##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

|                               |  |                                                                                             
|------------------------------ |  | --------------------------------------------------------------------------------------------
|þ                              |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                              
|                               |  | For the quarterly period ended June 30,
    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                               |  | (877) 888-7348                          
|Santa Ana, California 92705                                        |  | (Registrants telephone number,         
|(Address of principal executive
    offices)                       |  | 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 August 16, 2004, there were 4,643,000 shares of common
stock of T REIT, Inc. outstanding.



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T REIT, INC.

FORM 10-Q

For the Quarterly Period Ended June 30,
2004


INDEX

|                                   |  |                                                                                                                            |    |      |    | 
|---------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                   |  |                                                                                                                            |    | Page
|                                   |  |                                                                                                                            |    |     
|PART I 
    FINANCIAL INFORMATION
|Item 1.                            |  | Financial Statements                                                                                                       |    |      | 2  | 
|                                   |  | Consolidated Balance Sheets
    as of June 30, 2004 (Unaudited) and December 31,
    2003                                  |    |      | 3  | 
|                                   |  | Consolidated Statements of
    Operations for the three and six month periods ended
    June 30, 2004 and 2003 (Unaudited) |    |      | 4  | 
|                                   |  | Consolidated Statement of
    Shareholders Equity for the six month period ended
    June 30, 2004 (Unaudited)            |    |      | 5  | 
|                                   |  | Consolidated Statements of
    Cash Flows for the six month period ended June 30, 2004 and
    2003 (Unaudited)            |    |      | 6  | 
|                                   |  | Notes to Consolidated
    Financial Statements                                                                             |    |      | 7  | 
|Item 2.                            |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                                  |    |      | 18 | 
|Item 3.                            |  | Quantitative and Qualitative
    Disclosure About Market Risks                                                             |    |      | 24 | 
|Item 4.                            |  | Controls and Procedures                                                                                                    |    |      | 25 | 
|PART II 
    OTHER INFORMATION   
|Item 1.                            |  | Legal Proceedings                                                                                                          |    |      | 26 | 
|Item 2.                            |  | Changes in Securities and
    Use of Proceeds                                                                              |    |      | 26 | 
|Item 3.                            |  | Defaults Upon Senior
    Securities                                                                                        |    |      | 26 | 
|Item 4.                            |  | Submission of Matters to a
    Vote of Security Holders                                                                    |    |      | 26 | 
|Item 5.                            |  | Other Information                                                                                                          |    |      | 27 | 
|Item 6.                            |  | Exhibits and Reports on
    Form 8-K                                                                                       |    |      | 27 | 
|Signatures                         |  |                                                                                                                            | 30 |     
|EXHIBIT 31.1                      
|EXHIBIT 31.2                      
|EXHIBIT 32.1                      
|EXHIBIT 32.2                      



1



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##### Table of Contents






PART I  FINANCIAL
INFORMATION






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

The accompanying June 30, 2004 and 2003
interim financial statements of the Company required to be filed
with this Form 10-Q Quarterly Report were prepared by
management without audit and commence on the following page,
together with the related Notes. In the opinion of management,
these interim financial statements present fairly the financial
condition, 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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##### Table of Contents



T REIT, INC.



CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                                                          |                                           |             |            |              |  |   |            |            | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ----------- | ---------- | ------------ |  | - | ---------- | ---------- | 
|                                                                                                                                                                                          |                                           | June 30,    |            | December 31,
|                                                                                                                                                                                          |                                           | 2004        |            | 2003        
|                                                                                                                                                                                          |                                           |             |            |             
|                                                                                                                                                                                          |                                           | (Unaudited) |            |             
|ASSETS                                                                                                                                                                                   
|Real estate investments:                                                                                                                                                                  |                                           |             |            |              |  |   |            |           
|                                                                                                                                                                                          | Operating properties, net                 |             | $          | 7,008,000    |  |   | $          | 15,747,000 | 
|                                                                                                                                                                                          | Investments in unconsolidated real estate |             |            | 25,741,000   |  |   |            | 19,331,000 | 
|                                                                                                                                                                                          |                                           |             |            |              |  |   |            |           
|                                                                                                                                                                                          |                                           |             | 32,749,000 |              |  |   | 35,078,000 |           
|Cash and cash equivalents                                                                                                                                                                 |                                           |             | 346,000    |              |  |   | 12,189,000 |           
|Investment in marketable securities                                                                                                                                                       |                                           |             | 465,000    |              |  |   |           |           
|Accounts receivable, net                                                                                                                                                                  |                                           |             | 96,000     |              |  |   | 37,000     |           
|Accounts receivable from related parties                                                                                                                                                  |                                           |             | 418,000    |              |  |   | 538,000    |           
|Real estate deposits                                                                                                                                                                      |                                           |             |           |              |  |   | 11,000     |           
|Other assets, net                                                                                                                                                                         |                                           |             | 363,000    |              |  |   | 870,000    |           
|Note receivable                                                                                                                                                                           |                                           |             | 9,339,000  |              |  |   | 647,000    |           
|                                                                                                                                                                                          |                                           |             |            |              |  |   |            |           
|Total assets                                                                                                                                                                              |                                           | $           | 43,776,000 |              |  | $ | 49,370,000 |           
|                                                                                                                                                                                          |                                           |             |            |              |  |   |            |           
|                                                                                                                                                                                         
|LIABILITIES AND SHAREHOLDERS
    EQUITY                                                                                                                                                 
|Accounts payable and accrued liabilities                                                                                                                                                  |                                           | $           | 868,000    |              |  | $ | 1,635,000  |           
|Distributions payable                                                                                                                                                                     |                                           |             | 318,000    |              |  |   | 318,000    |           
|Security deposits and prepaid rent                                                                                                                                                        |                                           |             | 54,000     |              |  |   | 59,000     |           
|Notes payable                                                                                                                                                                             |                                           |             | 5,071,000  |              |  |   | 9,250,000  |           
|                                                                                                                                                                                          |                                           |             |            |              |  |   |            |           
|                                                                                                                                                                                          |                                           |             | 6,311,000  |              |  |   | 11,262,000 |           
|Commitments and contingencies                                                                                                                                                             |                                           |             |            |              |  |   |            |           
|Shareholders equity:                                                                                                                                                                     |                                           |             |            |              |  |   |            |           
|Common stock, $.01 par value;
    10,000,000 shares authorized; 4,720,000 shares issued,
    4,643,000 and 4,646,000 outstanding at June 30, 2004 and
    December 31, 2003, respectively |                                           |             | 47,000     |              |  |   | 47,000     |           
|Additional paid-in capital                                                                                                                                                                |                                           |             | 41,265,000 |              |  |   | 41,265,000 |           
|Treasury stock, 77,000 shares and 74,000 at
    June 30, 2004 and December 31, 2003, respectively                                                                                         |                                           |             | (707,000   | )            |  |   | (675,000   | )         
|Distributions in excess of earnings                                                                                                                                                       |                                           |             | (3,131,000 | )            |  |   | (2,529,000 | )         
|Other comprehensive loss                                                                                                                                                                  |                                           |             | (9,000     | )            |  |   |           |           
|                                                                                                                                                                                          |                                           |             |            |              |  |   |            |           
|Total shareholders equity                                                                                                                                                                |                                           |             | 37,465,000 |              |  |   | 38,108,000 |           
|                                                                                                                                                                                          |                                           |             |            |              |  |   |            |           
|Total liabilities and shareholders equity                                                                                                                                                |                                           | $           | 43,776,000 |              |  | $ | 49,370,000 |           
|                                                                                                                                                                                          |                                           |             |            |              |  |   |            |           

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

3



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T REIT, INC.




CONSOLIDATED STATEMENTS OF
OPERATIONS

(Unaudited)


|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |         | 
|---------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------ | --------- | ---------------- | - | ---- | --------- | ------------- |  | - | --------- | ------- |  | - | --------- | ------- | 
|                                                                             |                                                                  |                    |           |                 
|                                                                             |                                                                  | Three Months Ended |           | Six Months Ended
|                                                                             |                                                                  | June 30,           |           | June 30,        
|                                                                             |                                                                  |                    |           |                 
|                                                                             |                                                                  | 2004               |           | 2003             |   | 2004 |           | 2003         
|                                                                             |                                                                  |                    |           |                  |   |      |           |              
|                                                                             |                                                                  |                    |           | (As restated)    |   |      |           | (As restated)
|Revenues                                                                     |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|                                                                             | Rental income                                                    |                    | $         | 239,000          |   |      | $         | 272,000       |  |   | $         | 485,000 |  |   | $         | 506,000 | 
|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|                                                                             |                                                                  |                    | 239,000   |                  |   |      | 272,000   |               |  |   | 485,000   |         |  |   | 506,000   |        
|Expenses                                                                     |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|                                                                             | Rental expenses                                                  |                    |           | 96,000           |   |      |           | 61,000        |  |   |           | 133,000 |  |   |           | 124,000 | 
|                                                                             | General and administrative                                       |                    |           | 265,000          |   |      |           | 221,000       |  |   |           | 356,000 |  |   |           | 333,000 | 
|                                                                             | Depreciation and amortization                                    |                    |           | 38,000           |   |      |           | 37,000        |  |   |           | 75,000  |  |   |           | 74,000  | 
|                                                                             | Interest (including amortization of deferred
    financing fees) |                    |           | 79,000           |   |      |           | 63,000        |  |   |           | 153,000 |  |   |           | 125,000 | 
|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|                                                                             |                                                                  |                    | 478,000   |                  |   |      | 382,000   |               |  |   | 717,000   |         |  |   | 656,000   |        
|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|Loss before other income and discontinued
    operations                     |                                                                  |                    | (239,000  | )                |   |      | (110,000  | )             |  |   | (232,000  | )       |  |   | (150,000  | )      
|Other income                                                                 |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|                                                                             | Interest income                                                  |                    |           | 139,000          |   |      |           | 41,000        |  |   |           | 179,000 |  |   |           | 65,000  | 
|                                                                             | Dividend income                                                  |                    |           | 21,000           |   |      |           |              |  |   |           | 61,000  |  |   |           |        | 
|                                                                             | Gain on sale of marketable securities                            |                    |           | 3,000            |   |      |           |              |  |   |           | 50,000  |  |   |           |        | 
|                                                                             | Equity in earnings of unconsolidated real estate                 |                    |           | 55,000           |   |      |           | 406,000       |  |   |           | 335,000 |  |   |           | 964,000 | 
|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|Income (loss) from continuing operations before
    discontinued operations  |                                                                  |                    | (21,000   | )                |   |      | 337,000   |               |  |   | 393,000   |         |  |   | 879,000   |        
|Gain (loss) on sale of real estate investments                               |                                                                  |                    | (9,000    | )                |   |      |          |               |  |   | 813,000   |         |  |   | (191,000  | )      
|Income (loss) from discontinued
    operations  property held for sale, net |                                                                  |                    | (4,000    | )                |   |      | 546,000   |               |  |   | 101,000   |         |  |   | 767,000   |        
|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|Net income (loss)                                                            |                                                                  | $                  | (34,000   | )                |   | $    | 883,000   |               |  | $ | 1,307,000 |         |  | $ | 1,455,000 |        
|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|Net income (loss) per common share:                                          |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|Basic and diluted:                                                           |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|                                                                             | Continuing operations                                            |                    | $         | (0.01            | ) |      | $         | 0.07          |  |   | $         | 0.08    |  |   | $         | 0.18    | 
|                                                                             | Discontinued operations                                          |                    | $         | (0.00            | ) |      | $         | 0.12          |  |   | $         | 0.20    |  |   | $         | 0.12    | 
|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|Total net income (loss) per common share                                     |                                                                  | $                  | (0.01     | )                |   | $    | 0.19      |               |  | $ | 0.28      |         |  | $ | 0.30      |        
|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|Diluted:                                                                     |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        
|Weighted average common shares
    outstanding  basic                       |                                                                  |                    | 4,643,000 |                  |   |      | 4,695,000 |               |  |   | 4,644,000 |         |  |   | 4,696,000 |        
|Weighted average common shares
    outstanding  diluted                     |                                                                  |                    | 4,643,000 |                  |   |      | 4,704,000 |               |  |   | 4,644,000 |         |  |   | 4,696,000 |        
|Dividends declared per share                                                 |                                                                  | $                  | 0.21      |                  |   | $    | 0.21      |               |  | $ | 0.41      |         |  | $ | 0.41      |        
|                                                                             |                                                                  |                    |           |                  |   |      |           |               |  |   |           |         |  |   |           |        

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

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T REIT, INC.



CONSOLIDATED STATEMENT OF SHAREHOLDERS
EQUITY


For the Six Months Ended June 30,
2004


(Unaudited)


|                                |  |           |           |           |  |            |        |          |  |               |            |                 |  |       |          |   |  |   |            |   |  |   |        |   |  |   |            |  
|------------------------------- |  | --------- | --------- | --------- |  | ---------- | ------ | -------- |  | ------------- | ---------- | --------------- |  | ----- | -------- | - |  | - | ---------- | - |  | - | ------ | - |  | - | ---------- | -
|                                |  |           |           | Common    |  | Additional |        |          |  | Distributions |            | Accumulated Net |  |      
|                                |  | Number of |           | Stock Par |  | Paid-In    |        | Treasury |  | in Excess of  |            | Comprehensive   |  |      
|                                |  | Shares    |           | Value     |  | Capital    |        | Stock    |  | Earnings      |            | Income/(Loss)   |  | Total
|                                |  |           |           |           |  |            |        |          |  |               |            |                 |  |      
|BALANCE  December 31,
    2003 |  |           | 4,646,000 |           |  | $          | 47,000 |          |  | $             | 41,265,000 |                 |  | $     | (675,000 | ) |  | $ | (2,530,000 | ) |  | $ |       |   |  | $ | 38,107,000 |  
|Net Income                      |  |           |          |           |  |            |       |          |  |               |           |                 |  |       |         |   |  |   | 1,307,000  |   |  |   |       |   |  |   | 1,307,000  |  
|Comprehensive income (loss)     |  |           |          |           |  |            |       |          |  |               |           |                 |  |       |         |   |  |   |           |   |  |   | (9,000 | ) |  |   | (9,000     | )
|                                |  |           |           |           |  |            |        |          |  |               |            |                 |  |       |          |   |  |   |            |   |  |   |        |   |  |   |            |  
|Comprehensive income            |  |           |           |           |  |            |        |          |  |               |            |                 |  |       |          |   |  |   |            |   |  |   |        |   |  |   | 1,298,000  |  
|Distributions                   |  |           |          |           |  |            |       |          |  |               |           |                 |  |       |         |   |  |   | (1,908,000 | ) |  |   |       |   |  |   | (1,908,000 | )
|Repurchase of Shares            |  |           | (3,000    | )         |  |            |       |          |  |               |           |                 |  |       | (32,000  | ) |  |   |           |   |  |   |       |   |  |   | (32,000    | )
|                                |  |           |           |           |  |            |        |          |  |               |            |                 |  |       |          |   |  |   |            |   |  |   |        |   |  |   |            |  
|BALANCE  June 30,
    2004     |  |           | 4,643,000 |           |  | $          | 47,000 |          |  | $             | 41,265,000 |                 |  | $     | (707,000 | ) |  | $ | (3,131,000 | ) |  | $ | (9,000 | ) |  | $ | 37,465,000 |  
|                                |  |           |           |           |  |            |        |          |  |               |            |                 |  |       |          |   |  |   |            |   |  |   |        |   |  |   |            |  

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

5



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##### Table of Contents



T REIT, INC.




CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Unaudited)


|                                                                                                |                                                                           |                                                         |             |               |            |   |            |            |            |  
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------------------------------------------- | ----------- | ------------- | ---------- | - | ---------- | ---------- | ---------- | -
|                                                                                                |                                                                           | Six Months                                              |             | Six Months   
|                                                                                                |                                                                           | June 30, 2004                                           |             | June 30, 2003
|                                                                                                |                                                                           |                                                         |             |              
|                                                                                                |                                                                           |                                                         |             | (As restated)
|CASH FLOWS FROM OPERATING ACTIVITIES                                                            |                                                                           |                                                         |             |               |            |   |            |           
|Net income                                                                                      |                                                                           | $                                                       | 1,307,000   |               |            | $ | 1,455,000  |           
|Adjustments to reconcile net income to net cash
    (used in) provided by operating activities: |                                                                           |                                                         |             |               |            |   |            |           
|                                                                                                | Equity in earnings of unconsolidated real estate                          |                                                         |             | (335,000      | )          |   |            | (964,000   | )         
|                                                                                                | (Gain)/ loss on sale of real estate investments                           |                                                         |             | (813,000      | )          |   |            | 191,000    |           
|                                                                                                | Gain on sale of marketable securities                                     |                                                         |             | (50,000       | )          |   |            |           |           
|                                                                                                | Depreciation  continuing operations                                      |                                                         |             | 75,000        |            |   |            | 74,000     |           
|                                                                                                | Depreciation  discontinued operations                                    |                                                         |             | 77,000        |            |   |            | 203,000    |           
|                                                                                                | Deferred financing costs                                                  |                                                         |             | 11,000        |            |   |            | 89,000     |           
|Change in operating assets and liabilities:                                                     |                                                                           |                                                         |             |               |            |   |            |           
|                                                                                                | Accounts receivable                                                       |                                                         |             | (58,000       | )          |   |            | (116,000   | )         
|                                                                                                | Accounts receivable from related parties                                  |                                                         |             | 120,000       |            |   |            | 239,000    |           
|                                                                                                | Other assets                                                              |                                                         |             | 245,000       |            |   |            | (815,000   | )         
|                                                                                                | Accounts payable and accrued liabilities                                  |                                                         |             | (607,000      | )          |   |            | (185,000   | )         
|                                                                                                | Security deposits and prepaid rent                                        |                                                         |             | (6,000        | )          |   |            | (45,000    | )         
|                                                                                                |                                                                           |                                                         |             |               |            |   |            |           
|                                                                                                |                                                                           | Net cash (used in) provided by operating
    activities |             |               | (34,000    | ) |            |            | 126,000    |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                            |                                                                           |                                                         |             |               |            |   |            |           
|                                                                                                | Purchase of marketable securities                                         |                                                         |             | (4,229,000    | )          |   |            |           |           
|                                                                                                | Proceeds from sale of marketable securities                               |                                                         |             | 3,806,000     |            |   |            |           |           
|                                                                                                | Purchase of real estate operating properties                              |                                                         |             |              |            |   |            | (8,891,000 | )         
|                                                                                                | Purchase of investments in unconsolidated real
    estate                 |                                                         |             | (6,587,000    | )          |   |            | (5,025,000 | )         
|                                                                                                | Distributions received from investments in
    unconsolidated real estate |                                                         |             | 1,058,000     |            |   |            | 1,049,000  |           
|                                                                                                | Capital expenditures                                                      |                                                         |             | (1,662,000    | )          |   |            |           |           
|                                                                                                | Proceeds from disposition of property                                     |                                                         |             | 2,452,000     |            |   |            | 3,843,000  |           
|                                                                                                | Collections of notes receivable                                           |                                                         |             | 8,000         |            |   |            | 4,000      |           
|                                                                                                | Real estate deposits applied to purchases                                 |                                                         |             | 11,000        |            |   |            | 3,919,000  |           
|                                                                                                |                                                                           |                                                         |             |               |            |   |            |           
|                                                                                                |                                                                           | Net cash used in investing activities                   |             |               | (5,143,000 | ) |            |            | (5,101,000 | )
|CASH FLOWS FROM FINANCING ACTIVITIES                                                            |                                                                           |                                                         |             |               |            |   |            |           
|                                                                                                | Borrowings under notes payable                                            |                                                         |             |              |            |   |            | 5,000,000  |           
|                                                                                                | Principal payments on notes payable                                       |                                                         |             | (4,936,000    | )          |   |            | (3,059,000 | )         
|                                                                                                | Borrowings on line of credit                                              |                                                         |             | 710,000       |            |   |            |           |           
|                                                                                                | Repayment on line of credit                                               |                                                         |             | (500,000      | )          |   |            |           |           
|                                                                                                | Distributions paid                                                        |                                                         |             | (1,908,000    | )          |   |            | (1,928,000 | )         
|                                                                                                | Repurchase of shares                                                      |                                                         |             | (32,000       | )          |   |            | (16,000    | )         
|                                                                                                |                                                                           |                                                         |             |               |            |   |            |           
|                                                                                                |                                                                           | Net cash used in financing activities                   |             |               | (6,666,000 | ) |            |            | (3,000     | )
|NET DECREASE IN CASH AND CASH
    EQUIVALENTS                                                   |                                                                           |                                                         | (11,843,000 | )             |            |   | (4,978,000 | )         
|CASH AND CASH EQUIVALENTS 
    beginning of period                                             |                                                                           |                                                         | 12,189,000  |               |            |   | 6,129,000  |           
|                                                                                                |                                                                           |                                                         |             |               |            |   |            |           
|CASH AND CASH EQUIVALENTS  end of
    period                                                   |                                                                           | $                                                       | 346,000     |               |            | $ | 1,151,000  |           
|                                                                                                |                                                                           |                                                         |             |               |            |   |            |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
    INFORMATION:                                           |                                                                           |                                                         |             |               |            |   |            |           
|Cash paid during the period for:                                                                |                                                                           |                                                         |             |               |            |   |            |           
|                                                                                                |                                                                           | Interest                                                |             | $             | 272,000    |   |            | $          | 967,000    |  
|                                                                                                |                                                                           | Income taxes                                            |             | $             | 5,000      |   |            | $          | 17,000     |  
|                                                                                                |                                                                           |                                                         |             |               |            |   |            |           
|SUPPLEMENTAL DISCLOSURE OF NONCASH
    ACTIVITIES:                                              |                                                                           |                                                         |             |               |            |   |            |           
|                                                                                                |                                                                           | Note receivable due to sale of property                 |             | $             | 8,700,000  |   |            | $          |           |  
|                                                                                                |                                                                           |                                                         |             |               |            |   |            |           

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

6



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##### Table of Contents






T REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

June 30, 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 June 30, 2004, the Company
owned real estate investments consisting of one consolidated
property and interests in ten 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 9).



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



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

The accompanying consolidated financial
statements include the accounts of the Company, the Operating
Partnership, and the wholly owned subsidiaries of the Operating
Partnership and variable interest entities that the Company has
concluded should be consolidated; all material intercompany
transactions and account balances have been eliminated in
consolidation. All references to the Company include the
Operating Partnership and its subsidiaries.



| |                       
| | ----------------------
| | Interim Financial Data

The accompanying interim financial statements
have been prepared by the Companys management in
accordance with accounting principles generally accepted in the
United States of America (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 require by GAAP for complete
financial statements. The accompanying financial information
reflects all adjustments, which are, in our opinion, of a normal
recurring nature and necessary for a fair presentation of our
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. The accompanying 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 Securities
and Exchange Commission.



| |                                        
| | ---------------------------------------
| | Investment in Marketable
    Securities

Marketable securities are carried at fair value
and consist primarily of investments in marketable common stocks
of public REITs. 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 a debt or equity security is
temporary in nature, it records the decline as an unrealized
loss in stockholders equity. If the decline is believed to
be other than temporary, the debt or equity security is written
down to the carrying value and a realized loss is recorded on
the Companys statement of income. Managements
assessment of a decline in value includes, among other things,
its current judgment as to the financial position and future
prospects of

7



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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.



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

Certain reclassifications have been made to prior
year amounts in order to conform to the current period
presentation.



| |             
| | ------------
| | 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 for the year,
as defined by the 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 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 six months ended
June 30, 2004 and the 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.



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

The Company reports earnings per share pursuant
to Statement of Financial Accounting Standards No. 128,
Earnings Per Share. Basic earnings per share
attributable for all periods presented is computed by dividing
the net income by the weighted average number of common shares
outstanding during the period. Diluted earnings per share are
computed based on the weighted average number of common shares
and all potentially dilutive securities. The Companys
potentially dilutive securities consist of 101,000 warrants at
June 30, 2004 and December 31, 2003 and 425,000 and
165,000 stock options which are accounted for under the treasury
method and therefore, 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 June 30, 2004 and
December 31, 2003 and the revenues and expenses for each of
the periods. Actual results could differ from those estimates.



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

As permitted by FAS 123, Accounting
for Stock-Based Compensation, and FAS 148,
Accounting for Stock-Based Compensation Transition and
Disclosure, the Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations in
accounting for its employee stock options. Under APB 25,
compensation expense is recorded when the exercise price of
employee stock options is less than the fair value of the
underlying stock on the date of grant. The Company has
implemented the disclosure-only provisions of FAS 123 and
FAS 148. Had the

8



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Company elected to adopt the expense recognition
provisions of FAS 123, the impact on net income (loss) and
earnings (loss) per share would have been as follows:

|                                                              |  |                             |         |                           |  |      |         |      |  |   |           |  |  |   |           | 
|------------------------------------------------------------- |  | --------------------------- | ------- | ------------------------- |  | ---- | ------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                                              |  |                             |         |                          
|                                                              |  | Three Months Ended June 30, |         | Six Months Ended June 30,
|                                                              |  | 2004                        |         | 2003                      |  | 2004 |         | 2003
|                                                              |  |                             |         |                           |  |      |         |     
|Actual net income (loss)                                      |  | $                           | (34,000 | )                         |  | $    | 883,000 |      |  | $ | 1,307,000 |  |  | $ | 1,455,000 | 
|Pro forma compensation expense                                |  |                             | 42,000  |                           |  |      | 13,000  |      |  |   | 65,000    |  |  |   | 31,000    | 
|                                                              |  |                             |         |                           |  |      |         |      |  |   |           |  |  |   |           | 
|Pro forma net income (loss)                                   |  | $                           | (76,000 | )                         |  | $    | 870,000 |      |  | $ | 1,242,000 |  |  | $ | 1,424,000 | 
|                                                              |  |                             |         |                           |  |      |         |      |  |   |           |  |  |   |           | 
|Actual net income (loss) per share 
    basic and diluted    |  | $                           | (0.01   | )                         |  | $    | 0.19    |      |  | $ | 0.28      |  |  | $ | 0.30      | 
|                                                              |  |                             |         |                           |  |      |         |      |  |   |           |  |  |   |           | 
|Pro forma net income (loss) per share 
    basic and diluted |  | $                           | (0.02   | )                         |  | $    | 0.19    |      |  | $ | 0.27      |  |  | $ | 0.30      | 
|                                                              |  |                             |         |                           |  |      |         |      |  |   |           |  |  |   |           | 

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 $1.00 per option, using the Black-Scholes
option-pricing model, assuming an 8.25% dividend yield, a 4.75%
risk-free interest rate based on the 10-year U.S. Treasury
Bond, an expected life of 9.0 years, and a 0% volatility
rate.

The weighted average remaining contractual life
of all options outstanding at June 30, 2004, was
9.01 years.



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

The Company internally evaluates all properties
as one industry segment and accordingly does not report segment
information.



|   |                        
|-- | -----------------------
|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 investment in consolidated
properties at June 30, 2004 and December 31, 2003 is
as follows:

|                                  |  |          |           |              |  |   |            |  
|--------------------------------- |  | -------- | --------- | ------------ |  | - | ---------- | -
|                                  |  | June 30, |           | December 31,
|                                  |  | 2004     |           | 2003        
|                                  |  |          |           |             
|Buildings and tenant improvements |  | $        | 5,800,000 |              |  | $ | 15,160,000 |  
|Land                              |  |          | 1,488,000 |              |  |   | 1,012,000  |  
|                                  |  |          |           |              |  |   |            |  
|                                  |  |          | 7,288,000 |              |  |   | 16,172,000 |  
|Less: accumulated depreciation    |  |          | (280,000  | )            |  |   | (425,000   | )
|                                  |  |          |           |              |  |   |            |  
|                                  |  | $        | 7,008,000 |              |  | $ | 15,747,000 |  
|                                  |  |          |           |              |  |   |            |  

9



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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



| |                                                 
| | ------------------------------------------------
| | 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 an 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



| |                                          
| | -----------------------------------------
| | 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. The note was
refinanced and the Company received $6,500,000 on July 9,
2004 and issued an adjustable note receivable for $2,200,000
(see Note 5). 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.



| |                                              
| | ---------------------------------------------
| | 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. The Company had the
following investments in unconsolidated real estate at
June 30, 2004:

|                               |  |          |                 |            |  |            |       |  |  |   |            | 
|------------------------------ |  | -------- | --------------- | ---------- |  | ---------- | ----- |  |  | - | ---------- | 
|                               |  |          |                 | Percentage |  | Companys 
|Property                       |  | Location |                 | Owned      |  | Investment
|                               |  |          |                 |            |  |           
|City Center West A Building  |  |          | Las Vegas, NV   |            |  |            | 89.1% |  |  | $ | 7,770,000  | 
|AmberOaks                      |  |          | Austin, TX      |            |  |            | 75.0% |  |  |   | 5,973,000  | 
|Congress Center                |  |          | Chicago, IL     |            |  |            | 10.2% |  |  |   | 4,662,000  | 
|Pacific Corporate Park         |  |          | Lake Forest, CA |            |  |            | 22.8% |  |  |   | 1,932,000  | 
|Titan Building and Titan Plaza |  |          | San Antonio, TX |            |  |            | 48.5% |  |  |   | 1,886,000  | 
|Reno Trademark Building        |  |          | Reno, NV        |            |  |            | 40.0% |  |  |   | 1,151,000  | 
|Saddleback Financial           |  |          | San Antonio, TX |            |  |            | 25.0% |  |  |   | 783,000    | 
|Oakey Building                 |  |          | Las Vegas, NV   |            |  |            | 9.8%  |  |  |   | 699,000    | 
|Enclave                        |  |          | Houston, TX     |            |  |            | 3.3%  |  |  |   | 447,000    | 
|County Center Building         |  |          | Temecula, CA    |            |  |            | 16.0% |  |  |   | 438,000    | 
|                               |  |          |                 |            |  |            |       |  |  |   |            | 
|                               |  |          |                 |            |  |            |       |  |  | $ | 25,741,000 | 
|                               |  |          |                 |            |  |            |       |  |  |   |            | 

10



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Condensed combined historical financial
information of investments in unconsolidated real estate as of
June 30, 2004 is as follows:

|                               |  |                |             | 
|------------------------------ |  | -------------- | ----------- | 
|                               |  | As of June 30,
|                               |  | 2004          
|                               |  |               
|Assets (primarily real estate) |  | $              | 278,693,000 | 
|                               |  |                |             | 
|Mortgages notes payable        |  |                | 178,266,000 | 
|Other liabilities              |  |                | 4,626,000   | 
|Equity                         |  |                | 95,801,000  | 
|                               |  |                |             | 
|Total liabilities and equity   |  | $              | 278,693,000 | 
|Companys share of equity      |  |                | 25,741,000  | 
|Revenues                       |  | $              | 18,733,000  | 
|Rental and other expenses      |  |                | 16,276,000  | 
|                               |  |                |             | 
|Net Income                     |  | $              | 2,457,000   | 
|                               |  |                |             | 
|Companys equity in earnings   |  |                | 335,000     | 
|                               |  |                |             | 



| |             
| | ------------
| | 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 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
commission to Realty of $585,000, or 2.3% 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.



| |                                       
| | --------------------------------------
| | 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 $8,137,000. 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.

11



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |             
|-- | ------------
|4. | Other Assets

Other assets as of June 30, 2004 and
December 31, 2003 consisted of the following:

|                                                                                                                              |                    |          |         |              |  |   |         |         | 
|----------------------------------------------------------------------------------------------------------------------------- | ------------------ | -------- | ------- | ------------ |  | - | ------- | ------- | 
|                                                                                                                              |                    | June 30, |         | December 31,
|                                                                                                                              |                    | 2004     |         | 2003        
|                                                                                                                              |                    |          |         |             
|Loan impounds and reserves                                                                                                    |                    | $        | 216,000 |              |  | $ | 574,000 |        
|Deferred rent receivable                                                                                                      |                    |          | 61,000  |              |  |   | 75,000  |        
|Lease commissions, net of accumulated
    amortization of $9,000 at December 31, 2003                                         |                    |          |        |              |  |   | 75,000  |        
|Loan fees, net of accumulated amortization of
    $36,000 at June 30, 2004 and $48,000 at December 31,
    2003, respectively |                    |          | 81,000  |              |  |   | 145,000 |        
|Prepaid expenses                                                                                                              |                    |          | 4,000   |              |  |   |        |        
|Other assets                                                                                                                  |                    |          | 1,000   |              |  |   | 1,000   |        
|                                                                                                                              |                    |          |         |              |  |   |         |        
|                                                                                                                              | Total other assets |          | $       | 363,000      |  |   | $       | 870,000 | 
|                                                                                                                              |                    |          |         |              |  |   |         |        

5.     Notes
Receivable

The Company issued 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 was
due June 14, 2004. The note was refinanced and the Company
received $6,500,000 on July 9, 2004 and issued a new note
for $2,200,000. The new note is an adjustable rate note with
interest calculated at a blended rate in which the
borrowers interest paid cannot exceed a total of $522,000
annually between the borrowers two notes. The interest
rate for the $2,200,000 note at July 9, 2004 was 8.6%. The
new note is interest only with the balance, including all unpaid
interest, due on August 1, 2006.

Additionally, the Company also holds an existing
note with a balance of $640,000 and $647,000 at June 30,
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.

6.     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 June 30, 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 June 30, 2004, the Company had
$755,000 outstanding under the line of credit.

7.     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.

8.     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

12



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 repurchased 3,000 shares for $32,000 during the six
months ended June 30, 2004 and repurchased 50,000 shares of
common stock for $455,000 during the year ended
December 31, 2003.



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

As permitted by FAS 123, Accounting
for Stock-Based Compensation, and FAS 148,
Accounting for Stock-Based Compensation Transition and
Disclosure, the Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations in
accounting for its employee stock options. Under APB 25,
compensation expense is recorded when the exercise price of
employee stock options is less than the fair value of the
underlying stock on the date of grant. The Company has
implemented the disclosure-only provisions of FAS 123 and
FAS 148.

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. Options 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 June 30, 2004, options for a total of
425,000 shares are outstanding under the Officer and Employee
Stock Option Plan and Independent Director Stock Option Plan.

|                    |           |           |         |          |   |                  |      |      |  |   |      |      | 
|------------------- | --------- | --------- | ------- | -------- | - | ---------------- | ---- | ---- |  | - | ---- | ---- | 
|                    |           |           |         | Range of |   |                 
|                    |           | Number    |         | Exercise |   | Weighted Average
|Options Outstanding |           | of Shares |         | Prices   |   | Exercise Price  
|                    |           |           |         |          |   |                 
|December 31, 2003   |           |           | 165,000 |          |   | $                | 9.05 |      |  | $ | 9.05 |     
|                    | Granted   |           |         | 320,000  |   |                  |      | 9.05 |  |   |      | 9.05 | 
|                    | Cancelled |           |         | (60,000  | ) |                  |      | 9.05 |  |   |      | 9.05 | 
|                    |           |           |         |          |   |                  |      |      |  |   |      |     
|June 30, 2004       |           |           | 425,000 |          |   | $                | 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 
|Range of        |  | Number      |  | Contractual  |  | Outstanding      |  | Number      |  | Exercisable     
|Exercise Prices |  | Outstanding |  | Life (Years) |  | Options          |  | Exercisable |  | Options         
|                |  |             |  |              |  |                  |  |             |  |                 
|$9.05           |  | 425,000     |  | 9.00         |  | $9.05            |  | 160,000     |  | $9.05           

13



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The fair value of the options outstanding are
calculated using the Black-Scholes option-pricing model.
Assumptions used in the calculation included a 8.25% dividend
yield, a 4.75% risk-free interest rate based on the 10-year U.S.
Treasury Bond, an expected life of 9.0 years, and a 0%
volatility rate. The fair value at June 30, 2004 was $1.00.

The weighted average remaining contractual life
of all options outstanding at June 30, 2004, was
approximately 9.01 years.

9.     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 and six months
ended June 30, 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. 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,
per the Advisory agreement, for each property managed by Realty.
All of the Companys properties are managed by Realty. The
Company incurred $30,000 and $181,000 in property management
fees for the six months ended June 30, 2004 and
June 30, 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

14



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##### Table of Contents



T REIT, INC.


NOTES TO 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 six months ended June 30, 2004 and
2003.



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

As discussed in Note 3, the Company paid Realty
real estate sales commissions of $1,161,000 and $2,000,000 in
connection with the Companys real estate acquisitions and
dispositions during the six months ended June 30, 2004 and
June 30, 2003, respectively.

10.     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 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.

On July 19, 2004, Michael R. and Patricia C.
Long, as Trustees of the Michael R. and Patricia C. Long 2001
Trust (the Purchasers) filed a petition in the
District Court of the 25th Judicial District Guadalupe County,
Texas against T REIT-Seguin, LLC, Peck-Seguin, LLC, Lake Air
Mall-Seguin, LLC, Chicago Title Company and Triple Net
Properties, LLC (collectively, the Sellers). The
Company, through its wholly owned subsidiary T REIT-Seguin,
LLC purchased a 26% interest in the Seguin Corners Shopping
Center in November 2000 which was sold to the Purchasers in
August 2002. The petition alleges that Sellers misrepresented
and/or failed to disclose that they did not own and could not
convey the property in its entirety to Purchasers. Management
strongly disagrees with the points outlined in the suit and
intends to vigorously defend the action. While management
believes that its exposure should be limited by its title
insurance coverage with Chicago Title Company, if Purchasers
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

15



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

respect to an environmental liability that the
Company believes would require additional disclosure or the
recording of a loss contingency.



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

11.     Discontinued
Operations  Property Held for Sale

In accordance with SFAS 144 Accounting for
the Impairment or Disposal of Long-Lived Assets, the net
income and the net gain on dispositions of operating properties
sold subsequent to December 31, 2001 or classified as held
for sale are reflected in the consolidated statement of
operations as discontinued operations for all periods presented.
For the three and six months ended June 30, 2004 and 2003,
discontinued operations included the net income of one property
sold in 2004 and three properties sold in 2003. The following
table summarizes the income and expense components that comprise
discontinued operations for the three and six months ended
June 30:

|           |                                                                  |                    |        |                  |  |      |           |               |  |   |         |         |   |   |           |           | 
|---------- | ---------------------------------------------------------------- | ------------------ | ------ | ---------------- |  | ---- | --------- | ------------- |  | - | ------- | ------- | - | - | --------- | --------- | 
|           |                                                                  |                    |        |                 
|           |                                                                  | Three Months Ended |        | Six Months Ended
|           |                                                                  | June 30            |        | June 30         
|           |                                                                  |                    |        |                 
|           |                                                                  | 2004               |        | 2003             |  | 2004 |           | 2003         
|           |                                                                  |                    |        |                  |  |      |           |              
|           |                                                                  |                    |        | (As restated)    |  |      |           | (As restated)
|Revenues   |                                                                  |                    |        |                  |  |      |           |               |  |   |         |         |   |   |           |          
|           | Rental Income                                                    |                    | $      | 27,000           |  |      | $         | 1,396,000     |  |   | $       | 356,000 |   |   | $         | 2,725,000 | 
|           | Interest Income                                                  |                    |        |                 |  |      |           | 1,000         |  |   |         | 1,000   |   |   |           | 1,000     | 
|           |                                                                  |                    |        |                  |  |      |           |               |  |   |         |         |   |   |           |          
|           |                                                                  |                    | 27,000 |                  |  |      | 1,397,000 |               |  |   | 357,000 |         |   |   | 2,726,000 |          
|Expenses   |                                                                  |                    |        |                  |  |      |           |               |  |   |         |         |   |   |           |          
|           | Rental expenses                                                  |                    |        | 31,000           |  |      |           | 255,000       |  |   |         | 57,000  |   |   | $         | 738,000   | 
|           | General and administrative                                       |                    |        |                 |  |      |           | 43,000        |  |   |         | (13,000 | ) |   |           | 59,000    | 
|           | Depreciation and amortization                                    |                    |        |                 |  |      |           | 65,000        |  |   |         | 77,000  |   |   |           | 203,000   | 
|           | Interest (including amortization of deferred
    financing fees) |                    |        |                 |  |      |           | 488,000       |  |   |         | 135,000 |   |   |           | 959,000   | 
|           |                                                                  |                    |        |                  |  |      |           |               |  |   |         |         |   |   |           |          
|           |                                                                  |                    | 31,000 |                  |  |      | 851,000   |               |  |   | 256,000 |         |   |   | 1,959,000 |          
|           |                                                                  |                    |        |                  |  |      |           |               |  |   |         |         |   |   |           |          
|Net income |                                                                  | $                  | (4,000 | )                |  | $    | 546,000   |               |  | $ | 101,000 |         |   | $ | 767,000   |          
|           |                                                                  |                    |        |                  |  |      |           |               |  |   |         |         |   |   |           |          

12.     Restatement

As noted in the Companys 2003 annual report
on Form 10K/ A, certain 2003 amounts have been restated to
reflect the reclassification of discontinued operations and the
loss on sale of real estate due to the reallocation of the
property basis.

16



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

T REIT, Inc.

Statement of Operations

|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |           | 
|---------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------ | --------- | ---------------- |  | ------------- | --------- | ------------- |  | - | --------- | ------- |  | - | --------- | --------- | 
|                                                                             |                                                                  |                    |           |                 
|                                                                             |                                                                  | Three Months Ended |           | Six Months Ended
|                                                                             |                                                                  | June 30, 2003      |           | June 30, 2003   
|                                                                             |                                                                  |                    |           |                 
|                                                                             |                                                                  | (As restated)      |           | (As reported)    |  | (As restated) |           | (As reported)
|Revenues                                                                     |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|                                                                             | Rental income                                                    |                    | $         | 272,000          |  |               | $         | 636,000       |  |   | $         | 506,000 |  |   | $         | 1,129,000 | 
|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|                                                                             |                                                                  |                    | 272,000   |                  |  |               | 636,000   |               |  |   | 506,000   |         |  |   | 1,129,000 |          
|Expenses                                                                     |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|                                                                             | Rental expenses                                                  |                    |           | 61,000           |  |               |           | 236,000       |  |   |           | 124,000 |  |   |           | 400,000   | 
|                                                                             | General and administrative                                       |                    |           | 221,000          |  |               |           | 252,000       |  |   |           | 333,000 |  |   |           | 372,000   | 
|                                                                             | Depreciation and amortization                                    |                    |           | 37,000           |  |               |           | 107,000       |  |   |           | 74,000  |  |   |           | 175,000   | 
|                                                                             | Interest (including amortization of deferred
    financing fees) |                    |           | 63,000           |  |               |           | 94,000        |  |   |           | 125,000 |  |   |           | 215,000   | 
|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|                                                                             |                                                                  |                    | 382,000   |                  |  |               | 689,000   |               |  |   | 656,000   |         |  |   | 1,162,000 |          
|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|Loss before other income and discontinued
    operations                     |                                                                  |                    | (110,000  | )                |  |               | (53,000   | )             |  |   | (150,000  | )       |  |   | (33,000   | )        
|Other income                                                                 |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|                                                                             | Interest income                                                  |                    |           | 41,000           |  |               |           | 41,000        |  |   |           | 65,000  |  |   |           | 65,000    | 
|                                                                             | Equity in earnings of unconsolidated real estate                 |                    |           | 406,000          |  |               |           | 406,000       |  |   |           | 964,000 |  |   |           | 964,000   | 
|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|Income (loss) from continuing operations
    before discontinued operations  |                                                                  |                    | 337,000   |                  |  |               | 394,000   |               |  |   | 879,000   |         |  |   | 996,000   |          
|Gain (loss) on sale of real estate
    investments                           |                                                                  |                    |          |                  |  |               |          |               |  |   | (191,000  | )       |  |   | 24,000    |          
|Income (loss) from discontinued
    operations  property held for sale, net |                                                                  |                    | 546,000   |                  |  |               | 488,000   |               |  |   | 767,000   |         |  |   | 650,000   |          
|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|Net income (loss)                                                            |                                                                  | $                  | 883,000   |                  |  | $             | 882,000   |               |  | $ | 1,455,000 |         |  | $ | 1,670,000 |          
|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|Net income (loss) per common share:                                          |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|Basic and diluted:                                                           |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|                                                                             | Continuing operations                                            |                    | $         | 0.07             |  |               | $         | 0.08          |  |   | $         | 0.18    |  |   | $         | 0.21      | 
|                                                                             | Discontinued operations                                          |                    | $         | 0.12             |  |               | $         | 0.10          |  |   | $         | 0.12    |  |   | $         | 0.14      | 
|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|Total net income (loss) per common share                                     |                                                                  | $                  | 0.19      |                  |  | $             | 0.18      |               |  | $ | 0.30      |         |  | $ | 0.35      |          
|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|Diluted:                                                                     |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|Weighted average common shares
    outstanding  basic                       |                                                                  |                    | 4,695,000 |                  |  |               | 4,695,000 |               |  |   | 4,696,000 |         |  |   | 4,696,000 |          
|Weighted average common shares
    outstanding  diluted                     |                                                                  |                    | 4,704,000 |                  |  |               | 4,704,000 |               |  |   | 4,696,000 |         |  |   | 4,700,000 |          
|Dividends declared per share                                                 |                                                                  | $                  | 0.21      |                  |  | $             | 0.21      |               |  | $ | 0.41      |         |  | $ | 0.41      |          
|                                                                             |                                                                  |                    |           |                  |  |               |           |               |  |   |           |         |  |   |           |          
|Distributions declared                                                       |                                                                  | $                  | 964,000   |                  |  | $             | 964,000   |               |  | $ | 1,928,000 |         |  | $ | 1,928,000 |          

17



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    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 real estate
investment trusts (REIT)), availability of capital,
interest rates, competition and, supply and demand for operating
properties in the Companys current and proposed market
areas. 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
(SEC). 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. To maintain the 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 of 1986, as amended, (the
Code) to the shareholders, among other requirements.
If the Company fails to qualify as a REIT in any taxable year,
it would be subject to Federal income tax on its taxable income
at regular corporate tax rates. As of June 30, 2004, the
Company believes it is in compliance with all relevant REIT
requirements.

The Company is externally advised by Triple Net
Properties, LLC (the Advisor), which is primarily
responsible for managing the day-to-day operations and assets of
the Company. The advisory agreement between the Company and its
advisor has a one year term, and is subject to successive
renewals with the written consent of the parties including a
majority of its independent directors. The Companys
Advisor is affiliated with the Company in that the two entities
have common officers and directors, some of whom also own an
equity interest in the Advisor.

As of June 30, 2004, the Company owned one
consolidated office/industrial property and interests in ten
unconsolidated properties, including eight office and three
office/industrial properties. Comparability between 2004 and
2003 is limited due to the number of acquisitions and
dispositions during these two years.

18



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##### Table of Contents



Business Strategy

The Companys primary business strategy is
to actively manage its portfolio to seek to achieve gains in
rental rates and occupancy, control operating expenses and
maximize income from ancillary operations and services. The
Company believes that new real estate investments will have a
significant impact on its future results of operations.

The Company may also sell existing properties and
place the proceeds into investments it believes will generate
higher long-term value.

Acquisitions in the Six Months Ended
June 30, 2004

The Company acquired an interest in the following
properties during the six months ended June 30, 2004; for
further discussion on the properties, see Note 3 to the
condensed consolidated financial statements.



| |                                                                                
| | -------------------------------------------------------------------------------
| | AmberOaks LP  Austin,
    Texas  January 20, 2004  75%                      
| | Land  Gateway Mall 
    Bismarck, North Dakota  February 27,
    2004  100%
| | Oakey Building  Las Vegas,
    Nevada  April 2, 2004  9.8%                  

Dispositions in the Six Months Ended
June 30, 2004

The Company disposed of the following properties
during the six months ended June 30, 2004, for further
discussion on the properties, see Note 3 to the condensed
consolidated financial statements.



| |                                                           
| | ----------------------------------------------------------
| | Gateway Mall  Bismarck, North
    Dakota  March 18, 2004

Critical Accounting Policies

The preparation of financial statements in
accordance with accounting principles generally accepted in the
United States of America (GAAP) requires the Company
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 qualification as a REIT. These estimates are
made and periodically evaluated 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. A
summary of these policies can be found in Managements
Discussion and Analysis in the Companys Annual Report on
Form 10-K/ A for the year ended December 31, 2003.

Factors Which May Influence Results of
Operations



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

The amount of rental income generated by the
Companys properties depends principally on its ability to
maintain the occupancy rates of currently leased space and to
lease currently available space and space available from
unscheduled lease terminations. Negative trends in one or more
of these factors could adversely affect the Companys
rental income in future periods.

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

19



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##### Table of Contents



of 4,720,000 shares. For the six months
ended June 30, 2004 and June 30, 2003, the Company had
repurchased 3,000 and 1,739 shares pursuant to its
Repurchase Plan, respectively.


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 six months ended June 30, 2004
and the year ended December 31, 2003, the comparability of
financial data from period to period will be limited.



| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | Comparison of the Three and Six Months
    Ended June 30, 2004 to the Three and Six Months Ended
    June 30, 2003

|                                                                             |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |        |   
|---------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------ | -------- | ------------- |  | ------- | -------- | ------------------------- |  | ----------- | -------- | ------------- | - | ------ | ------- | ------ | -- | - | --------- | ------- |  | - | --------- | ------- |  | - | --------- | -------- | - |  | ------ | ------ | --
|                                                                             |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |       
|                                                                             |                                                                  | Three Months Ended |          |               |  |         |          |                           |  |             |          |              
|                                                                             |                                                                  | June 30,           |          |               |  |         |          | Six Months Ended June 30, |  |             |          |              
|                                                                             |                                                                  |                    |          |               |  | Percent |          |                           |  |             |          | Percent      
|                                                                             |                                                                  | 2004               |          | 2003          |  | Change  |          | Change                    |  | 2004        |          | 2003          |   | Change |         | Change
|                                                                             |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |       
|                                                                             |                                                                  | (Unaudited)        |          | (As restated) |  |         |          |                           |  | (Unaudited) |          | (As restated) |   |        |         |       
|Revenues                                                                     |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |       
|                                                                             | Rental income                                                    |                    | $        | 239,000       |  |         | $        | 272,000                   |  |             | $        | (33,000       | ) |        |         | (12.13 | )% |   | $         | 485,000 |  |   | $         | 506,000 |  |   | $         | (21,000  | ) |  |        | (4.15  | )%
|                                                                             |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |       
|                                                                             |                                                                  |                    | 239,000  |               |  |         | 272,000  |                           |  |             | (33,000  | )             |   |        | (12.13  | )%     |    |   | 485,000   |         |  |   | 506,000   |         |  |   | (21,000   | )        |   |  | (4.15  | )%    
|Expenses                                                                     |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |       
|                                                                             | Rental expenses                                                  |                    |          | 96,000        |  |         |          | 61,000                    |  |             |          | 35,000        |   |        |         | 57.38  | %  |   |           | 133,000 |  |   |           | 124,000 |  |   |           | 9,000    |   |  |        | 7.26   | % 
|                                                                             | General and administrative                                       |                    |          | 265,000       |  |         |          | 221,000                   |  |             |          | 44,000        |   |        |         | 19.91  | %  |   |           | 356,000 |  |   |           | 333,000 |  |   |           | 23,000   |   |  |        | 6.91   | % 
|                                                                             | Depreciation and amortization                                    |                    |          | 38,000        |  |         |          | 37,000                    |  |             |          | 1,000         |   |        |         | 2.70   | %  |   |           | 75,000  |  |   |           | 74,000  |  |   |           | 1,000    |   |  |        | 1.35   | % 
|                                                                             | Interest (including amortization of deferred
    financing fees) |                    |          | 79,000        |  |         |          | 63,000                    |  |             |          | 16,000        |   |        |         | 25.40  | %  |   |           | 153,000 |  |   |           | 125,000 |  |   |           | 28,000   |   |  |        | 22.40  | % 
|                                                                             |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |       
|                                                                             |                                                                  |                    | 478,000  |               |  |         | 382,000  |                           |  |             | 96,000   |               |   |        | 25.13   | %      |    |   | 717,000   |         |  |   | 656,000   |         |  |   | 61,000    |          |   |  | 9.30   | %     
|                                                                             |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |       
|Loss before other income and discontinued
    operations                     |                                                                  |                    | (239,000 | )             |  |         | (110,000 | )                         |  |             | (129,000 | )             |   |        | 117.27  | %      |    |   | (232,000  | )       |  |   | (150,000  | )       |  |   | (82,000   | )        |   |  | 54.67  | %     
|Other Income                                                                 |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |       
|                                                                             | Interest income                                                  |                    |          | 139,000       |  |         |          | 41,000                    |  |             |          | 98,000        |   |        |         | 239.02 | %  |   |           | 179,000 |  |   |           | 65,000  |  |   |           | 114,000  |   |  |        | 175.38 | % 
|                                                                             | Dividend income                                                  |                    |          | 21,000        |  |         |          |                          |  |             |          | 21,000        |   |        |         | 0.00   | %  |   |           | 61,000  |  |   |           |        |  |   |           | 61,000   |   |  |        | 0.00   | % 
|                                                                             | Gain on sale of marketable securities                            |                    |          | 3,000         |  |         |          |                          |  |             |          | 3,000         |   |        |         | 0.00   | %  |   |           | 50,000  |  |   |           |        |  |   |           | 50,000   |   |  |        | 0.00   | % 
|                                                                             | Equity in earnings of unconsolidated real estate                 |                    |          | 55,000        |  |         |          | 406,000                   |  |             |          | (351,000      | ) |        |         | (86.45 | )% |   |           | 335,000 |  |   |           | 964,000 |  |   |           | (629,000 | ) |  |        | (65.25 | )%
|                                                                             |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |       
|Income (loss) from before discontinued operations                            |                                                                  |                    | (21,000  | )             |  |         | 337,000  |                           |  |             | (358,000 | )             |   |        | (106.23 | )%     |    |   | 393,000   |         |  |   | 879,000   |         |  |   | (486,000  | )        |   |  | (55.29 | )%    
|Gain (loss) on sale of real estate investments                               |                                                                  |                    | (9,000   | )             |  |         |         |                           |  |             | (9,000   | )             |   |        | 0.00    | %      |    |   | 813,000   |         |  |   | (191,000  | )       |  |   | 1,004,000 |          |   |  | 525.65 | %     
|Income (loss) from discontinued
    operations  property held for sale, net |                                                                  |                    | (4,000   | )             |  |         | 546,000  |                           |  |             | (550,000 | )             |   |        | (100.73 | )%     |    |   | 101,000   |         |  |   | 767,000   |         |  |   | (666,000  | )        |   |  | (86.83 | )%    
|                                                                             |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |       
|Net income (loss)                                                            |                                                                  | $                  | (34,000  | )             |  | $       | 883,000  |                           |  | $           | (917,000 | )             |   |        | (103.85 | )%     |    | $ | 1,307,000 |         |  | $ | 1,455,000 |         |  | $ | (148,000  | )        |   |  | (10.17 | )%    
|                                                                             |                                                                  |                    |          |               |  |         |          |                           |  |             |          |               |   |        |         |        |    |   |           |         |  |   |           |         |  |   |           |          |   |  |        |       

Rental Income.Rental income decreased $33,000 or 12% to $239,000 and $21,000
or 4% to $485,000 during the three and six months ended
June 30, 2004, respectively, when compared with the same
periods of the prior year. These decreases were attributable to
the decrease in rent received on the Companys wholly owned
property.

Interest Income.Interest income increased $98,000, or 239%, to $139,000 and
$114,000, or 175% to $179,000 during the three and six months
ended June 30, 2004, respectively, when compared with the
same period of the prior year. This increase was primarily due
to the interest on the note receivable due to the sale of
Gateway Mall.

20



---



##### Table of Contents



Dividend Income.Dividend income from investment in marketable securities was
$21,000 and $61,000 for the three and six months ended
June 30, 2004, respectively.

Gain on sale of marketable
securities.Gain of $50,000 on sale of
marketable securities was due to purchase and sale of REIT
investments for the three months ended June 30, 2004.

Rental Expenses.Rental expenses increased $35,000, or 57% to $96,000 and $9,000,
or 7% to $133,000 during the three and six months ended
June 30, 2004, respectively, when compared with the same
period of the prior year. This increase was due to additional
management fees paid, higher insurance costs and increased
property taxes.

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 increased $44,000, or 20%, to $265,000 and $23,000, or
7%, to $356,000 during the three and six months ended
June 30, 2004, respectively when compared with the same
period of the prior year.

Interest Expense.Interest expense increased $16,000, or 25% to $79,000 and
$28,000, or 22% to $153,000 during the three and six months
ended June 30, 2004, respectively, when compared to the
same period of the prior year. The increase was due to the draws
against the line of credit in 2004.

Equity in Net Earnings of Unconsolidated Real
Estate.Equity in earnings of
unconsolidated real estate decreased by $351,000, or 86% to
$55,000 and $629,000 or 65% to $335,000 for the three and six
months ended June 30, 2004 compared with the same period of
the prior year. The majority of the decrease was due to
finalization of purchase price and related depreciation and
amortization of the assets for the acquisitions of
unconsolidated real estate.

Income (Loss) From Discontinued
Operations  Property Held For
Sale.Income from discontinued
operations for the six months ended June 30, 2004,
represents the net operating results of one consolidated
property sold through the date of sale, including interest
expense and depreciation related to this property. Income from
discontinued operations for the six months ended June 30,
2003, represents the net operating results of the three
properties sold in 2003.

Gain (Loss) on Sale of Real Estate
Investments.Gain on the sale of real
estate investments was $813,000 for the six months ended
June 30, 2004 and was due to the sale of Gateway Mall on
March 18, 2004. Loss on the sale of real estate investments
for the six months ended June 30, 2003 was $191,000 and was
due to the sale of North Star Shopping Center.

Net Income (Loss) from Continuing Operations
before Discontinued Operations.Net
income (loss) from continuing operations before discontinued
operations decreased by $358,000, or 106% to a loss of $21,000
or $(0.01) per basic and diluted share and $486,000, or 55%, to
income of $393,000, or $0.08 per basic and diluted share for the
three and six months ended June 30, 2004 when compared with
the same period of the prior year.

Net Income (Loss).As a result of the above items, net income (loss) was $(34,000)
or $(0.01) per basic and dilutive share and $1,307,000, or
$0.28 per basic and dilutive share for the three and six
months ended June 30, 2004, respectively, compared with a
income of $883,000, or $0.19 per basic and dilutive share
and a $1,455,000, or $0.30 per basic and dilutive share for
the three and six months ended June 30, 2003, respectively.

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

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##### Table of Contents



the second anniversary. As of June 30, 2004,
the Company had $755,000 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 the Companys financial condition,
changes in the financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or
capital resources.



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

Cash flows used in operating activities were
$34,000 for the six months ended June 30, 2004 compared to
cash flows provided by operating activities of $126,000 for the
six months ended June 30, 2003. The decrease was primarily
due to a decrease in net income, gain on sale of real estate
investments and a decrease in accounts payable, offset in part
by decreases in accounts receivable and depreciation and
amortization when compared to the prior year.

Cash flows used in investing activities were
$5,143,000 for the six months ended June 30, 2004. The use
of cash was primarily for the acquisition of the two
unconsolidated properties and the Gateway Mall Land purchased
during 2004 and the purchase of marketable securities, offset in
part by the sale of one consolidated property and marketable
securities.

Cash flows used in financing activities were
$6,666,000 for the six months ended June 30, 2004. The
decrease was due to the repayment of debt and distributions,
offset in part by borrowings on the line of credit.

As a result of the above, cash and cash
equivalents decreased $11,843,000 for the six months ended
June 30, 2004 to $346,000.



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

At June 30, 2004, the Company had $811,000
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 Code, and other factors the Board of Directors
may deem relevant.



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

Notes and contracts payable as a percentage of
total capitalization decreased to 11.9% at June 30, 2004
from 19.5% at December 31, 2003. This decrease was due to
the sale of Gateway Mall and subsequent payment of the note
related to the property.

22



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##### Table of Contents



Subsequent Events



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



| |                                  
| | ---------------------------------
| | Emerald Plaza  San Diego,
    CA

On July 26, 2004, through its wholly-owned
subsidiary, TREIT  NNN Emerald Plaza, LLC, the
Company purchased a 2.7% tenant in common interest in Emerald
Plaza in San Diego, CA from NNN Emerald Plaza, LLC.. The
Companys total investment was $1,000,000 in cash. The
property was purchased by NNN Emerald Plaza, LLC and other
tenants-in-common on June 14, 2004 for $100,940,000 and was
financed with a $68,500,000 mortgage from Citigroup Global
Markets Realty Group at an interest rate of 3.83%. Emerald Plaza
is a 336,000 square foot Class A office building
located in downtown San Diego, CA and is 81% leased to
multiple tenants. The sellers paid a commission to Realty of
$2,940,000 or 2.9% of the purchase price.

Funds from Operations

The Company defines Funds from Operations
(FFO), a non-GAAP measure, consistent with the
standards established by the White Paper on FFO approved by the
Board of Governors of the National Association of Real Estate
Investment Trust (NAREIT), in April 2002. The White
Paper defines FFO as net income or loss computed in accordance
with GAAP, excluding gains or losses from sales of property plus
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated joint ventures are calculated to reflect funds
from operations.

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 above.

23



---



##### Table of Contents



Following is the calculation of FFO for the six
months ended June 30, 2004 and 2003:

|                                                                          |                                                                    |               |           |               |  |   |           |          |  
|------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------- | --------- | ------------- |  | - | --------- | -------- | -
|                                                                          |                                                                    | Six Months    |           | Six Months   
|                                                                          |                                                                    | Ended         |           | Ended        
|                                                                          |                                                                    | June 30, 2004 |           | June 30, 2003
|                                                                          |                                                                    |               |           |              
|Net income                                                                |                                                                    | $             | 1,307,000 |               |  | $ | 1,455,000 |         
|Add:                                                                      |                                                                    |               |           |               |  |   |           |         
|                                                                          | Depreciation  continuing operations                               |               |           | 75,000        |  |   |           | 74,000   |  
|                                                                          | Depreciation  discontinued operations                             |               |           | 17,000        |  |   |           | 203,000  |  
|                                                                          | Depreciation  unconsolidated real
    estate operating properties |               |           | 1,077,000     |  |   |           | 513,000  |  
|Less:                                                                     |                                                                    |               |           |               |  |   |           |         
|                                                                          | Gain/(loss) on Sale of property                                    |               |           | 813,000       |  |   |           | (191,000 | )
|                                                                          |                                                                    |               |           |               |  |   |           |         
|Funds from operations                                                     |                                                                    | $             | 1,663,000 |               |  | $ | 2,436,000 |         
|                                                                          |                                                                    |               |           |               |  |   |           |         
|Gain on the sale of investments included in net
    income (loss) and FFO |                                                                    | $             | 50,000    |               |  |   |          |         
|                                                                          |                                                                    |               |           |               |  |   |           |         

Inflation

The Company 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. The Company expects
that there will be provisions in the majority of its tenant
leases that would protect it 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.

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 June 30, 2004. The table does not reflect available
extension options.

|                                     |       |                        |         |             |  |             |         |              |  |       |           |           |  |   |   |   |  |   |           |           | 
|------------------------------------ | ----- | ---------------------- | ------- | ----------- |  | ----------- | ------- | ------------ |  | ----- | --------- | --------- |  | - | - | - |  | - | --------- | --------- | 
|                                     |       |                       
|                                     |       | Payments Due by Period
|                                     |       |                       
|                                     |       | Less than              |         |             |  | More than   |         |             
|                                     |       | 1 Year                 |         | 1-3 Years   |  | 3-5 Years   |         | 5 Years      |  |      
|                                     |       | (2004)                 |         | (2005-2006) |  | (2007-2008) |         | (After 2008) |  | Total
|                                     |       |                        |         |             |  |             |         |              |  |      
|Principal payments  fixed rate debt |       | $                      | 31,000  |             |  | $           | 206,000 |              |  | $     | 4,079,000 |           |  | $ |  |   |  | $ | 4,316,000 |          
|Principal payments  credit facility |       |                        | 755,000 |             |  |             |        |              |  |       |          |           |  |   |  |   |  |   | 755,000   |          
|Interest payments  fixed rate debt  |       |                        | 115,000 |             |  |             | 669,000 |              |  |       | 18,000    |           |  |   |  |   |  |   | 802,000   |          
|Interest payments  credit facility  |       |                        | 8,000   |             |  |             |        |              |  |       |          |           |  |   |  |   |  |   | 8,000     |          
|                                     |       |                        |         |             |  |             |         |              |  |       |           |           |  |   |   |   |  |   |           |          
|                                     | Total |                        | $       | 909,000     |  |             | $       | 875,000      |  |       | $         | 4,097,000 |  |   | $ |  |  |   | $         | 5,881,000 | 
|                                     |       |                        |         |             |  |             |         |              |  |       |           |           |  |   |   |   |  |   |           |          

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 the Companys financial condition,
changes in the financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or
capital resources.






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

24



---



##### Table of Contents



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    |         |      |  |      |        |      |  |      |        |            |  |      
|                                       |  | June 30, |         |      |  |      |        |      |  |      |        |            |  |      
|                                       |  | 2004     |         | 2005 |  | 2006 |        | 2007 |  | 2008 |        | Thereafter |  | Total
|                                       |  |          |         |      |  |      |        |      |  |      |        |            |  |      
|Fixed rate debt                        |  | $        | 31,000  |      |  | $    | 65,000 |      |  | $    | 69,000 |            |  | $     | 72,000 |   |  | $ | 4,079,000 |   |  |  |     |   |  | $ | 4,316,000 |  
|Average interest rate on maturing debt |  |          | 5.25    | %    |  |      | 5.25   | %    |  |      | 5.25   | %          |  |       | 5.25   | % |  |   | 5.25      | % |  |  | 5.25 | % |  |   | 5.25      | %
|Variable rate debt                     |  | $        | 755,000 |      |  |      |       |      |  |      |       |            |  |       |       |   |  |   |          |   |  |  |     |   |  | $ | 755,000   |  
|Average interest rate on maturing debt |  |          | 4.50    | %    |  |      | 4.50   | %    |  |      | 4.50   | %          |  |       | 4.50   | % |  |   | 4.50      | % |  |  | 4.50 | % |  |   | 4.50      | %

The fair estimated value of the Companys
debt approximates its June 30, 2004 carrying amount.

Approximately $5,071,000 or 100% of the
Companys mortgages payable at June 30, 2004, have
fixed interest rates averaging 5.25% and variable rates
averaging 4.5%. An increase in interest rates of 0.25% on the
Companys variable rate mortgage loans would not
significantly impact earnings due to current market interest
rates being substantially below the floor interest rates on
these mortgage loans.






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

(a) Evaluation of disclosure 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 SECs rules and forms, and that such
information is accumulated and communicated to our management,
including our Chief Executive Officer and Interim 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.

As of June 30, 2004, the end of the quarter
covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the
Companys management, including its Chief Executive Officer
and its Interim Chief Financial Officer, of the effectiveness of
the design and operation of the Companys disclosure
controls and procedures. Based on the foregoing, the
Companys Chief Executive Officer and Interim Chief
Financial Officer concluded that the Companys disclosure
controls and procedures were effective at the reasonable
assurance level.

(b) Changes in internal control over
financial reporting. There have been no significant changes
in the Companys internal control over financial reporting
that occurred subsequent to the date of their evaluation that
have materially affected or are reasonably likely to materially
affect the Companys internal control over financial
reporting.

25



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##### Table of Contents






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.

On July 19, 2004, Michael R. and Patricia C.
Long, as Trustees of the Michael R. and Patricia C. Long 2001
Trust (the Purchasers) filed a petition in the
District Court of the 25th Judicial District Guadalupe County,
Texas against T REIT-Seguin, LLC, Peck-Seguin, LLC, Lake Air
Mall-Seguin, LLC, Chicago Title Company and Triple Net
Properties, LLC (collectively, the Sellers). The
Company, through its wholly owned subsidiary T REIT-Seguin
purchased a 26% interest in the Seguin Corners Shopping Center
in November 2000 which was sold to the Purchasers in August
2002. The petition alleges that Sellers misrepresented and/or
failed to disclose that they did not own and could not convey
the property in its entirety to Purchasers. Management strongly
disagrees with the points outlined in the suit and intends to
vigorously defend the action. While management believes that its
exposure should be limited by its title insurance coverage with
Chicago Title Company, if Purchasers 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.






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

On June 29, 2004, the Company held its
Annual Meeting of Shareholders. At the meeting shareholders
voted on the election of directors to the Companys Board
of Directors and the ratification of the accounting firm
Deloitte and Touche LLP. The shareholders voted to elect the
following persons as

26



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##### Table of Contents



directors for one year terms: W. Brand Inlow,
Anthony W. Thompson and D. Fleet Wallace and to ratify the
appointment of Deloitte and Touche LLP as the Companys
independent auditors for 2004.


The Company received proxies representing 58.20%
of the Companys 4,642,533 shares of common stock
outstanding as of May 10, 2004, the record date. The number
of votes for, against, abstaining, and withheld were as follows.

|                                                        |  |     |           |         |  |         |        |          |  |  |        |  |  |  |   | 
|------------------------------------------------------- |  | --- | --------- | ------- |  | ------- | ------ | -------- |  |  | ------ |  |  |  | - | 
|Directors:                                              |  | For |           | Against |  | Abstain |        | Withheld
|                                                        |  |     |           |         |  |         |        |         
|W. Brand Inlow                                          |  |     | 2,643,214 |         |  |         | 626    |          |  |  | 24,996 |  |  |  |  | 
|Anthony W. Thompson                                     |  |     | 2,639,214 |         |  |         | 3,500  |          |  |  | 24,996 |  |  |  |  | 
|D. Fleet Wallace                                        |  |     | 2,641,841 |         |  |         | 2,000  |          |  |  | 24,996 |  |  |  |  | 
|Ratification of Deloitte and Touche LLP as
    auditors |  |     | 2,609,321 |         |  |         | 45,519 |          |  |  | 43,603 |  |  |  |  | 






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

None.






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

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

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

27



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##### Table of Contents



|     |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                           
|---- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |    |            
|No.  |    | Description
|     |    |            
|     | 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).                                                                                                                                     
|     | 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).                                                                              

28



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##### Table of Contents



|     |    |             |  |                                                                                                                                                                                                                                                                                                                                               
|---- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |    |            
|No.  |    | Description
|     |    |            
|     | 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 June 30, 2004:

On April 9, 2004, the Company filed a
Current Report on Form 8-K dated April 5, 2004 to
report the resignation of Diana M. Laing as the Companys
Chief Financial Officer and the appointment of Richard Hutton as
the Companys Interim Chief Financial Officer.

29



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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/ ANTHONY W. THOMPSON

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



| |     |                           
| | --- | --------------------------
| | By: | /s/ RICHARD T. HUTTON, JR.

| |                                
| | -------------------------------
| |                                
| | Richard T. Hutton, Jr.         
| | Interim Chief Financial Officer

Date: August 16, 2004

30



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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)                         

31



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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.                                                                                                                                                                                                                                                        

32