##### 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
    September 30, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE  SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          toCommission File
    Number: 0-50261   G REIT, Inc.
 (Exact name of registrant as
    specified in its charter)
  Maryland

52-2362509(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)1551 N. Tustin Avenue,

92705Suite 200 Santa Ana, California(Address of principal executive offices)

(Zip code)   (714) 667-8252
   N/A
  þ o
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ




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##### 



G REIT,
    INC.
    (A Maryland Corporation)
    TABLE OF CONTENTS
  PART I  FINANCIAL
    INFORMATIONItem 1.


Financial Statements


2Condensed Consolidated Statements of Net Assets
    (Liquidation Basis) as of September 30, 2007 (Unaudited)
    and December 31, 2006 (Unaudited)


2Condensed Consolidated Statements of Changes in
    Net Assets (Liquidation Basis) for the Three and Nine Months
    Ended September 30, 2007 (Unaudited) and 2006
    (Unaudited)


3Notes to Condensed Consolidated Financial
    Statements (Unaudited)


4Item 2.


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


23Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


39Item 4.


Controls and Procedures


39Item 4T.


Controls and Procedures


40PART II  OTHER INFORMATIONItem 1.


Legal Proceedings


40Item 1A.


Risk Factors


41Item 2.


Unregistered Sales of Equity Securities and Use
    of Proceeds


41Item 3.


Defaults Upon Senior Securities


41Item 4.


Submission of Matters to a Vote of Security
    Holders


41Item 5.


Other Information


41Item 6.


Exhibits


42SIGNATURES


43EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   1




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION
  Item 1.
    Financial
    Statements.  G REIT,
    INC.
    CONDENSED CONSOLIDATED STATEMENTS OF NET ASSETS
    (Liquidation Basis)
    September 30, 2007 (Unaudited) and December 31, 2006
    (Unaudited)
  September 30,


December 31,2007


2006ASSETSReal estate investments:Real estate held for sale

$
83,634,000


$
417,384,000Investment in unconsolidated real estate


16,249,000



15,889,00099,883,000



433,273,000Cash and cash equivalents


72,958,000



76,812,000Restricted cash


1,646,000



8,555,000Accounts receivable, net


2,539,000



5,025,000Accounts receivable from related parties


401,000



199,000Asset for estimated receipts in excess of estimated costs during
    liquidation


1,047,000



3,041,000Total assets


178,474,000



526,905,000LIABILITIESMortgage loans payable secured by properties held for sale


24,436,000



225,836,000Accounts payable and accrued liabilities


5,256,000



8,526,000Accounts payable due to related parties


631,000



1,175,000Security deposits and prepaid rent


743,000



2,629,000Total liabilities


31,066,000



238,166,000Commitments and contingencies (Note 12)Net assets in liquidation

$
147,408,000


$
288,739,000    2




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G REIT,
    INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
    (Liquidation Basis)
    For the Three and Nine Months Ended September 30, 2007
    (Unaudited) and 2006 (Unaudited)
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006Net assets in liquidation, beginning of period

$
151,719,000


$
473,518,000


$
288,739,000


$
453,459,000Changes in net assets in liquidation:Changes to asset (liability) for estimated receipts (costs) in
    excess of estimated costs (receipts) during liquidation:Operating income


(1,501,000
)


(6,192,000
)


(8,176,000
)


(17,894,000
)Distributions received from unconsolidated properties


(182,000
)


(347,000
)


(601,000
)


(1,041,000
)Payments of liquidation costs and other amounts


1,006,000



3,093,000



3,967,000



10,231,000Distributions to stockholders














8,235,000Change in estimated receipts (costs) in excess of estimated
    costs (receipts) during liquidation


762,000



2,904,000



2,816,000



(767,000
)Change to asset (liability) for estimated receipts (costs) in
    excess of estimated costs (receipts) during liquidation


85,000



(542,000
)


(1,994,000
)


(1,236,000
)Change in fair value of assets and liabilities:Change in fair value of marketable securities






(50,000
)






(132,000
)Change in fair value of real estate investments


(2,519,000
)


(5,945,000
)


(1,433,000
)


26,103,000Change in assets and liabilities due to activity in asset
    (liability) for estimated receipts (costs) in excess of
    estimated costs (receipts) during liquidation


677,000



3,446,000



4,810,000



469,000Net increase (decrease) in fair value


(1,842,000
)


(2,549,000
)


3,377,000



26,440,000Liquidating distributions to stockholders


(2,554,000
)


(8,234,000
)


(142,714,000
)


(16,470,000
)Change in net assets in liquidation


(4,311,000
)


(11,325,000
)


(141,331,000
)


8,734,000Net assets in liquidation, end of period

$
147,408,000


$
462,193,000


$
147,408,000


$
462,193,000    3




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)
  The use of the words we, us or
    our refers to G REIT, Inc. and its
    subsidiaries, including G REIT, L.P., or our Operating
    Partnership, except where the context otherwise requires.
  1.
    Organization
    and Description of Business             4




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
  2.
    Plan of
    Liquidation        3.
    Summary
    of Significant Accounting Policies   5




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
  Interim
    Financial Data
  Form 10-K,
  Principles
    of Consolidation
    Liquidation
    Basis of Accounting
  tenant-in-common,
   6




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
    Segments
    Recently
    Issued Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes
  Fair Value
    Measurement
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities
  4.
    Asset for
    Estimated Receipts in Excess of Estimated Costs During
    Liquidation   7




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
      December 31,


Cash Payments


Change in


September 30,2006


and (Receipts)


Estimates


2007Assets:Estimated net inflows from consolidated and unconsolidated
    operating activities

$
12,424,000


$
(8,777,000
)

$
1,641,000


$
5,288,000Liabilities:Liquidation costs


(5,291,000
)


1,112,000



460,000



(3,719,000
)Capital expenditures


(4,092,000
)


2,855,000



715,000



(522,000
)(9,383,000
)


3,967,000



1,175,000



(4,241,000
)Total asset for estimated receipts in excess of estimated costs
    during liquidation

$
3,041,000


$
(4,810,000
)

$
2,816,000


$
1,047,000   5.
    Net
    Assets in Liquidation     8




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
       9




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
      6.
    Real
    Estate Investments      Dispositions
    in 2007
    Two
    Corporate Plaza  Houston, Texas
    One
    World Trade Center  Long Beach,
    California
   10




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
    One
    Financial Plaza  St. Louis,
    Missouri
    824
    Market Street  Wilmington, Delaware
  tenant-in-common,
  North
    Belt Corporate Center  Houston, Texas
    Opus
    Plaza at Ken Caryl  Littleton, Colorado
   11




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
    Madrona
    Buildings  Torrance, California
    Eaton
    Freeway Industrial Park  Phoenix,
    Arizona
    North
    Pointe Corporate Center  Sacramento,
    California
    Termination
    of Property Under Contract
   12




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
  Dispositions
    in 2006
  600 B Street 
    San Diego, California
    Hawthorne
    Plaza  San Francisco, California
    AmberOaks 
    Austin, Texas
    7.
    Restricted
    Cash    8.
    Mortgage
    Loans Payable   13




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
          9.
    Minority
    Interests        10.
    Stockholders
    Equity  Common
    Stock
   14




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
    Dividend
    Reinvestment Program
    Share
    Repurchase Plan
    Stock
    Option Plans
  Independent
    Director Stock Option Plan
    Officer
    and Employee Stock Option Plan
    2004
    Incentive Award Plan
   15




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
        Share-Based Payment
  11.
    Related
    Party Transactions  Advisory
    Agreement
  Advisory
    Fees
     16




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
  Real
    Estate Acquisition Fee
    Real
    Estate Disposition Fee
    Lease
    Commissions
    Property
    Management Fees
    Incentive
    Distributions
   17




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
  Retention
    Bonuses and Milestone Payments
      Real
    Estate Commissions
    Related
    Party Accounts Receivable/Payable
    12.
    Commitments
    and Contingencies  SEC
    Investigation
  In the matter of Triple Net Properties,
    LLC.
 18




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
    and/or Accounting for Contingencies
  Litigation
    Environmental
    Matters
    Unconsolidated
    Debt
     19




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
      Other
    13.
    Concentration
    of Credit Risk     20




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
    Percentage of2007 Annual


2007 Annual





Square Footage


LeaseTenant

Base Rent(1)


Base Rent


Property


(Approximately)


Expiration DateFederal Deposit Insurance Corp. (FDIC)(2)

$
5,019,000



34.0
%


Pacific Place



321,000



11/30/2007     (1)
    
    Annualized rental income is based on contractual base rent set
    forth in leases in effect as of September 30, 2007.(2)
    
    We have been notified that the FDIC does not intend to renew
    their lease upon expiration of their current lease term on
    November 30, 2007.    14.
    Subsequent
    Events  Plan of
    Liquidation
    Real
    Estate Investments
  Dispositions
    in 2007
  Bay
    View Plaza  Alameda, California
    Mortgage
    Loans Payable
   21




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G REIT,
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Continued
    Stockholders
    Equity
   22




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Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  The use of the words we, us or
    our refers to G REIT, Inc. and its
    subsidiaries, including G REIT, L.P., our Operating
    Partnership.
  Form 10-Q.
  Forward-Looking
    Statements
    Overview
    and Background
   23




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Business
    Strategy and Plan of Liquidation
     24




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Critical
    Accounting Policies
  Form 10-K,
  Interim
    Financial Data
   25




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##### Table of Contents



Form 10-K,
  Dispositions
    in 2007
    Two
    Corporate Plaza  Houston, Texas
    One
    World Trade Center  Long Beach,
    California
    One
    Financial Plaza  St. Louis,
    Missouri
    824
    Market Street  Wilmington, Delaware
  tenant-in-common,
 26




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North
    Belt Corporate Center  Houston, Texas
    Opus
    Plaza at Ken Caryl  Littleton, Colorado
    Madrona
    Buildings  Torrance, California
    Eaton
    Freeway Industrial Park  Phoenix,
    Arizona
    North
    Pointe Corporate Center  Sacramento,
    California
   27




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Termination
    of Property Under Contract
    Dispositions
    in 2006
  600 B Street 
    San Diego, California
    Hawthorne
    Plaza  San Francisco, California
    AmberOaks 
    Austin, Texas
    Factors
    Which May Influence Results of Operations
  Rental
    Income
   28




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Scheduled
    Lease Expirations
    Sarbanes-Oxley
    Act
  and/or
  Changes
    in Net Assets in Liquidation
  Three
    and Nine Months Ended September 30, 2007 and
    2006
     29




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30




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Liquidity
    and Capital Resources
    Current
    Sources of Capital and Liquidity
  and/or
   31




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Factors
    Which May Influence Future Sources of Capital and
    Liquidity
  SEC
    Investigation
  In the matter of Triple Net Properties,
    LLC.
  and/or Accounting for Contingencies
  Debt
    Financing
        Weighted-AverageTotal Debt


Interest RateSeptember 30,


December 31,


September 30,


December 31,2007


2006


2007


2006(Liquidation Basis)Mortgage debt

$
24,436,000


$
225,836,000



8.30
%


5.65
%Fixed rate and variable rateFixed rate

$



$
196,321,000







5.32
%Variable rate

$
24,436,000


$
29,515,000



8.30
%


7.86
%  32




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Other
    Liquidity Needs
       33




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Capital
    Resources
  General
   34




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##### Table of Contents



and/or
    Financing
      Unconsolidated
    Debt
     35




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Debt
    Service Requirements
      Contractual
    Obligations
   36




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Payments Due by PeriodLess Than








More Than1 Year


1-3 Years


3-5 Years


5 Years(2007)


(2008-2009)


(2010-2011)


(After 2011)


TotalPrincipal payments  variable rate debt

$
18,868,000


$
5,568,000


$



$



$
24,436,000Interest payments  variable rate debt (based on rate
    in effect as of September 30, 2007)


919,000



430,000











1,349,000Ground lease obligations(1)


















Tenant improvement and lease commission obligations


822,000















822,000Total

$
20,609,000


$
5,998,000


$



$



$
26,607,000     (1)
    
    The Sutter Square Galleria property is subject to a ground lease
    expiring in 2040 with one ten-year option period thereafter.
    Future minimum rents to be paid under this non-cancelable
    operating lease are computed at 12.5% of gross rents, as defined
    in the ground lease agreement.  Off-Balance
    Sheet Arrangements
    Inflation
    Subsequent
    Events
  Plan of
    Liquidation
   37




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Real
    Estate Investments
  Dispositions
    in 2007
  Bay
    View Plaza  Alameda, California
    Mortgage
    Loans Payable
    Stockholders
    Equity
    Recently
    Issued Accounting Pronouncements
    Fair Value
    Measurement
 38




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The
    Fair Value Option for Financial Assets and Financial
    Liabilities
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk.      Expected Maturity Date2007


2008


2009


2010


2011


Thereafter


TotalFixed rate debt

$



$



$



$



$



$



$
Average interest rate on maturing debt


























Variable rate debt

$
18,868,000


$
115,000


$
5,453,000


$



$



$



$
24,436,000Average interest rate on maturing debt (based on rate in effect
    as of September 30, 2007)


8.56
%


7.39
%


7.39
%














8.30
%     Item 4.
    Controls
    and Procedures.   39




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##### Table of Contents



Item 4T.
    Controls
    and Procedures.  Evaluation of disclosure controls and
    procedures
  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.
  PART II 
    OTHER INFORMATION
  Item 1.
    Legal
    Proceedings.  SEC
    Investigation
  In the matter of Triple Net Properties,
    LLC.
  and/or
 40




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Litigation
    Item 1A.
    Risk
    Factors.  Form 10-K,
  Some or all of our properties may incur vacancies, which
    may result in reduced revenue and liquidation value, a reduction
    in cash available for liquidating distributions and a diminished
    return on your investment.
    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.    Item 5.
    Other
    Information.   41




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Item 6.
    Exhibits.   42




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SIGNATURES
    G REIT, INC.(Registrant)November 9, 2007


By:



/s/  SCOTT
    D. PETERSDate





Scott D. Peters
    Chief Executive Officer and President
    (principal executive officer)November 9, 2007


By:


/s/  COURTNEY A. BROWERDate





Courtney A. Brower
    Chief Accounting Officer
    (principal accounting officer)  43




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

Exhibit2
.1

G REIT, Inc. Plan of Liquidation and Dissolution, as approved by
    stockholders on February 27, 2006 and as currently in
    effect (included as Exhibit A to our Definitive Proxy
    Statement filed on January 13, 2006 and incorporated herein
    by reference)3
.1

Articles of Incorporation of G REIT, Inc. (as approved by
    stockholders on June 29, 2004 and as currently in effect
    (included as Appendix B to our Definitive Proxy Statement
    filed on May 27, 2004 and incorporated herein by reference)3
.2

Bylaws of G REIT, Inc. (as approved by stockholders on
    June 29, 2004 and as currently in effect (included as
    Appendix C to our Definitive Proxy Statement filed on
    May 27, 2004 and incorporated herein by reference)10
.1

Form of Agreement of Limited Partnership of G REIT, L.P.
    (included as Exhibit 10.1 to our Registration Statement on
    Form S-11
    filed on January 9, 2002 (File
    No. 333-76498)
    and incorporated herein by reference)10
.2

Advisory Agreement between G REIT, Inc. and Triple Net
    Properties, LLC (included as Exhibit 10.6 to our
    Registration Statement on
    Form S-11
    filed on January 9, 2002 (File
    No. 333-76498)
    and incorporated herein by reference)10
.3

First Amendment to Advisory Agreement between G REIT, Inc. and
    Triple Net Properties, LLC (included as Exhibit 10.8 to
    Post Effective Amendment No. 1 to our Registration
    Statement on
    Form S-11
    filed on December 18, 2002 (File
    No. 333-76498)
    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 Accounting 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 Accounting Officer, pursuant to 18 U.S.C.
    Section 1350, as created by Section 906 of the
    Sarbanes-Oxley Act of 2002     *
    
    Filed herewith. 44