##### Table of Contents



UNITED STATES
    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 1934For the quarterly period ended
    June 30, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For 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

(I.R.S. Employerincorporation or
    organization)

Identification No.)1551 N. Tustin
    Avenue, Suite 200
    Santa Ana, California 92705(Address of principal executive
    offices)     (Registrants telephone number, including area code)(877) 888-7348
  N/A (Former name)
   þ o
  non-accelerated Rule 12b-2
  o o þ
  Rule 12b-2 o þ




---



##### 



T REIT,
    Inc.
    (A Virginia Corporation)
  
  TABLE OF
    CONTENTS
  PagePART I 
    FINANCIAL INFORMATIONItem 1.

Financial
    Statements


2Condensed
    Consolidated Statements of Net Assets (Liquidation Basis) as of
    June 30, 2006 (Unaudited) and December 31, 2005
    (Unaudited)


3Condensed
    Consolidated Statements of Changes in Net Assets (Liquidation
    Basis) for the Three and Six Months Ended June 30, 2006
    (Unaudited)


4Condensed
    Consolidated Statements of Operations and Comprehensive Income
    (Loss) (Going Concern Basis) for the Three and Six Months Ended
    June 30, 2005 (Unaudited)


5Condensed
    Consolidated Statement of Cash Flows (Going Concern Basis) for
    the Six Months Ended June 30, 2005 (Unaudited)


6Notes to Condensed
    Consolidated Financial Statements (Unaudited)


7Item 2.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


22Item 3.

Quantitative and
    Qualitative Disclosures About Market Risk


30Item 4.

Controls and
    Procedures


30PART II 
    OTHER INFORMATIONItem 1.

Legal
    Proceedings


31Item 1A.

Risk
    Factors


33Item 2.

Unregistered Sales
    of Equity Securities and Use of Proceeds


33Item 3.

Defaults Upon
    Senior Securities


33Item 4.

Submission of
    Matters to a Vote of Security Holders


33Item 5.

Other
    Information


33Item 6.

Exhibits


33Signatures


34EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   1




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##### Table of Contents



T REIT,
    INC
 PART I 
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  Form 10-Q Form 10-K,
 2




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##### Table of Contents



T REIT,
    INC.






CONDENSED CONSOLIDATED STATEMENTS OF NET ASSETS(Liquidation Basis)
    As of June 30, 2006 (Unaudited) and December 31, 2005
    (Unaudited)




|                                                                                   |  |          |            |  |              |   |            | 
|---------------------------------------------------------------------------------- |  | -------- | ---------- |  | ------------ | - | ---------- | 
|                                                                                   |  | June 30, |            |  | December 31, |  
|                                                                                   |  | 2006     |            |  | 2005         |  
|                                                                                  
|ASSETS                                                                            
|Real estate investments:                                                           |  |          |            |  |              |   |            | 
|Real estate held for sale                                                          |  | $        |           |  |              | $ | 25,075,000 | 
|Investments in unconsolidated real
    estate                                      |  |          | 10,176,000 |  |              |   | 11,710,000 | 
|                                                                                   |  |          |            |  |              |   |            | 
|                                                                                   |  |          | 10,176,000 |  |              |   | 36,785,000 | 
|Cash and cash equivalents                                                          |  |          | 15,591,000 |  |              |   | 3,575,000  | 
|Restricted cash                                                                    |  |          | 348,000    |  |              |   | 1,111,000  | 
|Investment in marketable securities                                                |  |          | 952,000    |  |              |   | 1,924,000  | 
|Accounts receivable, net                                                           |  |          | 3,000      |  |              |   | 1,675,000  | 
|Accounts receivable from related
    parties                                       |  |          | 119,000    |  |              |   | 223,000    | 
|Notes receivable                                                                   |  |          | 556,000    |  |              |   | 2,762,000  | 
|Asset for estimated receipts in
    excess of estimated costs during liquidation   |  |          |           |  |              |   | 267,000    | 
|                                                                                   |  |          |            |  |              |   |            | 
|Total assets                                                                       |  |          | 27,745,000 |  |              |   | 48,322,000 | 
|                                                                                  
|LIABILITIES                                                                       
|Mortgages payable secured by
    properties held for sale and other debt           |  |          | 253,000    |  |              |   | 15,464,000 | 
|Accounts payable and accrued
    liabilities                                       |  |          | 99,000     |  |              |   | 233,000    | 
|Security deposits and prepaid rent                                                 |  |          | 1,000      |  |              |   | 96,000     | 
|Reserve for estimated costs in
    excess of estimated receipts during liquidation |  |          | 358,000    |  |              |   |           | 
|                                                                                   |  |          |            |  |              |   |            | 
|Total liabilities                                                                  |  |          | 711,000    |  |              |   | 15,793,000 | 
|Commitments and contingencies
    (Note 12)                                        |  |          |            |  |              |   |            | 
|                                                                                   |  |          |            |  |              |   |            | 
|Net assets in liquidation                                                          |  | $        | 27,034,000 |  |              | $ | 32,529,000 | 
|                                                                                   |  |          |            |  |              |   |            | 







3



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T REIT,
    INC.




CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS(Liquidation Basis)
    For the Three and Six Months Ended June 30, 2006
    (Unaudited)




|                                                                                                                                                                          |  |                    |            |   |                  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | - | ---------------- | - | ----------- | -
|                                                                                                                                                                          |  | Three Months Ended |            |   | Six Months Ended |  
|                                                                                                                                                                          |  | June 30, 2006      |            |   | June 30, 2006    |  
|                                                                                                                                                                         
|Net assets in liquidation,
    beginning of period                                                                                                                        |  | $                  | 26,105,000 |   |                  | $ | 32,529,000  |  
|                                                                                                                                                                          |  |                    |            |   |                  |   |             |  
|Changes in net assets in
    liquidation:                                                                                                                                 |  |                    |            |   |                  |   |             |  
|Changes to asset (reserve) for
    estimated receipts (costs) in excess of estimated costs
    (receipts) during liquidation:                                             |  |                    |            |   |                  |   |             |  
|Operating (income) loss                                                                                                                                                   |  |                    | 329,000    |   |                  |   | (827,000    | )
|Distributions received from
    unconsolidated properties                                                                                                                 |  |                    | (377,000   | ) |                  |   | (634,000    | )
|Payments of liquidation costs and
    other amounts                                                                                                                       |  |                    | 1,120,000  |   |                  |   | 1,402,000   |  
|Change in estimated receipts
    (costs) in excess of estimated costs (receipts) during
    liquidation                                                                   |  |                    | (746,000   | ) |                  |   | (566,000    | )
|                                                                                                                                                                          |  |                    |            |   |                  |   |             |  
|Changes to asset (reserve) for
    estimated receipts (costs) in excess of estimated costs
    (receipts) during liquidation                                              |  |                    | 326,000    |   |                  |   | (625,000    | )
|                                                                                                                                                                          |  |                    |            |   |                  |   |             |  
|Change in fair value of assets and
    liabilities:                                                                                                                       |  |                    |            |   |                  |   |             |  
|Change in fair value of marketable
    securities                                                                                                                         |  |                    | (29,000    | ) |                  |   | (145,000    | )
|Change in fair value of real
    estate investments                                                                                                                       |  |                    | 1,704,000  |   |                  |   | 7,216,000   |  
|Change in assets and liabilities
    due to activity in asset (reserve) for estimated receipts
    (costs) in excess of estimated costs (receipts) during
    liquidation |  |                    | (1,072,000 | ) |                  |   | 59,000      |  
|                                                                                                                                                                          |  |                    |            |   |                  |   |             |  
|Net increase in fair value                                                                                                                                                |  |                    | 603,000    |   |                  |   | 7,130,000   |  
|                                                                                                                                                                          |  |                    |            |   |                  |   |             |  
|Liquidating distributions to
    shareholders                                                                                                                             |  |                    |           |   |                  |   | (12,000,000 | )
|                                                                                                                                                                          |  |                    |            |   |                  |   |             |  
|Change in net assets in
    liquidation                                                                                                                                   |  |                    | 929,000    |   |                  |   | (5,495,000  | )
|                                                                                                                                                                          |  |                    |            |   |                  |   |             |  
|Net assets in liquidation, end
    of period                                                                                                                              |  | $                  | 27,034,000 |   |                  | $ | 27,034,000  |  
|                                                                                                                                                                          |  |                    |            |   |                  |   |             |  







4



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T REIT,
    INC.




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    AND COMPREHENSIVE INCOME (LOSS)(Going Concern Basis)
    For the Three and Six Months Ended June 30, 2005
    (Unaudited)




|                                                                            |  |                    |           |   |                  |   |            |  
|--------------------------------------------------------------------------- |  | ------------------ | --------- | - | ---------------- | - | ---------- | -
|                                                                            |  | Three Months Ended |           |   | Six Months Ended |  
|                                                                            |  | June 30, 2005      |           |   | June 30, 2005    |  
|                                                                           
|Expenses:                                                                   |  |                    |           |   |                  |   |            |  
|General and administrative                                                  |  | $                  | 459,000   |   |                  | $ | 1,013,000  |  
|                                                                            |  |                    |           |   |                  |   |            |  
|Operating loss                                                              |  |                    | (459,000  | ) |                  |   | (1,013,000 | )
|Other income (expense):                                                     |  |                    |           |   |                  |   |            |  
|Other income                                                                |  |                    | 38,000    |   |                  |   | 52,000     |  
|Interest expense (including
    amortization of deferred financing costs)   |  |                    | (36,000   | ) |                  |   | (44,000    | )
|Interest and dividend income                                                |  |                    | 132,000   |   |                  |   | 233,000    |  
|Gain on sale of marketable
    securities                                   |  |                    | 110,000   |   |                  |   | 126,000    |  
|Gain on sale of unconsolidated
    real estate investments                  |  |                    | 191,000   |   |                  |   | 191,000    |  
|Equity in earnings of
    unconsolidated real estate                        |  |                    | 407,000   |   |                  |   | 787,000    |  
|                                                                            |  |                    |           |   |                  |   |            |  
|Income from continuing operations                                           |  |                    | 383,000   |   |                  |   | 332,000    |  
|Discontinued operations:                                                    |  |                    |           |   |                  |   |            |  
|Income (loss) from discontinued
    operations                              |  |                    | 25,000    |   |                  |   | (272,000   | )
|                                                                            |  |                    |           |   |                  |   |            |  
|Net income                                                                  |  | $                  | 408,000   |   |                  | $ | 60,000     |  
|                                                                            |  |                    |           |   |                  |   |            |  
|Comprehensive income (loss):                                                |  |                    |           |   |                  |   |            |  
|Net income                                                                  |  | $                  | 408,000   |   |                  | $ | 60,000     |  
|Unrealized income (loss) on
    marketable securities                       |  |                    | 50,000    |   |                  |   | (24,000    | )
|                                                                            |  |                    |           |   |                  |   |            |  
|Comprehensive income                                                        |  | $                  | 458,000   |   |                  | $ | 36,000     |  
|                                                                            |  |                    |           |   |                  |   |            |  
|Net income (loss) per common share:                                         |  |                    |           |   |                  |   |            |  
|Continuing operations 
    basic and diluted                               |  | $                  | 0.08      |   |                  | $ | 0.07       |  
|Discontinued
    operations  basic and diluted                             |  |                    | 0.01      |   |                  |   | (0.06      | )
|                                                                            |  |                    |           |   |                  |   |            |  
|Total net income per common
    share  basic and diluted                   |  | $                  | 0.09      |   |                  | $ | 0.01       |  
|                                                                            |  |                    |           |   |                  |   |            |  
|Weighted average shares of common
    stock outstanding  basic and diluted |  |                    | 4,605,000 |   |                  |   | 4,605,000  |  
|                                                                            |  |                    |           |   |                  |   |            |  







5



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##### Table of Contents



T REIT,
    INC.






CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(Going Concern Basis)
    For the Six Months Ended June 30, 2005 (Unaudited)




|                                                                                         |  |   |            |  
|---------------------------------------------------------------------------------------- |  | - | ---------- | -
|CASH FLOWS FROM OPERATING
    ACTIVITIES                                                 |  |   |            |  
|Net income                                                                               |  | $ | 60,000     |  
|Adjustments to reconcile net
    income to net cash provided by operating activities     |  |   |            |  
|Distributions received in excess
    of equity in earnings of unconsolidated real estate |  |   | 706,000    |  
|Gain on sale of unconsolidated
    real estate investments                               |  |   | (191,000   | )
|Gain on sale of marketable
    securities                                                |  |   | (126,000   | )
|Depreciation and amortization                                                            |  |   | 1,237,000  |  
|Stock based compensation expense                                                         |  |   | 64,000     |  
|Minority interests                                                                       |  |   | (124,000   | )
|Change in operating assets and
    liabilities:                                          |  |   |            |  
|Accounts receivable                                                                      |  |   | (83,000    | )
|Accounts receivable/payable
    from/to related parties                                  |  |   | (617,000   | )
|Other assets                                                                             |  |   | 188,000    |  
|Accounts payable and accrued
    liabilities                                             |  |   | (440,000   | )
|Security deposits and prepaid rent                                                       |  |   | 209,000    |  
|                                                                                         |  |   |            |  
|Net cash provided by operating
    activities                                            |  |   | 883,000    |  
|                                                                                         |  |   |            |  
|CASH FLOWS FROM INVESTING
    ACTIVITIES                                                 |  |   |            |  
|Purchase of marketable securities                                                        |  |   | (6,101,000 | )
|Proceeds from sale of marketable
    securities                                          |  |   | 4,909,000  |  
|Proceeds from sale of
    unconsolidated real estate                                     |  |   | 603,000    |  
|Restricted cash                                                                          |  |   | 310,000    |  
|Capital expenditures                                                                     |  |   | (3,000     | )
|Collections of notes receivable                                                          |  |   | 531,000    |  
|                                                                                         |  |   |            |  
|Net cash provided by investing
    activities                                            |  |   | 249,000    |  
|                                                                                         |  |   |            |  
|CASH FLOWS FROM FINANCING
    ACTIVITIES                                                 |  |   |            |  
|Principal payments on mortgages
    payable                                              |  |   | (33,000    | )
|Distributions paid                                                                       |  |   | (1,910,000 | )
|Distributions to minority
    shareholders                                               |  |   | (91,000    | )
|Repurchase of shares                                                                     |  |   | (87,000    | )
|                                                                                         |  |   |            |  
|Net cash used in financing
    activities                                                |  |   | (2,121,000 | )
|                                                                                         |  |   |            |  
|NET DECREASE IN CASH AND CASH
    EQUIVALENTS                                            |  |   | (989,000   | )
|CASH AND CASH
    EQUIVALENTS  beginning of period                                      |  |   | 7,229,000  |  
|                                                                                         |  |   |            |  
|CASH AND CASH
    EQUIVALENTS  end of period                                            |  | $ | 6,240,000  |  
|                                                                                         |  |   |            |  
|SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION                                     |  |   |            |  
|Cash paid during the period for:                                                         |  |   |            |  
|Interest                                                                                 |  | $ | 638,000    |  
|                                                                                         |  |   |            |  
|Income taxes                                                                             |  | $ | 3,000      |  
|                                                                                         |  |   |            |  







6



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##### Table of Contents



T REIT,
    INC.




NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




|   |                                             
|-- | --------------------------------------------
|1. | Organization
    and Description of Business







day-to-day month-to-month




|   |                        
|-- | -----------------------
|2. | Plan of
    Liquidation













7



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##### Table of Contents





T REIT,
    INC.




NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)








|   |                                               
|-- | ----------------------------------------------
|3. | Summary
    of Significant Accounting Policies



Interim
    Financial Data




Form 10-K,




Principles
    of Consolidation




Consolidation of Variable Interest Entities




Segments








Cash
    and Cash Equivalents






8



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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Asset
    (Reserve) for Estimated Receipts (Costs) in Excess of Estimated
    Costs (Receipts) During Liquidation      December 31,


Cash Payments


Change in


June 30,2005


and (Receipts)


Estimates


2006Assets:Estimated net inflows from
    consolidated and unconsolidated operating activities

$
2,634,000


$
(1,462,000
)

$
(251,000
)

$
921,000Liabilities:Liquidation costs


(1,151,000
)


525,000



(653,000
)


(1,279,000
)Other (capital expenditures)


(1,216,000
)


878,000



338,000



(2,367,000
)


1,403,000



(315,000
)


(1,279,000
)Total asset (reserve) for
    estimated receipts (costs) in excess of estimated costs
    (receipts) during liquidation

$
267,000


$
(59,000
)

$
(566,000
)

$
(358,000
)   5.
    Net
    Assets in Liquidation       9




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Real
    Estate Investments    Investments
    in Unconsolidated Real Estate
  tenant-in-common,
    Three Months


Six MonthsEnded


EndedJune 30, 2005


June 30, 2005Revenues

$
10,995,000


$
22,380,000Rental and other expenses


9,003,000



19,817,000Net income

$
1,992,000


$
2,563,000Our equity in earnings

$
407,000


$
787,000   Dispositions
    in 2006
       10




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Properties
    Under Contract
    7.
    Investment
    in Marketable Securities    8.
    Notes Receivable    25-year
 11




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    9.
    Mortgages
    Payable and Other Debt    June 30,


December 31,2006


2005Note payable to a mortgage
    company, secured by a deed of trust, rate per annum equal to an
    initial benchmark floor rate of 3.00% based on the
    10-year
    Treasury note plus 2.25% and matures January 1, 2008. As of
    December 31, 2005 the interest rate was 5.25% per
    annum. Equal principal and interest payments of $24,000 were
    payable monthly until repaid in full. The note was repaid in
    full on January 31, 2006

$



$
4,214,000Note payable to a bank, secured by
    a first deed of trust, monthly interest-only through
    February 15, 2006 and thereafter, principal and interest
    payments through the maturity date of January 20, 2007 at
    the prime rate plus 1.07%, subject to a floor of 5.50% per
    annum. The interest rate as of December 31, 2005 was
    8.00% per annum. The note was repaid in full on
    June 15, 2006






15,000,000Total mortgages payable






19,214,000Less: minority interest share of
    mortgages payable






3,750,000Mortgages payable (liquidation
    basis)

$



$
15,464,000     Other
    Debt
    10.
    Shareholders
    Equity  Share
    Repurchase Program
   12




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock
    Option Plans
    11.
    Advisory
    Fees and Other Related Party Transactions  Advisory
    Agreement
  Advisory
    Fees
  month-to-month day-to-day
    Property
    Management Fees
    Real
    Estate Commissions
   13




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Compensation
    for Services
    Incentive
    Distributions
    Incentive
    Bonuses and Milestone Payments
      Investment
    in Unconsolidated Real Estate
  tax-free
  Related
    Party Accounts Receivable/Payable
     14




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   12.
    Commitments
    and Contingencies  SEC
    Investigation
  In the matter of Triple Net Properties, LLC.
  Accounting for
    Contingencies.
  Prior
    Performance Tables
    Unconsolidated
    Debt
   15




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     As of June 30, 2006


As of December 31, 2005Mortgage and


T REIT, Inc.s


Mortgage and


T REIT, Inc.sOwnership


Other Debt


Portion of


Other Debt


Portion ofProperty

Percentage


Balance


Debt


Balance


DebtReno Trademark
    Building  TIC


40.0
%

$



$



$
4,449,000


$
1,780,000Titan Building &
    Plaza  TIC


48.5



5,900,000



2,862,000



5,900,000



2,861,000Congress Center  LLC


10.3



97,500,000



9,962,000



97,500,000



9,962,000Enclave Parkway  LLC


3.3



22,832,000



744,000



23,000,000



749,000Oakey Building  LLC


9.8











8,757,000



855,000Total





$
126,232,000


$
13,568,000


$
139,606,000


$
16,207,000         Litigation
    T REIT-Seguin,
 16




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
    Environmental
    Matters
    Leases
    Other
   17




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    Discontinued
    Operations  Property Held for Sale  Accounting for the Impairment or
    Disposal of Long Lived Assets
  Three Months


Six MonthsEnded


EndedJune 30, 2005


June 30, 2005Rental income

$
1,237,000


$
2,248,000Rental expenses


489,000



943,000Depreciation and amortization


420,000



1,035,000Other (income)


(5,000
)


(9,000
)Interest expense (including
    amortization of deferred financing fees)


321,000



675,000Minority interest


(13,000
)


(124,000
)Income (loss) from discontinued
    operations

$
25,000


$
(272,000
)   14.
    Minority
    Interests    15.
    Concentration
    of Credit Risk     18




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Percentage of





Square


Lease2006 Annual


2006 Annual





Footage


ExpirationTenant

Base Rent(*)


Base Rent


Property


(Approximately)


DateHomeland Security

$
3,344,000



18.6
%


Congress Center



76,000



April 2012North American Co. Life and Health
    Ins


2,320,000



12.9



Congress Center



101,000



Feb. 2012Akzo Nobel, Inc.


1,983,000



11.0



Congress Center



90,000



Dec. 2013     *
    
    Annualized rental income is based on contractual base rent set
    forth in leases in effect as of June 30, 2006.    Percentage of2005 Annual


2005 Annual




Square


LeaseTenant

Base Rent(*)


Base Rent


Property

Footage


Expiration DateNetsolve, Inc.

$
1,112,000



42.2
%

AmberOaks


78,000



April 2007Newell Rubbermaid, Inc.


493,000



18.7


AmberOaks


51,000



April 2007General Services Administration


327,000



12.4


University Heights


21,000



Nov. 2015     *
    
    Annualized rental income is based on contractual base rent set
    forth in leases in effect as of June 30, 2005.  16.
    Per Share
    Data  Earnings Per Share. anti-dilutive.
 19




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##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Three Months


Six MonthsEnded


EndedJune 30, 2005


June 30, 2005Net income from continuing
    operations

$
383,000


$
332,000Net income (loss) from
    discontinued operations


25,000



(272,000
)Net income

$
408,000


$
60,000Net income (loss) per share:Continuing operations 
    basic and diluted

$
0.08


$
0.07Discontinued
    operations  basic and diluted


0.01



(0.06
)Total net income per
    share  basic and diluted

$
0.09


$
0.01Weighted-average number of shares
    outstanding  basic and diluted


4,605,000



4,605,000   17.
    Stock
    Based Compensation  Accounting for
    Stock-Based
    Compensation Accounting for
    Stock-Based Compensation Transition and Disclosure Accounting for Stock Issued to Employees
  Three Months


Six MonthsEnded


EndedJune 30, 2005


June 30, 2005Reported net income

$
408,000


$
60,000Add: Stock based employee
    compensation expense included in reported net income


32,000



64,000Less: Total stock based employee
    compensation expense determined under a fair value based method
    for all awards


(33,000
)


(83,000
)Pro forma net income

$
407,000


$
41,000Reported net income per
    share  basic and diluted

$
0.09


$
0.01Pro forma net income per
    share  basic and diluted

$
0.09


$
0.01     Expected life


8.2 yearsRisk-free interest based on the
    10-year
    U.S. Treasury Bond


4.22
%Expected dividend yield


8.25
%Expected volatility


10.0
%  20




---



##### Table of Contents



T REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   18.
    Subsequent
    Events     21




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q.
  Forward-Looking
    Statements
    Overview
    and Background
      day-to-day month-to-month
 22




---



##### Table of Contents



Critical
    Accounting Policies
  Form 10-K,
  Interim
    Financial Data
   23




---



##### Table of Contents



Form 10-K,
  Dispositions
    in 2006
             24




---



##### Table of Contents



Factors
    Which May Influence Results of Operations
  Rental
    Income
    Scheduled
    Lease Expirations
    Sarbanes-Oxley
    Act
  and/or
  Changes
    in Net Assets in Liquidation
  Three
    and Six Months Ended June 30, 2006
      Liquidity
    and Capital Resources
   25




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##### Table of Contents



Current
    Sources of Capital and Liquidity
  and/or
    Other
    Liquidity Needs
             26




---



##### Table of Contents



Capital
    Resources
  General
        Financing
       27




---



##### Table of Contents



Unconsolidated
    Debt
      As of June 30, 2006


As of December 31, 2005Mortgage and


T REIT, Inc.s


Mortgage and


T REIT, Inc.sOwnership


Other Debt


Portion of


Other Debt


Portion ofProperty

Percentage


Balance


Debt


Balance


DebtReno Trademark
    Building  TIC


40.0
%

$



$



$
4,449,000


$
1,780,000Titan Building &
    Plaza  TIC


48.5



5,900,000



2,862,000



5,900,000



2,861,000Congress Center  LLC


10.3



97,500,000



9,962,000



97,500,000



9,962,000Enclave Parkway  LLC


3.3



22,832,000



744,000



23,000,000



749,000Oakey Building  LLC


9.8











8,757,000



855,000Total





$
126,232,000


$
13,568,000


$
139,606,000


$
16,207,000         REIT
    Requirements
    Contractual
    Obligations
    Off-Balance
    Sheet Arrangements
    SEC
    Investigation
  In the matter of Triple Net Properties, LLC.
 28




---



##### Table of Contents



Accounting for
    Contingencies.
  Inflation
    Funds
    from Operations
         29




---



##### Table of Contents



Six MonthsEndedJune 30,2005Net income

$
60,000Add:Depreciation and
    Amortization  discontinued operations


1,026,000Depreciation and
    Amortization  unconsolidated real estate operating
    properties


430,000Less:Gain on sale of property


Funds from operations

$
1,516,000Weighted-average common shares
    outstanding  basic and diluted


4,605,000Gain on sale of investments
    included in net income and FFO

$
317,000   Subsequent
    Events
      Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Form 10-K
      Item 4.
    Controls
    and Procedures  Evaluation of disclosure controls and
    procedures.
 30




---



##### Table of Contents



Form 10-Q Rules 13a-14(a) 15d-14(a) Form 10-Q
  Rules 13a-15(e) 15d-15(e)
    Changes in internal control over financial
    reporting. Rules 13a-15(f) 15d-15(f)
 PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  SEC
    Investigation
  In the matter of Triple Net Properties,
    LLC.
  Accounting for
    Contingencies.
  Prior
    Performance Tables
   31




---



##### Table of Contents



Litigation
    T REIT-Seguin, and/or
   32




---



##### Table of Contents



Item 1A.
    Risk
    Factors  Dramatic
    increases in insurance rates could adversely affect our cash
    flow and our ability to make liquidating distributions to our
    shareholders pursuant to our plan of liquidation.
    Form 10-K,
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Item 3.
    Defaults
    Upon Senior Securities    Item 4.
    Submission
    of Matters to a Vote of Security Holders      For

Against

Abstain

WithheldElection of Directors:Anthony W. Thompson


2,381,000











19,000W. Brand Inlow


2,381,000











19,000D. Fleet Wallace


2,375,000











25,000Ratification of
    Deloitte & Touche, LLP
    as independent registered public accounting firm


2,330,000



15,000



55,000



   Item 5.
    Other
    Information    Item 6.
    Exhibits   33




---



##### Table of Contents



SIGNATURES       By:
    /s/  Jack
    R. Maurer   Chief Executive Officer
  By:
    /s/  Scott
    D. Peters   Chief Financial Officer
   34




---



##### Table of Contents



EXHIBIT INDEX
  Regulation S-K,
  Form 10-Q Regulation S-K).
  2
.1

T REIT, Inc. Plan of Liquidation
    and Dissolution, as approved by stockholders on July 27,
    2005 and as currently in effect (included as Exhibit A to
    the Companys Definitive Proxy Statement for the Annual
    Meeting of Shareholders filed on June 15, 2005 and
    incorporated herein by reference)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 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 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 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)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 reference)10
.2

Advisory Agreement between the
    Company and our 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 reference)10
.3

First Amendment to Advisory
    Agreement between the Company and our 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 reference)10
.4

Agreement for Purchase and Sale of
    Real Property and Escrow Instructions dated as of May 8,
    2006, by and between T
    REIT-AmberOaks,
    LP, et al and Chase Merritt, L.P. (included as
    Exhibit 10.4 to the
    Form 10-Q
    filed by the Company on May 10, 2006 and incorporated
    herein by reference)10
.5

Agreement for Purchase and Sale of
    Real Property and Escrow Instructions between TREIT-Titan Plaza,
    L.P., et al and Chase Merritt, L.P., dated June 7,
    2006 (included as Exhibit 10.1 to the
    Form 8-K
    filed by the Company on June 9, 2006 and incorporated
    herein by reference)10
.6

First Amendment to Purchase and
    Sale Agreement of Real Estate and Property and Joint Escrow
    Instructions (Amber Oaks III), by and between
    TREIT-Amberoaks,
    L.P., et al, and Chase Merritt Amber Oaks III, L.P.,
    dated June 7, 2006 (included as Exhibit 10.1 to the
    Form 8-K
    filed by the Company on June 15, 2006 and incorporated
    herein by reference)10
.7

Second Amendment to Purchase and
    Sale Agreement of Real Estate and Property and Joint Escrow
    Instructions (Amber Oaks III), by and between
    TREIT-Amberoaks,
    L.P., et al, and Chase Merritt Amber Oaks III, L.P.,
    dated June 12, 2006 (included as Exhibit 10.2 to the
    Form 8-K
    filed by the Company on June 15, 2006 and incorporated
    herein by reference)10
.8

First Amendment to Agreement for
    Purchase and Sale of Real Property and Escrow Instructions
    between TREIT-Titan Plaza L.P. et al and Chase Merritt
    Titan L.P., dated June 30, 2006 (included as
    Exhibit 10.1 to the
    Form 8-K
    filed by the Company on July 11, 2006 and incorporated
    herein by reference)31
.1*

Certification of Chief Executive
    Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200231
.2*

Certification of Chief Financial
    Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200232
.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 200232
.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     *
    
    Filed herewith.