,000  | 
|Saddleback Financial Center    |  |          | Laguna Hills, CA |                  |  |                      | 25.00 | % |  |   | 798,000    | 
|Enclave Parkway                |  |          | Houston, TX      |                  |  |                      | 3.26  | % |  |   | 456,000    | 
|                               |  |          |                  |                  |  |                      |       |   |  |   |            | 
|                               |  |          |                  |                  |  |                      |       |   |  | $ | 19,189,000 | 
|                               |  |          |                  |                  |  |                      |       |   |  |   |            | 

Condensed combined historical financial
information of the Companys unconsolidated real estate
investments is as follows:

|                               |  |                 |             |                    |  |   |             | 
|------------------------------ |  | --------------- | ----------- | ------------------ |  | - | ----------- | 
|                               |  | As of March 31, |             | As of December 31,
|                               |  | 2004            |             | 2003              
|                               |  |                 |             |                   
|Assets (primarily real estate) |  | $               | 246,485,000 |                    |  | $ | 246,975,000 | 
|                               |  |                 |             |                    |  |   |             | 
|Mortgages notes payable        |  | $               | 159,481,000 |                    |  | $ | 159,962,000 | 
|Other liabilities              |  |                 | 1,965,000   |                    |  |   | 3,713,000   | 
|Equity                         |  |                 | 85,039,000  |                    |  |   | 83,300,000  | 
|                               |  |                 |             |                    |  |   |             | 
|Total liabilities and equity   |  | $               | 246,485,000 |                    |  | $ | 246,975,000 | 
|                               |  |                 |             |                    |  |   |             | 
|Companys share of equity      |  | $               | 19,189,000  |                    |  | $ | 19,331,000  | 
|                               |  |                 |             |                    |  |   |             | 

|                             |  |                            |           |      |  |   |           | 
|---------------------------- |  | -------------------------- | --------- | ---- |  | - | --------- | 
|                             |  |                           
|                             |  | For the Three Months Ended
|                             |  | March 31,                 
|                             |  |                           
|                             |  | 2004                       |           | 2003
|                             |  |                            |           |     
|Revenues                     |  | $                          | 8,159,000 |      |  | $ | 5,343,000 | 
|Rental and other expenses    |  |                            | 6,721,000 |      |  |   | 3,968,000 | 
|                             |  |                            |           |      |  |   |           | 
|Net Income                   |  | $                          | 1,438,000 |      |  | $ | 1,375,000 | 
|                             |  |                            |           |      |  |   |           | 
|Companys equity in earnings |  | $                          | 265,000   |      |  | $ | 558,000   | 
|                             |  |                            |           |      |  |   |           | 



|   |                                           
|-- | ------------------------------------------
|4. | Accounts Receivable from Related
    Party

At March 31, 2004 and December 31,
2003, the Advisor owed the Company $460,000 and $520,000 for
amounts due under an indemnification agreement (See
Note 13).

14



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |             
|-- | ------------
|5. | Other Assets

Other assets as of March 31, 2004 and
December 31, 2003 consisted of the following:

|                                                                                                                                              |                    |           |           |              |  |   |         |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | --------- | --------- | ------------ |  | - | ------- | ------- | 
|                                                                                                                                              |                    | March 31, |           | December 31,
|                                                                                                                                              |                    | 2004      |           | 2003        
|                                                                                                                                              |                    |           |           |             
|Loan impounds and reserves                                                                                                                    |                    | $         | 173,000   |              |  | $ | 574,000 |        
|Deferred rent receivable                                                                                                                      |                    |           | 61,000    |              |  |   | 75,000  |        
|Lease commissions, net of accumulated
    amortization of $211,000 at March 31, 2004 and $9,000 at
    December 31, 2003                      |                    |           | 2,632,000 |              |  |   | 75,000  |        
|Deferred financing costs, net of accumulated
    amortization of $30,000 at March 31, 2004 and $48,000 at
    December 31, 2003, respectively |                    |           | 338,000   |              |  |   | 145,000 |        
|Prepaid expenses                                                                                                                              |                    |           | 12,000    |              |  |   |        |        
|Other assets                                                                                                                                  |                    |           |          |              |  |   | 1,000   |        
|                                                                                                                                              |                    |           |           |              |  |   |         |        
|                                                                                                                                              | Total other assets |           | $         | 3,216,000    |  |   | $       | 870,000 | 
|                                                                                                                                              |                    |           |           |              |  |   |         |        



|   |                 
|-- | ----------------
|6. | Notes Receivable

The Company received a note for $8,700,000 in
conjunction with the sale of Gateway Mall. The note is secured
by a pledge agreement, bears interest at 6% per annum and
is due June 14, 2004. The Company also holds an existing
note with a balance of $645,000 and $647,000 at March 31,
2004 and December 31, 2003, respectively. The note is
secured by a first deed of trust on a real estate property, with
interest at 8.5% per annum. All accrued, unpaid interest
and principal is due December 2006.



|   |               
|-- | --------------
|7. | Line of Credit

On September 3, 2003, the Company entered
into an agreement with Fleet National Bank for a line of credit
in the amount of $1,000,000 which bears interest at Fleets
prime rate plus fifty basis points (4.5% at March 31, 2004
and December 31, 2003). The credit facility matures on
September 2, 2004 and has two one-year extensions. The
credit facility is subject to a fee of 1% to be paid one-third
on each of the effective date, the first anniversary and the
second anniversary. As of March 31, 2004 and
December 31, 2003, respectively, the Company had no amounts
outstanding under the line of credit.



|   |              
|-- | -------------
|8. | Notes Payable

On March 18, 2004, the Company sold Gateway
Mall to an unaffiliated third party. Pursuant to the sale
agreement, the Company repaid a note payable secured by the
property with an outstanding balance of $4,876,000.

In connection with the acquisition of AmberOaks,
an office portfolio located in Austin, Texas, in January 2004,
the Company has a first mortgage in the amount of $15,000,000
from North Houston Bank. The mortgage requires interest only
payments through February 15, 2006 and, thereafter,
principal and interest payments through the maturity date of
January 20, 2007 at the prime rate plus 1.0%, subject to a
floor of 5.5%. The interest rate at March 31, 2004 was 5.5%.

15



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                   
|-- | ------------------
|9. | Minority Interests

Minority interests relate to the 25% interests in
AmberOaks not owned by the Company:



|    |                     
|--- | --------------------
|10. | Shareholders Equity



| |                         
| | ------------------------
| | Share Repurchase Program

Effective May 24, 2001 the Company adopted
the Share Repurchase Plan (the Repurchase Plan),
which provides eligible shareholders with limited liquidity by
enabling them to request the repurchase of their common stock by
the Company subject to various limitations. Repurchases are made
at the sole discretion of the Board of Directors. To be eligible
to request a repurchase, a shareholder must offer for resale at
least 25% of the total number of his shares of common stock and
must have owned the shares for at least one year.

The price paid by the Company per repurchased
share of common stock varies in accordance with the terms of the
Repurchase Plan. Repurchases are effected by the Company on or
about the last day of each calendar quarter. Funding for the
Repurchase Plan comes from the Companys operations. The
Company did not repurchase any shares during the three months
ended March 31, 2004 and repurchased 50,000 shares of
common stock for $455,000 during the year ended
December 31, 2003.



| |         
| | --------
| | Warrants

The Company agreed to sell to NNN Capital Corp.,
the dealer manager of the Companys initial public offering
which is solely owned by Anthony Thompson, the Companys
Chief Executive Officer, one warrant to purchase one share of
common stock for every 40 shares of common stock sold by
the dealer manager in any state other than Arizona, Missouri,
Ohio, or Tennessee, up to a maximum of 250,000 warrants to
purchase an equivalent number of shares. The dealer manager paid
the Company $0.0008 for each warrant.

The holder of a warrant is entitled to purchase
one share of common stock from the Company at a price of
$12.00 per share at any time from February 22, 2001 to
February 22, 2005. A warrant may not be exercised unless
the shares to be issued upon the exercise of the warrant have
been registered or are exempt from registration in the state of
residence of the warrant owner. Warrants are not exercisable
until one year from the date of issuance. In addition, holders
of warrants may not exercise the warrants to the extent such
exercise would jeopardize the Companys status as a REIT
under the federal tax laws. Warrant holders may not vote on
Company matters and are not entitled to receive distributions.

The terms of the warrants (including the exercise
price, the number and type of securities issuable upon their
exercise, and the number of such warrants) may be adjusted
pro-rata in the event of stock dividends, subdivisions,
combinations and reclassification of shares or the issuance to
stockholders of securities entitling them to purchase shares or
securities convertible into shares. The terms of the warrants
also may be adjusted if the Company engages in a merger or
consolidation transaction or if all or substantially all of the
assets are sold. Warrants are not transferable or assignable
except by the dealer manager, the broker-dealers participating
in the offering or to individuals who are both officers and
directors or licensed representatives of such entities. Exercise
of the warrants is governed by the terms and conditions set
forth in the dealer manager agreement and in the warrant.

As of March 31, 2004 and December 31,
2003, there were 101,000 outstanding warrants held by soliciting
dealers that sold the Companys shares. No warrants had
been exercised to date. The Company applies the fair value
method of accounting for the warrants in accordance with
SFAS 123.

16



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                   
| | ------------------
| | 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
APB 25, Accounting for Stock Issued to
Employees. 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.

In February 2000, the Company adopted stock
option plans (the Plans) for (1) independent
and outside directors and (2) its officers and employees.
Shares of common stock issued upon the exercise of such options
will have certain transferability restrictions. The unregistered
public sale of restricted stock, which is governed by
Rule 144 of the Securities Act of 1933, as amended, is
prohibited during the first year of ownership and limited as set
forth in such rule during the second year of ownership.

Stock options granted pursuant to the Plans will
expire ten years from the grant date and will be exercisable in
whole or in part upon the second anniversary of the grant date;
provided, however, that if the exercise of any stock option
would cause the aggregate of all Company stock owned by the
Advisor, affiliates of the Advisor and the Companys
officers and directors to exceed 10.0% of the total outstanding
shares of the Companys common stock, such exercise would
be delayed until the first date on which the exercise would not
cause such limit to be exceeded. The Company has authorized and
reserved a total of 100,000 shares and 700,000 shares
for issuance under the Director Plan and the Officer/ Employee
Plan, respectively. Option grants are subject to shareholder
approval of the Plans. Each of the Plans was approved by
shareholders at the Annual Meeting of Shareholders held
June 28, 2003.

As of March 31, 2004, options for a total of
485,000 shares are outstanding under the Officer and
Employee Stock Option Plan and Independent Director Stock Option
Plan.

|                    |         |           |         |          |  |          |      |      |  |   |      |      | 
|------------------- | ------- | --------- | ------- | -------- |  | -------- | ---- | ---- |  | - | ---- | ---- | 
|                    |         |           |         |          |  | Weighted
|                    |         |           |         | Range of |  | Average 
|                    |         | Number    |         | Exercise |  | Exercise
|Options Outstanding |         | of Shares |         | Prices   |  | Price   
|                    |         |           |         |          |  |         
|December 31, 2003   |         |           | 165,000 |          |  | $        | 9.05 |      |  | $ | 9.05 |     
|                    | Granted |           |         | 320,000  |  |          |      | 9.05 |  |   |      | 9.05 | 
|                    |         |           |         |          |  |          |      |      |  |   |      |     
|March 31, 2004      |         |           | 485,000 |          |  | $        | 9.05 |      |  | $ | 9.05 |     
|                    |         |           |         |          |  |          |      |      |  |   |      |     

A summary of outstanding options exercisable
under the Plans is presented in the schedule below.

|                         |  |             |         |              |  |                  |      |             |  |                  |      |  |  |  |        |  |  |   |      | 
|------------------------ |  | ----------- | ------- | ------------ |  | ---------------- | ---- | ----------- |  | ---------------- | ---- |  |  |  | ------ |  |  | - | ---- | 
|                         |  |             |         | Wtd Avg      |  | Wtd Avg          |      |             |  | Wtd Avg         
|                         |  |             |         | Remaining    |  | Exercise Price  |      |             |  | Exercise Price 
|                         |  | Number      |         | Contractual  |  | Outstanding      |      | Number      |  | Exercisable     
|Range of Exercise Prices |  | Outstanding |         | Life (Years) |  | Options          |      | Exercisable |  | Options         
|                         |  |             |         |              |  |                  |      |             |  |                 
|$9.05                    |  |             | 485,000 |              |  |                  | 9.00 |             |  | $                | 9.05 |  |  |  | 90,000 |  |  | $ | 9.05 | 



|    |                    
|--- | -------------------
|11. | Future Minimum Rent

The Company has operating leases with tenants
that expire at various dates through 2015 and are either subject
to scheduled fixed increases or adjustments based on the
Consumer Price Index. Generally, the leases grant tenants
renewal options. Leases also provide for additional rents based
on certain operating expenses.

17



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A certain amount of the Companys rental
income is from tenants with leases which are subject to
contingent rent provisions. These contingent rents are subject
to the tenant achieving periodic revenues in excess of specified
levels. For the three months ended March 31, 2004 and 2003,
the amount of contingent rent earned by the Company was not
significant.



|    |                                                      
|--- | -----------------------------------------------------
|12. | Advisory Agreement and Related Party
    Transactions



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

The Advisory Agreement between the Company and
the Advisor, as amended, was renewed by the Board of Directors
on May 8, 2004 for an additional one-year term effective
February 22, 2004. 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. As described below, there were no amounts paid to the
Advisor for services provided during the three months ended
March 31, 2004 and 2003.

The Advisor bears the expenses incurred in
connection with supervising, monitoring and inspecting real
property or other assets owned by the Company (excluding
proposed acquisitions) or otherwise relating to its duties under
the Advisory Agreement. Such expenses include employing its
personnel, rent, telephone, equipment, and other administrative
expenses. The Company reimburses the Advisor for certain
expenses incurred, including those related to proposed
acquisitions and travel expenses. However, the Company will not
reimburse the Advisor for any operating expenses that, in any
four consecutive fiscal quarters, exceed the greater of 2% of
Average Invested Assets (as defined) or 25% of net income for
such year. If the Advisor receives an incentive distribution,
net income (for purposes of calculating operating expenses)
excludes any gain from the sale of assets. Any amount exceeding
the greater of 2% of Average Invested Assets or 25% of net
income paid to the Advisor during a fiscal quarter will be
repaid to the Company within 60 days after the end of the
fiscal year. The Company bears its own expenses for functions
not required to be performed by the Advisor under the Advisory
Agreement, which generally include capital raising and financing
activities, corporate governance matters, and other activities
not directly related to real estate properties and other assets.

The Advisor may receive an annual Asset
Management Fee of up to 1.5% of the Average Invested Assets.
This fee will be paid or accrue quarterly, but will not be paid
until the Shareholders have received distributions equal to a
cumulative non-compounded rate of 8.25% per annum on their
investment in the Company. If the fee is not paid in any
quarter, it will accrue and be paid once the Shareholders have
received a cumulative 8.25% return. There were no asset
management fees incurred or paid to the Advisor during the three
month periods ended March 31, 2004 and 2003. The Advisor is
also entitled to receive property management fees for management
and leasing services. Such fees may not exceed 5% of the gross
revenue earned by the Company on properties managed.



| |                         
| | ------------------------
| | 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. The Company incurred $56,000 and $88,000 in property
management fees for the three months ended March 31, 2004
and March 31, 2003, respectively.



| |                        
| | -----------------------
| | 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

18



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

shareholders have received an 8.00% annual return
on their invested capital. No incentive distributions were made
to the Advisor for the three months ended March 31, 2004
and 2003.



| |                        
| | -----------------------
| | Real Estate Commissions

The total real estate sales commissions paid to
Realty by the Company and unrelated third parties in connection
with the Companys real estate acquisitions and
dispositions for the three months ended March 31, 2004 and
2003 was $924,000 and $2,250,000, respectively. Of the total
real estate sales commission paid to Realty, the Company paid
$339,000 and $0 for the three months ended March 31, 2004
and 2003, respectively (Note 3).



|    |                              
|--- | -----------------------------
|13. | Commitments and Contingencies



| |           
| | ----------
| | Litigation

On February 11, 2004, Clearview Properties
filed a petition in the District Court of the 270th Judicial
District, Harris County, Texas against Property Texas SC One
Corporation, Clarion Partners, LLC, Granite Partners I,
LLC, three unaffiliated entities, and the Advisor, Realty and
the Company. The complaint alleges that Property Texas breached
an Agreement of Sale and Purchase to sell Clearview certain real
property located in Houston, Texas. Only one of the
complaints eight separate counts alleges the involvement
of the Company, the Advisor and Realty. That count alleges that
the Company, the Advisor and Realty and/or the other defendants
wilfully and intentionally interfered with the contract between
Clearview and Property Texas and that such interference
proximately caused Clearviews injury and sufferance of
actual damages. The maximum exposure to the Company is
uncertain, as Clearview has failed to specifically allege a
monetary amount of loss as the result of the Companys
alleged involvement. The Company believes that there is no
substantive merit to the claims made by Clearview with respect
to the Company, the Advisor or Realty and it intends to
vigorously defend the action. However, if Clearview were to
prevail in this action, it could have a material adverse effect
upon the Companys financial condition, results of
operations and cash flows.

Other than the above, to the Companys
knowledge there are no material pending legal proceedings, other
than routine litigation incidental to the business, to which the
Company is a party to or of which any of its properties is the
subject.



| |                      
| | ---------------------
| | Environmental Matters

The Company follows the policy of monitoring its
properties for the presence of hazardous or toxic substances.
While there can be no assurance that a material environmental
liability does not exist, the Company is not currently aware of
any environmental liability with respect to the properties that
would have a material effect on the Companys financial
condition, results of operations and cash flows. Further, the
Company is not aware of any environmental liability or any
unasserted claim or assessment with respect to an environmental
liability that the Company believes would require additional
disclosure or the recording of a loss contingency.



| |      
| | -----
| | Lease

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

19



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

guaranty, 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 where the current tenants
lease had expired on August 31, 2002. In October 2002, the
tenant vacated the property. Accordingly, the Company has
accrued $590,000 related to its obligations under the guaranty
at March 31, 2004. The Company has no collateral; however
it has recourse against the Advisor under the indemnity
agreement. 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.



| |      
| | -----
| | 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.

14.     Discontinued
Operations  Property Held for Sale

Property sold during the three months ended
March 31, 2004, consisted of Gateway Mall, as discussed in
Footnote 3. The results of their operations were
reclassified to discontinued operations for the three months
ended March 31, 2004 and 2003. Also included in
discontinued operations for the three months ended
March 31, 2003, were the following properties that were
sold during 2003, North Star, Thousand Oaks and Pahrump.



|    |                  
|--- | -----------------
|15. | Subsequent Events



| |             
| | ------------
| | Acquisitions



| |                                       
| | --------------------------------------
| | Oakey Building  Las Vegas,
    Nevada

On April 2, 2004, through its wholly-owned
subsidiary, TREIT  NNN Oakey Building 2003, LLC, the
Company purchased a 9.761% interest in the Oakey Building in Las
Vegas, Nevada from an unaffiliated third party. The total
purchase price for the Oakey Building was $8,270,000. The
Companys total investment was $670,000. The purchase was
financed by $4,000,000 in borrowings under a secured mortgage
with Ivan Halaj and Vilma Halaj Inter Vivos Trust. The mortgage
requires principal and interest payments at a fixed interest
rate of 10% until the due date of April 1, 2005. The seller
of the property paid a sales commission to Realty of $237,000,
or 2.9% of the purchase price. The Oakey Building is a
104,000 square foot Class A office building located in
Las Vegas, Nevada.



|    |            
|--- | -----------
|16. | Restatement

The Company has historically accounted for its
undivided tenant-in-common interests in certain real estate
investments under the equity method in the same manner as
investments in uncontrolled partnerships as such real estate
properties have been subject to joint control by all owners in
accordance with each propertys tenant in common agreement.
Subsequent to the issuance of the Companys interim
condensed consolidated financial statements for the three month
period ended March 31, 2004, the Company determined that it
should have consolidated its 75% undivided tenant-in-common
interest in three buildings at AmberOaks Corporate Center
acquired on January 20, 2004 rather than accounting for it
as an investment in unconsolidated real estate under the equity
method because of certain provisions in the tenant in common
agreement that provide for control over the real estate property
by individuals or entities who own 66 2/3% or more of the
interests. The restatement did not affect the Companys net
income or net income per share.

20



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In addition, the Company determined that it
should have reported the gain (loss) on sale of real estate
investments in certain real estate properties previously
reported as income from continuing operations in the quarter
ended March 31, 2003 as discontinued operations and that
the gain (loss) on sale of certain real estate reported in the
quarter ended March 31, 2003 contained an error because the
final reallocation of the property basis had not been taken into
account.

As a result, the accompanying condensed
consolidated financial statements as of March 31, 2004 and
for the three month periods ended March 31, 2004 and 2003
have been restated from the amounts previously reported to
correct the accounting for the transactions discussed above. The
2003 amounts have also been restated to reclassify the operating
results of properties disposed subsequent to March 31, 2003
as discontinued operations.

A summary of the significant effects of the
restatements on the condensed consolidated financial statements
is as follows:

|                                           |  |                |            |                |  |   |            | 
|------------------------------------------ |  | -------------- | ---------- | -------------- |  | - | ---------- | 
|                                           |  | As of          |            | As of         
|                                           |  | March 31, 2004 |            | March 31, 2004
|                                           |  |                |            |               
|                                           |  | (As previously |            | (As restated) 
|                                           |  | reported)      |            |               
|Condensed Consolidated Balance
    Sheets: |  |                |            |                |  |   |            | 
|Operating properties, net                  |  | $              | 7,042,000  |                |  | $ | 26,848,000 | 
|Investments in unconsolidated real estate  |  |                | 25,607,000 |                |  |   | 19,189,000 | 
|Cash and cash equivalents                  |  |                | 858,000    |                |  |   | 2,115,000  | 
|Accounts receivable, net                   |  |                | 106,000    |                |  |   | 191,000    | 
|Other assets, net                          |  |                | 330,000    |                |  |   | 3,216,000  | 
|Accounts payable and accrued liabilities   |  |                | 876,000    |                |  |   | 986,000    | 
|Security deposits and prepaid rent         |  |                | 54,000     |                |  |   | 421,000    | 
|Notes payable                              |  |                | 4,332,000  |                |  |   | 19,332,000 | 
|Minority Interests                         |  |                |           |                |  |   | 2,139,000  | 

|                                                     |                                                     |                    |   |               |  |  |   |           | 
|---------------------------------------------------- | --------------------------------------------------- | ------------------ | - | ------------- |  |  | - | --------- | 
|                                                     |                                                     |                   
|                                                     |                                                     | For the           
|                                                     |                                                     | Three Months Ended
|                                                     |                                                     | March 31, 2004    
|                                                     |                                                     |                   
|                                                     |                                                     |                    |   |              
|                                                     |                                                     | (As                |   | (As restated)
|                                                     |                                                     | previously         |   |              
|                                                     |                                                     | reported)          |   |              
|Condensed Consolidated Statements of
    Operations: |                                                     |                    |   |               |  |  |   |          
|                                                     | Revenues                                            |                    | $ | 246,000       |  |  | $ | 748,000   | 
|                                                     | Operating expenses                                  |                    |   | 239,000       |  |  |   | 721,000   | 
|                                                     | Other income                                        |                    |   | 1,334,000     |  |  |   | 1,319,000 | 
|                                                     | Minority interests                                  |                    |   |              |  |  |   | 5,000     | 
|                                                     | Net income                                          |                    |   | 1,341,000     |  |  |   | 1,341,000 | 
|                                                     | Net income per common share  basic and
    diluted |                    |   | 0.28          |  |  |   | 0.28      | 

21



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##### Table of Contents



T REIT, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                 |                         |                                   |         |                  |  |                 |          |             |  |   |          |   |  |   |          |      | 
|---------------------------------------------------------------- | ----------------------- | --------------------------------- | ------- | ---------------- |  | --------------- | -------- | ----------- |  | - | -------- | - |  | - | -------- | ---- | 
|                                                                 |                         |                                  
|                                                                 |                         | Three Months Ended March 31, 2003
|                                                                 |                         |                                  
|                                                                 |                         |                                   |         | Reclassification |  |                
|                                                                 |                         | As Previously                     |         | Correction       |  | of Discontinued |          |            
|                                                                 |                         | Reported                          |         | of Errors        |  | Operations      |          | As Restated
|                                                                 |                         |                                   |         |                  |  |                 |          |            
|Revenues                                                         |                         | $                                 | 493,000 |                  |  | $               |         |             |  | $ | (259,000 | ) |  | $ | 234,000  |     
|Operating expenses                                               |                         |                                   | 566,000 |                  |  |                 |         |             |  |   | (292,000 | ) |  |   | 274,000  |     
|Other income                                                     |                         |                                   | 583,000 |                  |  |                 |         |             |  |   | (1,000   | ) |  |   | 582,000  |     
|Gain (loss) on sale of real estate investments                   |                         |                                   | 24,000  |                  |  |                 | (24,000  | )           |  |   |         |   |  |   |         |     
|                                                                 |                         |                                   |         |                  |  |                 |          |             |  |   |          |   |  |   |          |     
|Income from continuing operations                                |                         |                                   | 534,000 |                  |  |                 | (24,000  | )           |  |   | 32,000   |   |  |   | 542,000  |     
|Gain (loss) on sale of real estate investments                   |                         |                                   |        |                  |  |                 | (191,000 | )           |  |   |         |   |  |   | (191,000 | )   
|Income from discontinued operations 
    property held for sale |                         |                                   | 253,000 |                  |  |                 |         |             |  |   | (32,000  | ) |  |   | 221,000  |     
|                                                                 |                         |                                   |         |                  |  |                 |          |             |  |   |          |   |  |   |          |     
|Net income                                                       |                         | $                                 | 787,000 |                  |  | $               | (215,000 | )           |  | $ |         |   |  | $ | 572,000  |     
|                                                                 |                         |                                   |         |                  |  |                 |          |             |  |   |          |   |  |   |          |     
|Net income per common share  basic and
    diluted              |                         |                                   |         |                  |  |                 |          |             |  |   |          |   |  |   |          |     
|                                                                 | Continuing operations   |                                   | $       | 0.11             |  |                 |          |             |  |   |          |   |  |   | $        | 0.11 | 
|                                                                 | Discontinued operations |                                   | $       | 0.06             |  |                 |          |             |  |   |          |   |  |   | $        | 0.01 | 
|                                                                 |                         |                                   |         |                  |  |                 |          |             |  |   |          |   |  |   |          |     
|Total net income per common share                                |                         | $                                 | 0.17    |                  |  |                 |          |             |  |   |          |   |  | $ | 0.12     |     
|                                                                 |                         |                                   |         |                  |  |                 |          |             |  |   |          |   |  |   |          |     

22



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##### Table of Contents








|        |                                                                                                       
|------- | ------------------------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    (MD&A) of Financial Condition and Results of
    Operations

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. Additional
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.

Overview

The Company was organized in December 1998 to
acquire and manage a diversified portfolio of real estate
composed of office, industrial, retail and service properties
located primarily in the following focus states: Alaska,
Florida, Iowa, Michigan, Minnesota, Nevada, North Carolina,
South Carolina, South Dakota, Tennessee, Texas, Virginia,
Washington, Wisconsin and Wyoming. The Company has been
operating and intends to continue operating as a REIT for
federal and state income tax purposes. Triple Net Properties,
LLC (the Advisor) has been retained to manage, for a
fee, the Companys day to day affairs, subject to the
supervision of the Companys Board of Directors.

As of March 31, 2004, the Company owned two
consolidated office/industrial properties and interests in eight
unconsolidated properties, including six office and two
office/industrial properties. Comparability between 2004 and
2003 is limited due to the number of acquisitions and
dispositions during these two years.

Acquisitions in the Three Months Ended
March 31, 2004



| |                                 
| | --------------------------------
| | AmberOaks LP  Austin,
    Texas

On January 20, 2004, the Company, through it
wholly-owned subsidiary, TREIT  AmberOaks LP,
purchased a 75% undivided tenant-in-common interest in three
buildings at AmberOaks Corporate Center located in Austin, Texas
from an unaffiliated third party. Three unaffiliated entities
purchased the remaining 25% tenant-in-common interests in the
property. The total purchase price for AmberOaks was
$22,965,000. The Companys total investment was $6,462,000.
The purchase was financed by $15,000,000 in borrowings under a
secured mortgage with North Houston Bank. The mortgage requires
interest only payments through February 15, 2006 and,
thereafter, principal and interest payments through the maturity
date of January 20, 2007 at the Prime Rate plus
1.0% subject to a floor of 5.5%. The seller paid a sales

23



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##### Table of Contents



commission to Realty of $585,000, or 2.5% of the
purchase price. AmberOaks is a three-building Class A
office portfolio totaling 206,000 square feet that is part
of an eight-building complex built during 1999-2001. An
affiliate of the Companys advisor purchased the remaining
five buildings.




| |                                                 
| | ------------------------------------------------
| | Land  Gateway Mall 
    Bismarck, North Dakota

On February 27, 2004, the Company purchased
43 acres of land, including 36 acres of land situated
under Gateway Mall from another unaffiliated third party for a
purchase price including closing costs of $1,631,000. Prior to
the land acquisition, the property had been subject to a ground
lease.

Dispositions in the Three Months Ended
March 31, 2004



| |                                          
| | -----------------------------------------
| | Gateway Mall  Bismarck, North
    Dakota

On March 18, 2004, the Company sold Gateway
Mall to an unaffiliated third party for a total consideration of
$11,600,000. The sale of Gateway Mall included the underlying
36 acres of land. Net sales proceeds included cash of
$2,452,000 and a note receivable in the amount of $8,700,000.
The note is secured by a pledge agreement, bears interest at
6% per annum and is due June 14, 2004. In connection
with the sale of Gateway Mall, the Company repaid a note payable
secured by the property with an outstanding balance of
$4,876,000. At closing, the Company paid a real estate
commission to Realty of $339,000, or 2.9% of the selling price.

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
4,720,000 shares. Through March 31, 2004, the Company
had repurchased 24,000 shares pursuant to its Repurchase
Plan.

Critical Accounting Policies and
Estimates

The preparation of 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, allowance for doubtful accounts, impairment of real
estate assets, purchase price allocation, deferred assets, and
qualifications 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
reasonable under the circumstances. Actual results could vary
from those estimates and those estimates could be different
under different assumptions or conditions. Refer to our 2003
Annual Report on Form 10-K/A for a discussion of our
critical accounting policies. There have been no material
changes to these policies in 2004.



| |                                                            
| | -----------------------------------------------------------
| | Revenue Recognition and Allowance for
    Doubtful Accounts

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 an allowance for doubtful accounts for
estimated losses resulting from the inability of tenants to make
required payments under lease agreements. The Company also
maintains an allowance for deferred rent receivables arising
from the straight-lining of rents. The adequacy of this
allowance is determined by continually evaluating individual
tenant receivables considering the tenants financial
condition, security deposits, letters of credit, lease
guarantees and current economic conditions.

24



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##### Table of Contents





| |           
| | ----------
| | Impairment

Real estate investments are stated at depreciated
cost. 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.                                  

In the event that the carrying amount of a
property exceeds the sum of the undiscounted cash flows
(excluding interest) that are expected to result from the use
and eventual disposition of the property, the Company would
recognize an impairment loss to the extent the carrying amount
exceeded the fair value of the property. The Company estimates
the fair value using available market information or other
industry valuation techniques such as present value calculations.



| |                          
| | -------------------------
| | Purchase Price Allocation

Property acquisitions since July 1, 2001,
have been accounted for in accordance with Statement of
Financial Accounting Standards No. 141, Business
Combinations. The fair value of the real estate acquired
is allocated to the acquired tangible assets, consisting of
land, building and tenant improvements, and identified
intangible assets and liabilities, consisting of the value of
above-market and below-market leases, other value of in-place
leases and value of tenant relationships, if any, based in each
case on their fair values.

The fair value of the tangible assets of an
acquired property (which includes land, building and tenant
improvements) is determined by valuing the property as if it
were vacant, and the as-if-vacant value is then
allocated to land, building and tenant improvements based on our
determination of the relative fair values of these assets.
Factors considered by Management in performing these analyses
include an estimate of carrying costs during the expected
lease-up periods considering current market conditions and
insurance and other operating expenses during the expected
lease-up periods based on current market demand. The Company
also estimates costs to execute similar leases including leasing
commissions, concessions, legal and other related costs.

In allocating the fair value of the identified
intangible assets and liabilities of an acquired property,
above-market and below-market in-place lease values are recorded
based on the present value (using an interest rate which
reflects the risks associated with the leases acquired) of the
difference between (i) the contractual amounts to be paid
pursuant to the in-place leases and (ii) our estimate of
fair market lease rates for the corresponding in-place leases,
measured over a period equal to the remaining non-cancelable
term of the lease. The capitalized above-market and below-market
lease values are amortized into rental income over the remaining
non-cancelable terms of the respective leases.



| |                       
| | ----------------------
| | 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.



| |                                             
| | --------------------------------------------
| | Investment in Unconsolidated Real
    Estate

The Company accounts for its investments in
unconsolidated real estate operating properties using the equity
method of accounting. Accordingly, the Company reports its net
equity in its proportionate share of the total investments in
unconsolidated real estate as Investment in unconsolidated
real estate on its Consolidated Balance Sheets. The
Company reports its proportionate share of the total earnings of
its investments in unconsolidated real estate as Equity in
the earnings of unconsolidated real estate on its
Consolidated Statements of Operations.

25



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

The Company has been organized and operated, and
intends to continue to operate, so as to qualify for taxation as
a REIT under the Internal Revenue Code. The Companys
qualification and taxation as a REIT depends on its ability to
meet, through actual annual operating results, asset
diversification, distribution levels and diversity of stock
ownership, numerous requirements established under highly
technical and complex Internal Revenue Code provisions subject
to interpretation.

If the Company failed to qualify as a REIT in any
taxable year, it would be subject to federal income tax,
including any applicable alternative minimum tax, on its taxable
income at regular corporate rates. Moreover, unless entitled to
relief under specific statutory provisions, the Company also
would be disqualified as a REIT for four taxable years following
the year during which qualification was lost.



| |            
| | -----------
| | Restatement

As discussed in Note 16 to the condensed
consolidated financial statements included in Item 1, the
Companys financial statements as of and for the three
month periods ended March 31, 2004 and 2003 have been
restated. The accompanying MD&A gives effect to the
restatement.

Results of Operations

The Companys operating results are
primarily comprised of income derived from its portfolio of
properties. Because of the significant property acquisitions and
dispositions throughout the three months ended March 31,
2004 and the year ended December 31, 2003, the
comparability of financial data from period to period will be
limited.



| |                                                         
| | --------------------------------------------------------
| | Three Months Ended March 31, 2004 and
    March 31, 2003

Rental Income.Rental income increased by $514,000 or 220% to $748,000 for the
three months ended March 31, 2004 compared to rental income
of $234,000 for the three months March 31, 2003. $502,000
of the increase was due to the purchase of Amber Oaks, further
contributing to the increase were rent increases throughout 2003.

Interest Income.Interest income increased by $16,000 or 66.7% to $40,000 for the
three months ended March 31, 2004 compared to interest
income of $24,000 for the three months ended March 31,
2003. This increase was primarily due to the interest on the
Moffat note receivable due to the sale of Gateway Mall.

Dividend Income.Dividend income of $40,000 was due to the return on investments
in marketable securities.

Rental Expenses.Rental expenses increased by $80,000 or 127% to $143,000 for the
three months ended March 31, 2004 compared to rental
expense of $63,000 for the three months ended March 31,
2003. $116,000 of the increase was due to the purchase of Amber
Oaks, offset in part by the difference in management fees paid
in the three months ended March 31, 2004.

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. General and administrative
expenses decreased by $19,000 or 17% to $93,000 for the three
months ended March 31, 2004 compared to general and
administrative expense of $112,000 for the three months ended
March 31, 2003.

Interest Expense.Interest expense increased by $12,000, or 19.4% to $74,000 for
the three months ended March 31, 2004 compared with $62,000
for the three months ended March 31, 2003. The increase was
due to interest payments on draws on the line of credit.

26



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##### Table of Contents



Equity in Net Earnings of Unconsolidated Real
Estate.Equity in earnings of
unconsolidated real estate decreased by $293,000, or 52.5% to
$265,000 for the three months ended March 31, 2004 compared
with $558,000 for the three months ended March 31, 2003.
The majority of the decrease was due to the increase in
depreciation and amortization as a result of the finalization of
purchase price allocations of the acquired unconsolidated real
estate assets.

Income from Discontinued
Operations  Property Held for
Sale.Income from discontinued
operations represents the net operating results of one property
sold during the three months ended March 31, 2004 through
the date of sale, including interest expense and depreciation
related to this property. Income from discontinued operations
decreased $116,000 or 52.5% to $105,000 for the three months
ended March 31, 2004 compared to $221,000 for the three
months ended March 31, 2003 primarily due to the results of
the various properties sold.

Gain (Loss) on Sale of Real Estate
Investments.Gain on the sale of real
estate investments was $822,000 for the three months ended
March 31, 2004 and was due to the sale of Gateway Mall on
March 18, 2004. Loss on the sale of real estate investments
was $191,000 for the three months ended March 31, 2003 and
was due to the sale of North Star Shopping Center.

Net Income.Net
income was $1,341,000 or $0.28 per share basic and diluted
for the three months ended March 31, 2004 compared to
$572,000 or $0.12 per share basic and diluted for the three
months ended March 31, 2003. Dividends declared were
$955,000 or $0.21 per share for the three months ended
March 31, 2004 compared to $965,000 or $0.21 per share
for the three months ended March 31, 2003.

Liquidity and Capital Resources



| |               
| | --------------
| | Line of Credit

On September 3, 2003 the Company entered
into an agreement with Fleet National Bank for an unsecured line
of credit in the amount of $1,000,000 which bears interest at
Fleets prime rate plus fifty basis points. The credit
facility matures on September 2, 2004 and has two one-year
extensions. The credit facility is subject to a fee of 1% to be
paid one-third on each of the effective date, the first
anniversary and the second anniversary. As of March 31,
2004 and December 31, 2003, respectively, the Company had
no amounts outstanding under the line of credit.



| |                                   
| | ----------------------------------
| | Off-Balance Sheet
    Arrangements

There are no off-balance sheet transactions,
arrangements or obligations (including contingent obligations)
that have, or are reasonably likely to have a current or future
material effect on our financial condition, changes in the
financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.



| |           
| | ----------
| | Cash Flows

Cash flows provided by operating activities for
the three months ended March 31, 2004, was $2,326,000
compared with cash flows used in operating activities of $7,000
for the three months ended March 31, 2003. The increase in
cash flows provided by operating activities was substantially
attributable to an increase in net income, depreciation and
amortization expense and decreases in other assets and security
deposits offset in part by the payment of semi-annual real
estate taxes in March 2004.

Cash flows used in investing activities for the
three months ended March 31, 2004, was $6,494,000 compared
with cash flows used in investing activities of $6,738,000 for
the three months ended March 31, 2003. Cash flows used in
investing activities was substantially attributable to the
purchase of marketable securities, purchase of land, and the
purchase of investments in unconsolidated real estate, offset in
part by the sale of marketable securities.

Cash flows used in financing activities for the
three months ended March 31, 2004 was $5,906,000 compared
with cash flows provided by financing activities of $1,207,000
for the three months ended March 31, 2003. The increase in
cash flows used in financing activities was substantially
attributable to the

27



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##### Table of Contents



payment of debt of $4,918,000 for property that
was sold in 2004 and the issuance of new debt of $5,000,000 in
2003.




| |          
| | ---------
| | Liquidity

At March 31, 2004, the Company had
approximately $2,296,000 in cash and marketable securities. The
Company intends to acquire additional properties and will seek
to fund these acquisitions through utilization of the current
cash balances, debt financings and/or asset dispositions.

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 distributions to shareholders and to support
the operating activities of the Company.

Distributions 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.

Subsequent Events



| |             
| | ------------
| | Acquisitions



| |                                       
| | --------------------------------------
| | Oakey Building  Las Vegas,
    Nevada

On April 2, 2004, through its wholly-owned
subsidiary, TREIT  NNN Oakey Building 2003, LLC, the
Company purchased a 9.761% interest in the Oakey Building in Las
Vegas, Nevada from an unaffiliated third party. The total
purchase price for the Oakey Building was $8,270,000. The
Companys total investment was $670,000. The purchase was
financed by $4,000,000 in borrowings under a secured mortgage
with Ivan Halaj and Vilma Halaj Inter Vivos Trust. The mortgage
requires principal and interest payments at a fixed interest
rate of 10% until the due date of April 1, 2005. The seller
of the property paid a sales commission to Realty of $237,000,
or 2.9% of the purchase price. The Oakey Building is a
104,000 square foot Class A office building located in
Las Vegas, Nevada.



| |           
| | ----------
| | Management

Effective April 22, 2004, Diana M. Laing
resigned her position as the Companys Chief Financial
Officer and the Board of Directors appointed Richard Hutton as
Interim Chief Financial Officer. Mr. Hutton has served as
the Chief Investment Officer of the Advisor since August 2003,
overseeing all financial operations of the Advisor, and
previously served as our interim Chief Financial Officer. From
April 1999 to August 2003, Mr. Hutton served as Senior Vice
President  Real Estate Acquisitions and Vice
President  Property Management for the Advisor. In
that position, Mr. Hutton oversaw the management of the
real estate portfolios and property management of the Advisor
and its affiliates. Mr. Hutton holds a BA in psychology
from Claremont McKenna College and has been licensed as a
Certified Public Accountant in California since 1984.

Funds From Operations

The Company defines Funds from Operations
(FFO), a non-GAAP measure, consistent with the
definition of the National Association of Real Estate Investment
Trusts, or NAREIT, as net income available to common
shareholders, plus depreciation and amortization of assets
uniquely significant to the real estate industry, reduced by
gains and increased by losses on (1) sales of investment
property and (2) extraordinary items.

28



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##### Table of Contents



The Company considers FFO to be an appropriate
supplemental measure of a REITs operating performance as
it is based on a net income analysis of property portfolio
performance that excludes non-cash items such as depreciation.
The historical accounting convention used for real estate assets
requires straight-line depreciation of buildings and
improvements, which implies that the value of real estate assets
diminishes predictably over time. Since real estate values
historically rise and fall with market conditions, presentations
of operating results for a REIT, using historical accounting for
depreciation, could be less informative. The use of FFO is
recommended by the REIT industry as a supplemental performance
measure.

Presentation of this information is intended to
assist the reader in comparing the operating performance of
different REITs, although it should be noted that not all REITs
calculate FFO the same way, so comparisons with other REITs may
not be meaningful. Furthermore, FFO is not necessarily
indicative of cash flow available to fund cash needs and should
not be considered as an alternative to net income as an
indication of the Companys performance.

The Companys FFO reporting complies with
NAREITs policy described in the preceding paragraph.
Following is the calculation of FFO for the three months ended
March 31, 2004 and March 31, 2003:

|                      |                                                                                     |              |           |              |  |   |           |          |  
|--------------------- | ----------------------------------------------------------------------------------- | ------------ | --------- | ------------ |  | - | --------- | -------- | -
|                      |                                                                                     | Three Months |           | Three Months
|                      |                                                                                     | Ended        |           | Ended       
|                      |                                                                                     | March 31,    |           | March 31,   
|                      |                                                                                     | 2004         |           | 2003        
|                      |                                                                                     |              |           |             
|Net income            |                                                                                     | $            | 1,341,000 |              |  | $ | 572,000   |         
|Add:                  |                                                                                     |              |           |              |  |   |           |         
|                      | Depreciation and amortization 
    continuing operations                           |              |           | 375,000      |  |   |           | 37,000   |  
|                      | Depreciation and amortization 
    discontinued operations                         |              |           | 17,000       |  |   |           | 171,000  |  
|                      | Depreciation and amortization 
    unconsolidated real estate operating properties |              |           | 399,000      |  |   |           | 304,000  |  
|Less:                 |                                                                                     |              |           |              |  |   |           |         
|                      | Gain/(Loss) on Sale of property                                                     |              |           | 822,000      |  |   |           | (191,000 | )
|                      |                                                                                     |              |           |              |  |   |           |         
|Funds from operations |                                                                                     | $            | 1,310,000 |              |  | $ | 1,275,000 |         
|                      |                                                                                     |              |           |              |  |   |           |         

Inflation

We will be exposed to inflation risk as income
from long-term leases is expected to be the primary source of
our cash flows from operations. We expect that there will be
provisions in the majority of our tenant leases that would
protect us from the impact of inflation. These provisions
include rent steps, reimbursement billings for operating expense
pass-through charges, real estate tax and insurance
reimbursements on a per square foot allowance. However, due to
the long-term nature of the leases, the leases may not re-set
frequently enough to cover inflation.

29



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##### Table of Contents



Contractual Obligations

The following table provides information with
respect to the maturities, scheduled principal payments of fixed
rate debt and scheduled interest, payments of the fixed rate
debt at March 31, 2004. The table does not reflect
available extension options.

|                                        |  |                        |         |             |  |             |            |              |  |       |           |  |  |   |   |  |  |   |            | 
|--------------------------------------- |  | ---------------------- | ------- | ----------- |  | ----------- | ---------- | ------------ |  | ----- | --------- |  |  | - | - |  |  | - | ---------- | 
|                                        |  |                       
|                                        |  | Payments Due by Period
|                                        |  |                       
|                                        |  | Less Than              |         |             |  | More Than   |            |             
|                                        |  | 1 Year                 |         | 1-3 Years   |  | 4-5 Years   |            | 5 Years      |  |      
|                                        |  | (2004)                 |         | (2005-2007) |  | (2008-2009) |            | (After 2009) |  | Total
|                                        |  |                        |         |             |  |             |            |              |  |      
|Principal payments  fixed rate debt    |  | $                      | 46,000  |             |  | $           | 207,000    |              |  | $     | 4,079,000 |  |  | $ |  |  |  | $ | 4,332,000  | 
|Interest payments  fixed rate debt     |  |                        | 173,000 |             |  |             | 669,000    |              |  |       |          |  |  |   |  |  |  |   | 842,000    | 
|Principal payments  variable rate debt |  |                        |        |             |  |             | 15,000,000 |              |  |       |          |  |  |   |  |  |  |   | 15,000,000 | 
|Interest payments  variable rate debt  |  |                        | 619,000 |             |  |             | 1,689,000  |              |  |       |          |  |  |   |  |  |  |   | 2,308,000  | 
|                                        |  |                        |         |             |  |             |            |              |  |       |           |  |  |   |   |  |  |   |            | 
|Total                                   |  | $                      | 838,000 |             |  | $           | 17,565,000 |              |  | $     | 4,079,000 |  |  | $ |  |  |  | $ | 22,482,000 | 
|                                        |  |                        |         |             |  |             |            |              |  |       |           |  |  |   |   |  |  |   |            | 






|        |                                                               
|------- | --------------------------------------------------------------
|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 and fund capital expenditures and expansion of its
real estate investment portfolio and operations. The
Companys interest rate risk management objectives are to
limit the impact of interest rate changes on earnings and cash
flows and to lower its overall borrowing costs. To achieve the
Companys objectives it borrows primarily at fixed rates or
variable rates with the lowest margins available and in some
cases, with the ability to convert variable rates to fixed
rates. 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 related
financial instrument. The Company does not enter into derivative
or interest rate transactions for speculative purposes.

The Companys interest rate risk is
monitored using a variety of techniques. The table below
presents the principal amounts and weighted average interest
rates by year of expected maturity to evaluate the expected cash
flows and sensitivity to interest rate changes.

|                                       |  |           |        |      |  |      |        |      |  |      |         |            |  |       |            |   |  |   |           |   |  |   |      |   |  |   |            |  
|-------------------------------------- |  | --------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | ---------- |  | ----- | ---------- | - |  | - | --------- | - |  | - | ---- | - |  | - | ---------- | -
|                                       |  | As of     |        |      |  |      |        |      |  |      |         |            |  |      
|                                       |  | March 31, |        |      |  |      |        |      |  |      |         |            |  |      
|                                       |  | 2004      |        | 2005 |  | 2006 |        | 2007 |  | 2008 |         | Thereafter |  | Total
|                                       |  |           |        |      |  |      |        |      |  |      |         |            |  |      
|Fixed rate debt                        |  | $         | 46,000 |      |  | $    | 65,000 |      |  | $    | 69,000  |            |  | $     | 73,000     |   |  | $ | 4,079,000 |   |  | $ |     |   |  | $ | 4,332,000  |  
|Average interest rate on maturing debt |  |           | 5.25   | %    |  |      | 5.25   | %    |  |      | 5.25    | %          |  |       | 5.25       | % |  |   | 5.25      | % |  |   | 5.25 | % |  |   | 5.25       | %
|Variable rate debt                     |  | $         |       |      |  | $    |       |      |  | $    | 227,000 |            |  | $     | 14,773,000 |   |  | $ |          |   |  | $ |     |   |  | $ | 15,000,000 |  
|Average interest rate on maturing debt |  |           | 5.50   | %    |  |      | 5.50   | %    |  |      | 5.50    | %          |  |       | 5.50       | % |  |   | 5.50      | % |  |   | 5.50 | % |  |   | 5.50       | %

The fair estimated value of the Companys
debt approximates its March 31, 2004 carrying amount.

The weighted average interest rate of mortgage
debt as of March 31, 2004 was approximately 5.44% per
annum. At March 31, 2004, the Companys mortgage debt
consisted of $4,332,000 or 22% of the total debt at a fixed
interest rate of 5.25% per annum and $15,000,000 or 78% of the
total debt at a weighted average variable interest rate of 5.50%
per annum. An increase in the variable interest rate on certain
mortgages payable constitutes a market risk. As of
March 31, 2004, for example, a 0.25% increase in LIBOR
would have increased the overall annual interest expense by
approximately $38,000 or less than 4.6%.

30



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##### Table of Contents








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

The Company maintains disclosure controls and
procedures that are designed to ensure that information required
to be disclosed in its Exchange Act reports is recorded,
processed, summarized and reported within the time periods
specified in the Commissions rules and forms, and that
such information is accumulated and communicated to the
Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls
and procedures.

Prior to the initial filing of the Companys
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2004, the Companys Chief Executive
Officer and Chief Financial Officer evaluated the effectiveness
of the Companys disclosure controls and procedures as of
March 31, 2004, the end of the period covered by that
report, and, based on that evaluation, the Companys Chief
Executive Officer and Chief Financial Officer had concluded, as
of the end of the period covered by that report, that the
Companys disclosure controls and procedures were effective
for this purpose.

During the quarterly review process for the
period ended September 30, 2004, the Company concluded that
its previously filed financial statements for the quarters ended
March 31, 2004 and June 30, 2004 and March 31,
2003 and June 30, 2003 should no longer be relied upon. The
Company has restated the relevant financial statements to
reflect the fact that one of the Companys real estate
properties should have been recorded on the purchase date on a
consolidated basis and not as an unconsolidated investment and
the reclassification of discontinued operations and loss on sale
of real estate. The Company believes that adequate controls and
procedures have been implemented or are currently being
implemented to mitigate the risk of similar occurrences in the
future, including the development and implementation of internal
testing and oversight procedures and policies.

Except as set forth above, there have been no
changes in the Companys internal control over financial
reporting that occurred during the Companys most recent
fiscal quarter that have materially affected or are reasonably
likely to materially affect the Companys internal control
over financial reporting.




PART II  OTHER
INFORMATION





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

On February 11, 2004, Clearview Properties
filed a petition in the District Court of the 270th Judicial
District, Harris County, Texas against Property Texas SC One
Corporation, Clarion Partners, LLC, Granite Partners I,
LLC, three unaffiliated entities, and the Advisor, Realty and
the Company. The complaint alleges that Property Texas breached
an Agreement of Sale and Purchase to sell Clearview certain real
property located in Houston, Texas. Only one of the
complaints eight separate counts alleges the involvement
of the Company, the Advisor and Realty. That count alleges that
the Company, the Advisor and Realty and/or the other defendants
wilfully and intentionally interfered with the contract between
Clearview and Property Texas and that such interference
proximately caused Clearviews injury and sufferance of
actual damages. The maximum exposure to the Company is
uncertain, as Clearview has failed to specifically allege a
monetary amount of loss as the result of our alleged
involvement. The Company believes that there is no substantive
merit to the claims made by Clearview with respect to the
Company, the Advisor or Realty and it intends to vigorously
defend the action. However, if Clearview were to prevail in this
action, it could have a material adverse effect upon the
Companys financial condition, results of operations and
cash flows.

Other than the above, to the Companys
knowledge there are no material pending legal proceedings, other
than routine litigation incidental to the business, to which the
Company is a party to or of which any of its properties is the
subject.

31



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##### Table of Contents








|        |                                              
|------- | ---------------------------------------------
|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.






|        |                                                        
|------- | -------------------------------------------------------
|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)                                   

32



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|     |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|---- | ----- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |       |            
|No.  |       | Description
|     |       |            
|     | 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 T REIT, 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 T REIT 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 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, 2003 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, 2003 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 T REIT  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, G REIT 
    Congress Center, LLC, and W REIT  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)                                                                                                                                                                                       
|     | 10.17 |             |  | Agreement for Purchase and Sale of Real Property
    and Escrow Instructions dated as of May 14, 2003 by and
    between T REIT  Thousand Oaks, LP and Weingarten
    Realty Investors (included as Exhibit 10.01 to the
    Form 8-K filed by the Company on August 26, 2003 and
    incorporated herein by reference)                                                                                 
|     | 10.18 |             |  | Agreement for Purchase and Sale of Real Property
    and Escrow Instructions dated as of May 15, 2003 by and
    between T REIT  Pahrump, LLC and Pacific Home
    Equities, LLC (included as Exhibit 10.01 to the
    Form 8-K filed by the Company on October 9, 2003 and
    incorporated herein by reference)                                                                                       
|     | 10.19 |             |  | Purchase and Sale Agreement dated as of
    October 17, 2003 by and between Austin Jack, L.L.C. and
    Triple Net Properties, LLC (included as Exhibit 10.01 to
    the Form 8-K filed by the Company on February 4, 2004
    and incorporated herein by reference)                                                                                                                                     

33



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##### Table of Contents



|     |       |             |  |                                                                                                                                                                                                                                                                                                                                              
|---- | ----- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |       |            
|No.  |       | Description
|     |       |            
|     | 10.20 |             |  | First Amendment and Restatement of Purchase and
    Sale Agreement dated as of December 8, 2003 by and between
    Austin Jack, L.L.C. and Triple Net Properties, LLC (included as
    Exhibit 10.02 to the Form 8-K filed by the Company on
    February 4, 2004 and incorporated herein by reference)                                      
|     | 10.21 |             |  | Agreement for Purchase and Sale of Real Property
    and Escrow Instructions dated as of March 15, 2004 by and
    between T REIT  Gateway Mall ND Fee, LLC and VP
    Investments, L.L.C. (included as Exhibit 10.01 to the
    Form 8-K filed by the Company on March 29, 2004 and
    incorporated herein by reference)                  
|     | 10.22 |             |  | First Amendment to Agreement for Purchase and
    Sale of Real Property and Escrow Instructions dated as of
    March 9, 2004 by and between T REIT  Gateway
    Mall ND Fee, LLC and VP Investments, L.L.C. (included as
    Exhibit 10.02 to the Form 8-K filed by the Company on
    March 29, 2004 and incorporated herein by reference)
|     | 31.1  |             |  | Certification of Chief Executive Officer,
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                      
|     | 31.2  |             |  | Certification of Chief Financial Officer,
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                      
|     | 32.1  |             |  | Certification of Chief Executive Officer,
    pursuant to 18 U.S.C. Section 1350, as created by
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                            
|     | 32.2  |             |  | Certification of Chief Financial Officer,
    pursuant to 18 U.S.C. Section 1350, as created by
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                            

(b) The following 8-K Reports were filed
during the quarter ended March 31, 2004:

On January 15, 2004, the Company filed a
Current Report on Form 8-K dated January 1, 2004 to
report the appointment of Diana M. Laing as the Companys
Chief Executive Officer.

On February 4, 2004, the Company filed a
Current Report on Form 8-K dated January 22, 2004 to
report the acquisition of AmberOaks in Austin, Texas.

On February 12, 2004, the Company filed a
Current Report on Form 8-K dated February 8, 2004 to
report the dismissal of Grant Thornton LLP as its independent
certified public accountant the appointment of
Deloitte & Touche, LLP as its independent certified
public accountant.

On February 19, 2004, the Company filed a
Current Report on Form 8-K/A dated January 20, 2004 to
correct the date of acquisition of AmberOaks in Austin, Texas.

On March 29, 2004, the Company filed a
Current Report on Form 8-K/A dated January 20, 2004 to
report the required Item 7 financial statements with
respect to the Companys acquisition of AmberOaks in
Austin, Texas.

On March 29, 2004, the Company filed a
Current Report on Form 8-K dated March 18, 2004 to
report the disposition of Gateway Mall in Bismarck, North Dakota
and to file the required Item 7 pro forma financial
statements.

34



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##### 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/ JACK R. MAURER

| |                        
| | -----------------------
| |                        
| | Jack R. Maurer         
| | Chief Executive Officer



| |     |                    
| | --- | -------------------
| | By: | /s/ SCOTT D. PETERS

| |                        
| | -----------------------
| |                        
| | Scott D. Peters        
| | Chief Financial Officer

Date: November 22, 2004

35



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##### 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 T REIT, 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 T REIT 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 on Form S-11 filed on October 19, 2001 (File
    No. 333-772229) and incorporated herein by reference)                         



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##### 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, 2003 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, 2003 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 T REIT  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, G REIT 
    Congress Center, LLC, and W REIT  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)                                                                                                                                                                                       
|     | 10.17 |             |  | Agreement for Purchase and Sale of Real Property
    and Escrow Instructions dated as of May 14, 2003 by and
    between T REIT  Thousand Oaks, LP and Weingarten
    Realty Investors (included as Exhibit 10.01 to the
    Form 8-K filed by the Company on August 26, 2003 and
    incorporated herein by reference)                                                                                 
|     | 10.18 |             |  | Agreement for Purchase and Sale of Real Property
    and Escrow Instructions dated as of May 15, 2003 by and
    between T REIT  Pahrump, LLC and Pacific Home
    Equities, LLC (included as Exhibit 10.01 to the
    Form 8-K filed by the Company on October 9, 2003 and
    incorporated herein by reference)                                                                                       
|     | 10.19 |             |  | Purchase and Sale Agreement dated as of
    October 17, 2003 by and between Austin Jack, L.L.C. and
    Triple Net Properties, LLC (included as Exhibit 10.01 to
    the Form 8-K filed by the Company on February 4, 2004
    and incorporated herein by reference)                                                                                                                                     
|     | 10.20 |             |  | First Amendment and Restatement of Purchase and
    Sale Agreement dated as of December 8, 2003 by and between
    Austin Jack, L.L.C. and Triple Net Properties, LLC (included as
    Exhibit 10.02 to the Form 8-K filed by the Company on
    February 4, 2004 and incorporated herein by reference)                                                                                                  
|     | 10.21 |             |  | Agreement for Purchase and Sale of Real Property
    and Escrow Instructions dated as of March 15, 2004 by and
    between T REIT  Gateway Mall ND Fee, LLC and VP
    Investments, L.L.C. (included as Exhibit 10.01 to the
    Form 8-K filed by the Company on March 29, 2004 and
    incorporated herein by reference)                                                                              
|     | 10.22 |             |  | First Amendment to Agreement for Purchase and
    Sale of Real Property and Escrow Instructions dated as of
    March 9, 2004 by and between T REIT  Gateway
    Mall ND Fee, LLC and VP Investments, L.L.C. (included as
    Exhibit 10.02 to the Form 8-K filed by the Company on
    March 29, 2004 and incorporated herein by reference)                                                            
|     | 31.1  |             |  | Certification of Chief Executive Officer,
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                  
|     | 31.2  |             |  | Certification of Chief Financial Officer,
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                  
|     | 32.1  |             |  | Certification of Chief Executive Officer,
    pursuant to 18 U.S.C. Section 1350, as created by
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                        
|     | 32.2  |             |  | Certification of Chief Financial Officer,
    pursuant to 18 U.S.C. Section 1350, as created by
    Section 906 of the Sarbanes-Oxley Act of 2002