Table of Contents





|                                                                                           |  | 
|------------------------------------------------------------------------------------------ |  | 
|UNITED STATES                                                                             
|SECURITIES AND EXCHANGE COMMISSION                                                        
|Washington, DC 20549                                                                      
|                                                                                          
|                                                                                           |  | 
|FORM 10-Q                                                                                 
|                                                                                           |  | 
|                                                                                           |  | 
|xQUARTERLY REPORT
 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                                                           |  | 
|For the quarterly period ended March 31,
 2010                                            
|                                                                                          
|OR                                                                                        
|                                                                                          
|oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                                                           |  | 
|For the transition period from _________ to
 _________                                    
|                                                                                           |  | 
|Commission file number 000-53841                                                          
|                                                                                           |  | 
|                                                                                           |  | 
|AmREIT, Inc.                                                                              
|(Exact Name of Registrant as Specified in
 Its Charter)                                   

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 20-8857707                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|                                                               |  |                                     
|8 Greenway Plaza, Suite 1000                                   |  | 77046                               
|Houston, Texas                                                 |  | (Zip Code)                          
|(Address of Principal Executive Offices)                       |  |                                     

|                                                                   |  | 
|------------------------------------------------------------------ |  | 
|Registrants telephone number, including area code: (713) 850-1400
|                                                                   |  | 
|                                                                   |  | 

Indicate by
check mark whether the registrant: (1) has filed all reports required to be
filed by Section 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 x
NO o

Indicate by
check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). o Yes
o No

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):

|                                              |                             
|--------------------------------------------- | ----------------------------
|Large accelerated filer o                     | Accelerated
 filer o        
|Non-accelerated filer o                       | Smaller
 reporting company x
|(Do not check if a smaller reporting company) |                             

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). YES o NO x

Indicate the
number of shares outstanding of each of the issuers classes of common stock,
as of the latest practicable date:

|                                           |  |                               
|------------------------------------------ |  | ------------------------------
|Class                                      |  | Outstanding as of May 12, 2010
|AmREIT, Inc. Common Stock, $0.01 par value |  | 23,108,196 shares             





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AmREIT, Inc.
Quarterly Report on Form 10-Q
Quarter Ended March 31, 2010

Table of Contents

|                                |  |                                                                                        |    | 
|------------------------------- |  | -------------------------------------------------------------------------------------- | -- | 
|Item No.                        |  | Page                                                                                  
|PART I -
 Financial Information
|1                               |  | Financial Statements                                                                   | 1  | 
|2                               |  | Managements Discussion and Analysis of Financial Condition and
 Results of Operations | 25 | 
|3                               |  | Quantitative and Qualitative Disclosures About Market Risk                             | 31 | 
|4                               |  | Controls and Procedures                                                                | 31 | 
|                                |  |                                                                                        |    | 
|PART II -
 Other Information   
|1                               |  | Legal Proceedings                                                                      | 32 | 
|2                               |  | Unregistered Sales of Equity Securities and Use of Proceeds                            | 32 | 
|3                               |  | Defaults Upon Senior Securities                                                        | 32 | 
|4                               |  | [Removed and Reserved]                                                                 | 32 | 
|5                               |  | Other Information                                                                      | 32 | 
|6                               |  | Exhibits                                                                               | 32 | 
|                                |  | Signatures                                                                             | 33 | 
|                                |  | Exhibit Index                                                                          | 34 | 

---



Table of Contents

PART I - FINANCIAL INFORMATION

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

AmREIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2010 and December 31, 2009
(in thousands, except share data)

|                                                                                                                                                     |  |                 |             |                    |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ----------- | ------------------ | - | ------- | -
|                                                                                                                                                     |  | March 31,
 2010 |             | December 31,
 2009 |  
|                                                                                                                                                     |  |                 |             |                    |   |         |  
|                                                                                                                                                     |  |                 | (unaudited) |                    |   |         |  
|ASSETS                                                                                                                                               |  |                 |             |                    |   |         |  
|Real estate investments at cost:                                                                                                                     |  |                 |             |                    |   |         |  
|Land                                                                                                                                                 |  | $               | 131,351     |                    | $ | 131,351 |  
|Buildings                                                                                                                                            |  |                 | 142,583     |                    |   | 142,575 |  
|Tenant improvements                                                                                                                                  |  |                 | 10,293      |                    |   | 9,883   |  
|                                                                                                                                                     |  |                 | 284,227     |                    |   | 283,809 |  
|Less accumulated depreciation and amortization                                                                                                       |  |                 | (26,068     | )                  |   | (24,934 | )
|                                                                                                                                                     |  |                 | 258,159     |                    |   | 258,875 |  
|                                                                                                                                                     |  |                 |             |                    |   |         |  
|Net investment in direct financing leases
 held for investment                                                                                       |  |                 | 20,986      |                    |   | 21,057  |  
|Acquired lease intangibles, net                                                                                                                      |  |                 | 6,750       |                    |   | 7,194   |  
|Investment in merchant development funds
 and other affiliates                                                                                       |  |                 | 8,924       |                    |   | 9,527   |  
|Net real estate investments                                                                                                                          |  |                 | 294,819     |                    |   | 296,653 |  
|                                                                                                                                                     |  |                 |             |                    |   |         |  
|Cash and cash equivalents                                                                                                                            |  |                 | 586         |                    |   | 1,067   |  
|Tenant receivables, net                                                                                                                              |  |                 | 3,464       |                    |   | 3,697   |  
|Accounts receivable, net                                                                                                                             |  |                 | 3,540       |                    |   | 2,014   |  
|Accounts receivable - related party                                                                                                                  |  |                 | 201         |                    |   | 152     |  
|Notes receivable                                                                                                                                     |  |                 | 4,100       |                    |   | 4,043   |  
|Notes receivable - related party                                                                                                                     |  |                 | 4,910       |                    |   | 4,669   |  
|Deferred costs, net                                                                                                                                  |  |                 | 2,668       |                    |   | 2,703   |  
|Other assets                                                                                                                                         |  |                 | 3,945       |                    |   | 5,334   |  
|TOTAL ASSETS                                                                                                                                         |  | $               | 318,233     |                    | $ | 320,332 |  
|                                                                                                                                                     |  |                 |             |                    |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                 |  |                 |             |                    |   |         |  
|Liabilities:                                                                                                                                         |  |                 |             |                    |   |         |  
|Notes payable                                                                                                                                        |  | $               | 184,906     |                    | $ | 182,976 |  
|Accounts payable and other liabilities                                                                                                               |  |                 | 6,022       |                    |   | 7,741   |  
|Acquired below market lease intangibles,
 net                                                                                                        |  |                 | 1,644       |                    |   | 1,732   |  
|Security deposits                                                                                                                                    |  |                 | 704         |                    |   | 705     |  
|TOTAL LIABILITIES                                                                                                                                    |  |                 | 193,276     |                    |   | 193,154 |  
|                                                                                                                                                     |  |                 |             |                    |   |         |  
|Stockholders equity:                                                                                                                                |  |                 |             |                    |   |         |  
|Preferred stock, $0.01 par value,
 50,000,000 shares authorized, none issued                                                                         |  |                 |            |                    |   |        |  
|AmREIT, Inc. common stock, $0.01 par value,
 1,000,000,000 shares authorized, 23,108,196 and 22,950,952 shares issued and
 outstanding, respectively |  |                 | 232         |                    |   | 230     |  
|Capital in excess of par value                                                                                                                       |  |                 | 191,122     |                    |   | 190,975 |  
|Accumulated distributions in excess of
 earnings                                                                                                     |  |                 | (66,098     | )                  |   | (63,908 | )
|Accumulated other comprehensive loss                                                                                                                 |  |                 | (451        | )                  |   | (384    | )
|Cost of treasury stock, 14,155 and 0
 shares, respectively                                                                                           |  |                 | (115        | )                  |   |        |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                           |  |                 | 124,690     |                    |   | 126,913 |  
|Non-controlling interest                                                                                                                             |  |                 | 267         |                    |   | 265     |  
|TOTAL EQUITY                                                                                                                                         |  |                 | 124,957     |                    |   | 127,178 |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                           |  | $               | 318,233     |                    | $ | 320,332 |  

See Notes to Consolidated
Financial Statements.

1

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Table of Contents

AmREIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

|                                                                                               |  |                              |        |      |   |        |  
|---------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------ | -
|                                                                                               |  | Three months ended March 31, |       
|                                                                                               |  | 2010                         |        | 2009 |  
|                                                                                               |  |                              |        |      |   |        |  
|Revenues:                                                                                      |  |                              |        |      |   |        |  
|Rental income from operating leases                                                            |  | $                            | 7,220  |      | $ | 7,507  |  
|Earned income from direct financing leases                                                     |  |                              | 556    |      |   | 545    |  
|Lease termination income                                                                       |  |                              |       |      |   | 1,065  |  
|Real estate fee income                                                                         |  |                              | 39     |      |   | 87     |  
|Real estate fee income - related party                                                         |  |                              | 384    |      |   | 690    |  
|Construction management fee income -
 related party                                            |  |                              | 77     |      |   | 38     |  
|Asset management fee income - related party                                                    |  |                              | 370    |      |   | 384    |  
|Total revenues                                                                                 |  |                              | 8,646  |      |   | 10,316 |  
|                                                                                               |  |                              |        |      |   |        |  
|Expenses:                                                                                      |  |                              |        |      |   |        |  
|General and administrative                                                                     |  |                              | 1,287  |      |   | 2,683  |  
|Property expense                                                                               |  |                              | 1,696  |      |   | 2,108  |  
|Legal and professional                                                                         |  |                              | 259    |      |   | 736    |  
|Real estate commissions                                                                        |  |                              | 1      |      |   | 1      |  
|Depreciation and amortization                                                                  |  |                              | 1,722  |      |   | 1,865  |  
|Total expenses                                                                                 |  |                              | 4,965  |      |   | 7,393  |  
|                                                                                               |  |                              |        |      |   |        |  
|Operating income                                                                               |  |                              | 3,681  |      |   | 2,923  |  
|                                                                                               |  |                              |        |      |   |        |  
|Other income (expense):                                                                        |  |                              |        |      |   |        |  
|Interest and other income - related party                                                      |  |                              | 215    |      |   | 181    |  
|Loss from merchant development funds and other
 affiliates                                     |  |                              | (541   | )    |   | (89    | )
|Income tax benefit for taxable REIT
 subsidiary                                                |  |                              | 70     |      |   | 291    |  
|Interest expense                                                                               |  |                              | (2,737 | )    |   | (2,594 | )
|                                                                                               |  |                              |        |      |   |        |  
|Income from continuing operations                                                              |  |                              | 688    |      |   | 712    |  
|                                                                                               |  |                              |        |      |   |        |  
|Income from discontinued operations, net of
 taxes                                             |  |                              |       |      |   | 10     |  
|Gain on sales of real estate acquired for
 resale, net of taxes                                |  |                              |       |      |   | 1,898  |  
|Income from discontinued operations                                                            |  |                              |       |      |   | 1,908  |  
|                                                                                               |  |                              |        |      |   |        |  
|Net income including noncontrolling
 interest                                                  |  |                              | 688    |      |   | 2,620  |  
|                                                                                               |  |                              |        |      |   |        |  
|Net income attributable to noncontrolling
 interest                                            |  |                              | (11    | )    |   | (53    | )
|Net income attributable to AmREIT
 stockholders                                                |  |                              | 677    |      |   | 2,567  |  
|                                                                                               |  |                              |        |      |   |        |  
|Distributions paid to Class C and D
 stockholders                                              |  |                              |       |      |   | (2,507 | )
|                                                                                               |  |                              |        |      |   |        |  
|Net income available to stockholders                                                           |  | $                            | 677    |      | $ | 60     |  
|                                                                                               |  |                              |        |      |   |        |  
|Net income per share of common stock -
 basic and diluted                                      |  |                              |        |      |   |        |  
|Income (loss) before discontinued
 operations                                                  |  | $                            | 0.03   |      | $ | (0.35  | )
|Income (loss) from discontinued operations                                                     |  | $                            |       |      | $ | 0.36   |  
|Net income                                                                                     |  | $                            | 0.03   |      | $ | 0.01   |  
|                                                                                               |  |                              |        |      |   |        |  
|Weighted average shares of common stock
 used to Compute net loss per share, basic and diluted |  |                              | 23,058 |      |   | 5,279  |  

See Notes to Consolidated
Financial Statements.

2

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Table of Contents

AmREIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the three months ended March 31, 2010 
(in thousands) 
(unaudited)

|                                                    |  |                         |     |                                  |   |                                                    |   |                                         |         |                          |   |                          |   |       |      |   |   |     |   |   |         |  
|--------------------------------------------------- |  | ----------------------- | --- | -------------------------------- | - | -------------------------------------------------- | - | --------------------------------------- | ------- | ------------------------ | - | ------------------------ | - | ----- | ---- | - | - | --- | - | - | ------- | -
|                                                    |  | Amount of
 Common Stock |     | Capital in
 excess of
 par value |   | Accumulated
 distributions
 in excess of
 earnings |   | Accumulated
 other
 comprehensive
 loss |         | Cost of
 treasury
 stock |   | Noncontrolling
 Interest |   | Total |     
|Balance at December 31, 2009                        |  | $                       | 230 |                                  | $ | 190,975                                            |   | $                                       | (63,908 | )                        | $ | (384                     | ) | $     |     |   | $ | 265 |   | $ | 127,178 |  
|                                                    |  |                         |     |                                  |   |                                                    |   |                                         |         |                          |   |                          |   |       |      |   |   |     |   |   |         |  
|Net income including noncontrolling interest        |  |                         |    |                                  |   |                                                   |   |                                         | 688     |                          |   |                         |   |       |     |   |   |    |   |   | 688     |  
|Net income attributable to noncontrolling interest  |  |                         |    |                                  |   |                                                   |   |                                         | (11     | )                        |   |                         |   |       |     |   |   | 11  |   |   |        |  
|Fair value of hedge liability                       |  |                         |    |                                  |   |                                                   |   |                                         |        |                          |   | (67                      | ) |       |     |   |   |    |   |   | (67     | )
|Deferred compensation issuance of restricted shares |  |                         |    |                                  |   | (1,535                                             | ) |                                         |        |                          |   |                         |   |       |     |   |   |    |   |   | (1,535  | )
|Issuance of shares of common stock                  |  |                         | 2   |                                  |   | 1,608                                              |   |                                         |        |                          |   |                         |   |       |     |   |   |    |   |   | 1,610   |  
|Amortization of deferred compensation               |  |                         |    |                                  |   | 74                                                 |   |                                         |        |                          |   |                         |   |       |     |   |   |    |   |   | 74      |  
|Repurchase of shares of common stock                |  |                         |    |                                  |   |                                                   |   |                                         |        |                          |   |                         |   |       | (115 | ) |   |    |   |   | (115    | )
|Distributions                                       |  |                         |    |                                  |   |                                                   |   |                                         | (2,867  | )                        |   |                         |   |       |     |   |   | (9  | ) |   | (2,876  | )
|                                                    |  |                         |     |                                  |   |                                                    |   |                                         |         |                          |   |                          |   |       |      |   |   |     |   |   |         |  
|Balance at March 31, 2010                           |  | $                       | 232 |                                  | $ | 191,122                                            |   | $                                       | (66,098 | )                        | $ | (451                     | ) | $     | (115 | ) | $ | 267 |   | $ | 124,957 |  

3

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Table of Contents

AmREIT, INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS(in
thousands, except share data) 
(unaudited)

|                                                                                   |  |                              |        |      |   |        |  
|---------------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------ | -
|                                                                                   |  | Three months ended March 31, |       
|                                                                                   |  | 2010                         |        | 2009 |  
|Cash flows from operating activities:                                              |  |                              |        |      |   |        |  
|Net income including noncontrolling interest                                       |  | $                            | 688    |      | $ | 2,620  |  
|Adjustments to reconcile net income to net cash provided by operating
 activities: |  |                              |        |      |   |        |  
|Proceeds from sale of real estate acquired for resale                              |  |                              |       |      |   | 1,100  |  
|Gain on sale of real estate acquired for resale                                    |  |                              |       |      |   | (2,875 | )
|Bad debt expense                                                                   |  |                              | 51     |      |   | 342    |  
|Lease termination income                                                           |  |                              |       |      |   | (1,065 | )
|Loss from merchant development funds and other affiliates                          |  |                              | 541    |      |   | 89     |  
|Cash receipts related to deferred related party fees                               |  |                              | 7      |      |   | 6      |  
|Depreciation and amortization                                                      |  |                              | 1,722  |      |   | 1,865  |  
|Amortization of above/below market rent                                            |  |                              | (39    | )    |   | (14    | )
|Amortization of loan premium and financing cost                                    |  |                              | 116    |      |   | 102    |  
|Amortization of deferred compensation                                              |  |                              | 74     |      |   | 125    |  
|Distributions from merchant development funds and other affiliate                  |  |                              | 36     |      |   | (5     | )
|Decrease (Increase) in tenant receivables                                          |  |                              | 182    |      |   | (313   | )
|Decrease (increase) in accounts receivable                                         |  |                              | 17     |      |   | (299   | )
|Increase in accounts receivable - related party                                    |  |                              | (49    | )    |   | (227   | )
|Cash receipts from direct financing leases more than income recognized             |  |                              | 72     |      |   | 56     |  
|Decrease in other assets                                                           |  |                              | 1,307  |      |   | 1,160  |  
|Increase (decrease) in accounts payable and other liabilities                      |  |                              | (3,328 | )    |   | 1,136  |  
|Decrease in accounts payable - related party                                       |  |                              | (1     | )    |   | (150   | )
|Increase (decrease) in security deposits                                           |  |                              | (1     | )    |   | 5      |  
|Net
 cash provided by operating activities                                         |  |                              | 1,395  |      |   | 3,658  |  
|                                                                                   |  |                              |        |      |   |        |  
|Cash flows from investing activities:                                              |  |                              |        |      |   |        |  
|Improvements to real estate                                                        |  |                              | (682   | )    |   | (663   | )
|Loans to affiliates                                                                |  |                              | (1,241 | )    |   | (67    | )
|Payments from affiliates                                                           |  |                              | 1,000  |      |   |       |  
|Investment in merchant development funds and other affiliates                      |  |                              | (66    | )    |   |       |  
|Distributions from merchant development funds and other affiliates                 |  |                              | 85     |      |   | 43     |  
|Decrease in preacquisition costs                                                   |  |                              |       |      |   | 4      |  
|Net cash used in investing activities                                              |  |                              | (904   | )    |   | (683   | )
|                                                                                   |  |                              |        |      |   |        |  
|Cash flows from financing activities:                                              |  |                              |        |      |   |        |  
|Proceeds from notes payable                                                        |  |                              | 3,150  |      |   | 561    |  
|Payments of notes payable                                                          |  |                              | (1,201 | )    |   | (1,766 | )
|Payments for financing costs                                                       |  |                              | (3     | )    |   | (52    | )
|Purchase of treasury stock                                                         |  |                              | (22    | )    |   |       |  
|Issuance of shares of common stock                                                 |  |                              | (20    | )    |   |       |  
|Retirement of shares of common stock                                               |  |                              |       |      |   | (267   | )
|Issuance costs                                                                     |  |                              |       |      |   | (4     | )
|Common dividends paid                                                              |  |                              | (2,867 | )    |   | (3,162 | )
|Distributions to noncontrolling interests                                          |  |                              | (9     | )    |   | (40    | )
|Net cash used in financing activities                                              |  |                              | (972   | )    |   | (4,730 | )
|                                                                                   |  |                              |        |      |   |        |  
|Net increase (decrease) in cash and cash equivalents                               |  |                              | (481   | )    |   | (1,755 | )
|Cash and cash equivalents, beginning of period                                     |  |                              | 1,067  |      |   | 2,335  |  
|Cash and cash equivalents, end of period                                           |  | $                            | 586    |      | $ | 580    |  
|                                                                                   |  |                              |        |      |   |        |  
|Supplemental schedule of cash flow information:                                    |  |                              |        |      |   |        |  
|Cash paid during the year for:                                                     |  |                              |        |      |   |        |  
|Interest                                                                           |  | $                            | 2,547  |      | $ | 2,518  |  
|Income taxes                                                                       |  |                              | 19     |      |   | 118    |  

Supplemental schedule of noncash investing and financing
activities

See Note 2 for further
discussion of non-cash investing and financing activities associated with the
recapitalization and merger, including the issuance of AmREIT, Inc. shares of
common stock in exchange for AmREIT class A, class C, and class D common shares of beneficial
ownership and in exchange for REITPluss net assets.

In 2009, we issued 64,000
restricted shares of common stock to AmREIT employees and directors as part of
their compensation arrangements. The restricted shares vest over a three year period. We
recorded $580,000 in deferred compensation related to the issuance of the
restricted shares.

In 2010, we issued 171,400
restricted shares of common stock to employees and directors as part of their
compensation arrangements. The restricted shares vest over a seven-year period. We
recorded $1.6 million in deferred compensation related to the issuance of the
restricted shares.

During the year ended
December 31, 2009, we reclassified $2.7 million of assets held for sale back to
held for use. Furthermore, approximately $2.2 million in building improvements,
a portion of which were incurred in 2009, were reclassified to investment in
direct financing lease upon execuition of a lease in 2009.

During 2009, we recognized $1.1
million in lease termination income related to a national tenant that declared
bankruptcy and subsequently defaulted upon their operating ground lease with
us. Upon default, ownership of the building transferred from the tenant to us
as the ground lessor. Accordingly, we recorded lease termination income in an
amount equal to the fair value of the building.

See Notes to Consolidated
Financial Statements.

4

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Table of Contents

AmREIT, Inc. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
March 31, 2010 
(unaudited)

1. OUR RECENT HISTORY AND OUR BUSINESS

OUR RECENT HISTORY

We were organized by our
predecessor, AmREIT, in April 2007 as REITPlus, Inc. (REITPlus), a Maryland
corporation that elected to be taxed as a real estate investment trust
(REIT). REITPlus was structured as an externally managed and advised REIT,
with a wholly-owned subsidiary of AmREIT providing investment advisory and
property and corporate management services.

During 2007, AmREIT initiated
a strategic plan referred to as Vision 2010. Vision 2010 was designed to
create a more conforming business platform that would reduce the earnings
volatility of AmREITs business model and that would also simplify its capital
structure, with the ultimate goal of growing its portfolio of properties and
providing liquidity for investors. Vision 2010 includes the following three
phases:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Phase I consisted of
 business model changes which were designed to reduce the earnings volatility
 created by certain of AmREITs transactional operating subsidiaries. In
 connection with Phase I, AmREIT simplified its operating platform and reduced
 its transactional volatility by exiting the general contracting business and
 the independent broker-dealer fund-raising business. Additionally, it
 terminated the best efforts equity offering of REITPlus. Together, these
 restructuring initiatives resulted in a one-time restructuring charge of
 approximately $2.5 million during 2008 but reduced AmREITs annual overhead
 and general and administrative expenses.                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Phase II consisted of
 changes which were designed to simplify AmREITs equity capital structure. As
 the first step in Phase II, in December 2008, AmREIT voluntarily de-listed
 its Class A common shares of beneficial interest from trading on the NYSE
 Alternext Exchange. As the last step in Phase II, at separate special
 meetings held on November 24, 2009, both AmREIT and REITPlus shareholders
 approved the merger of AmREIT with and into REITPlus (the Merger),
 resulting in a combined, conforming entity with a single class of common
 stock, which was renamed AmREIT, Inc. We believe that this simplified capital
 structure will better position us to raise Wall Street and/or institutional
 capital either through joint ventures at the entity level or through an initial
 public offering and re-listing of our shares.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | For the combined company,
 Phase III will consist of growing our portfolio of properties and identifying
 additional sources of liquidity for stockholders as the United States begins
 to exit the current recession and into recovery.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Following our strategic
combination with our predecessor, AmREIT, all of the independent members of the
boards of both AmREIT and REITPlus, as well as H. Kerr Taylor, who served as
chairman and chief executive officer of both companies, now form our
seven-member Board of Directors. Since the Merger, we are and have been
internally managed by the former management team of AmREIT. Accordingly, the
following discussion describes the business of AmREIT, Inc. which is comprised
of the combined businesses previously conducted by AmREIT and REITPlus. As
further discussed in Note 2 to the accompanying consolidated financial
statements, for accounting purposes, the Merger was treated as an asset
acquisition, with AmREIT being the accounting acquirer deemed to have acquired
the net assets of REITPlus. As a result, the accompanying consolidated
financial statements reflect the historical financial position and results of
operations of AmREIT prior to the Merger and those of the combined company
following the Merger.

In these notes to the
financial statements, we, us, our, or the Company refers to AmREIT,
Inc., the combined company following the Merger of REITPlus with AmREIT,
together with its predecessors and subsidiaries, including joint ventures,
unless the context requires otherwise.

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OUR BUSINESS

AmREIT, Inc. owns, operates and creates value on Irreplaceable Corners in Texas,
which is home to three of the top six major growth markets throughout the United States and has the
12th largest economy in the world based on GDP (ahead of Mexico, Russia and India). For over 25 years,
we have provided our clients and investors with financial transparency, reliability and creation of value for
future real estate investment growth. We have access to a variety of capital markets, including public and private
financial companies and institutional investors, and our platform has grown from approximately $100 million in assets
in 2002 to approaching $1 billion today. We have elected to be taxed as a real estate investment trust (REIT) for
federal income tax purposes. AmREIT, Inc. is headquartered in Houston, Texas, and has an office in Dallas, Texas.

Our core portfolio consists
of Todays Irreplaceable Corners. These are corner properties in top U.S.
growth markets with high barriers to entry, high daytime and evening
population, high rate of cars per day and high household incomes within 3-5
miles of the property. To provide future growth and investment opportunities,
our advisory business invests in and advises various real estate partnerships
and joint ventures that own, develop and manage Tomorrows Irreplaceable
Corners. These are properties that are located on dominant regional
intersections within fast growing markets. We create value for our clients and
investors through our expertise in development, redevelopment and daily
operation of these properties.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

MERGER ACCOUNTING

Simultaneously with the
Merger of AmREIT with and into REITPlus on November 24, 2009, wherein AmREIT
acquired REITPluss net assets, AmREIT consummated a recapitalization of its
equity structure by combining its three classes of common shares of beneficial
interest into a single class of common stock. The following discussion
addresses the accounting treatment for the recapitalization as well as for the
acquisition of REITPluss net assets.

Recapitalization  Prior to the Merger, AmREIT had Class A
common shares (Class A shares), Class C common shares (Class C shares) and
Class D common shares (Class D shares) outstanding (collectively, the AmREIT
Shares). The AmREIT Declaration of Trust provided that any merger of AmREIT
that resulted in Class A shares being converted into another security or other
form of consideration must also result in Class C shares and Class D shares
being converted or convertible into such securities or other consideration as
if the Class C shares and Class D shares had first been converted into Class A
shares at the conversion prices and fair market value per share of Class A as
set forth in the Declaration of Trust. The Class C shares and Class D shares
were each convertible into Class A shares at their respective premiums pursuant
to the Declaration of Trust. In conjunction with the Merger, the AmREIT Shares
were converted into a single class of AmREIT, Inc. common stock at exchange
ratios reflecting the foregoing conversion principles. The premium, which was
$10.2 million, was recorded during 2009 as an additional dividend in accordance
with U.S. generally accepted accounting principles (GAAP). Given that AmREIT
was the accounting acquirer, as discussed in more detail below, the foregoing
exchange/conversion was treated for accounting purposes as a deemed
recapitalization of AmREIT immediately prior to the acquisition of REITPluss
net assets. The Class C and Class D shareholders were issued 4,793,455 and
12,178,341 class A shares, respectively, in connection with the
recapitalization on November 24, 2009.

Acquisition - Although REITPlus was the surviving legal
entity in the Merger, AmREIT was deemed to be the acquirer for financial
reporting purposes pursuant to Accounting Standards Codification (ASC) ASC
805 Business Combinations. The
transaction was treated legally as a Merger of the two entities; however, for
accounting purposes the transaction was treated as an asset acquisition
pursuant to ASC 805.The Merger was therefore treated as an acquisition by
AmREIT of REITPluss net assets. Accordingly, the accompanying statements of
operations for the periods prior to the Merger represent the historical
operating results of AmREIT. The operating results generated by REITPluss net
assets were included in our 2009 operating results from November 24, 2009, the
date of the Merger. The acquisition of REITPlus was accounted for by applying
the acquisition method under ASC 805. The purchase price for REITPlus was
determined based on the fair value of the consideration given in exchange for
the REITPlus net assets received in the acquisition. The fair value of the
consideration given was $7.2 million, (calculated as the 758,604 AmREIT shares
deemed given in the transaction valued at $9.50/share) which management
believes reflects the fair value of the net assets of REITPlus deemed acquired
by AmREIT.

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AmREIT incurred costs of
approximately $1.3 million in connection with the Merger which included fees
for investment banking services, legal, accounting, due diligence, tax,
valuation, printing and various other services necessary to complete the
transaction. Costs incurred in connection with the issuance of our common stock
in the amount of $858,000 were recorded as a reduction of stockholders equity.
The remaining costs incurred in the amount of $441,000 were associated with the
acquisition of REITPluss net assets. Accordingly, they were initially
capitalized as part of the assets acquired pursuant to GAAP applied to asset
acquisitions, resulting in a total cost to AmREIT of approximately $7.6
million. However, we subsequently expensed such acquisition costs in 2009 as an
other-than-temporary impairment given that the carrying amount of REITPluss
net assets acquired was in excess of their fair value to the extent of these
costs.

The following represents the
assets acquired and liabilities assumed by AmREIT in the acquisition. No other
tangible or intangible assets were identified as part of the acquisition:

|                                                  |  |                |       |  
|------------------------------------------------- |  | -------------- | ----- | -
|                                                  |  | (in thousands) |      
|Assets                                            |  |                |       |  
|Cash                                              |  | $              | 743   |  
|Remaining interest in
 Shadow Creek Ranch (a)     |  |                | 5,769 |  
|Investment in AmREIT
 (90,241 Class A shares) (b) |  |                | 720   |  
|Prepaid expenses                                  |  |                | 48    |  
|Total assets acquired                             |  | $              | 7,280 |  
|Liabilities                                       |  |                |       |  
|Accounts payable and
 accrued liabilities         |  |                |      |  
|Accounts payable  related
 party                 |  |                | 75    |  
|Total liabilities assumed                         |  |                | 75    |  
|Net assets acquired                               |  | $              | 7,205 |  
|Less: Treasury shares                             |  |                | (720  | )
|Acquisition
 costs                                |  |                | (858  | )
|Net effect on equity                              |  | $              | 5,627 |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | AmREIT owned a 16% interest
 in REITPlus Operating Partnership, LP (REITPlus OP) which held the
 investment in Shadow Creek Ranch and in AmREIT. The remaining interest of
 $5.8 million represents AmREITs cost in acquiring the remaining 84% interest
 in Shadow Creek Ranch owned by REITPlus OP after expensing the $441,000 in
 acquisition costs as an other-than-temporary impairment.
|    |                                                                                                                                                                                                                                                                                                                                                                                                  
|(b) | The value of the investment
 in AmREIT was determined using a $9.50/share value of an AmREIT Class A share
 and represents the remaining 84% interest in the AmREIT shares owned by
 REITPlus OP.                                                                                                                                                                                                

In connection with the
Merger, each AmREIT Class A share was exchanged for one share of AmREIT, Inc.
common stock. The following table calculates the number of shares of AmREIT,
Inc. common stock outstanding after the effects of the AmREIT recapitalization
and subsequent merger with REITPlus:

|                                                                             |  |  |            |  |  |                    |  
|---------------------------------------------------------------------------- |  |  | ---------- |  |  | ------------------ | -
|                                                                             |  |  |            |  |  | Number of 
 Shares |  
|REITPlus shares pre-Merger                                                   |  |  |            |  |  | 758,604            |  
|AmREIT shares exchanged in
 the Merger - AmREIT shares post-recapitalization |  |  | 22,290,695 |  |  |                    |  
|Merger exchange rate                                                         |  |  | 1:1        |  |  | 22,290,695         |  
|                                                                            
|Less: Cancellation of
 AmREIT shares owned by REITPlus pre-Merger            |  |  |            |  |  | (90,241            | )
|                                                                             |  |  |            |  |  |                    |  
|AmREIT, Inc. shares
 immediately post-Merger (November 24, 2009)             |  |  |            |  |  | 22,959,058         |  

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BASIS OF PRESENTATION

Our financial records are
maintained on the accrual basis of accounting whereby revenues are recognized
when earned and expenses are recorded when incurred. The consolidated financial
statements include our accounts as well as the accounts of any wholly- or
majority-owned subsidiaries in which we have a controlling financial interest.
Investments in joint ventures and partnerships where we have the ability to
exercise significant influence but do not exercise financial and operating
control are accounted for using the equity method. The Company consolidates
certain joint ventures and partnerships in which it owns less than a 100%
equity interest as defined in ASC 810, Consolidation.
All significant inter-company accounts and transactions have been eliminated
through consolidation.

As discussed above, we have
exited the general contracting business and the independent broker-dealer
fund-raising business. Accordingly, the operating activity of these businesses,
including all prior activity, has been reclassified as discontinued operations
in the accompanying consolidated statements of operations. See Discontinued
Operations below for further detail.

The accompanying consolidated
financial statements included in this Report for the quarters ended March 31,
2010 and 2009 are unaudited. In our opinion, all adjustments necessary for a
fair presentation of such financial statements have been included, and such
adjustments consisted of normal recurring items.

REVENUE RECOGNITION

We lease space to tenants
under agreements with varying terms. The majority of the leases are accounted
for as operating leases and, although certain leases of the properties provide
for tenant occupancy during periods for which no rent is due and/or for
increases or decreases in the minimum lease payments over the terms of the
leases, revenue is recognized on a straight-line basis over the terms of the
individual leases. In most cases, revenue recognition under a lease begins when
the lessee takes possession of or controls the physical use of the leased
asset. Generally, possession or control occurs on the lease commencement date.
In cases where significant tenant improvements are made prior to lease
commencement, the leased asset is considered to be the finished space, and
revenue recognition therefore begins when the improvements are substantially
complete. Accrued rents are included in tenant receivables. Revenue from tenant
reimbursements of taxes, maintenance expenses and insurance is recognized in
the period that the related expense is recorded. Additionally, certain of the
lease agreements contain provisions that grant additional rents based on
tenants sales volumes (contingent or percentage rent). Percentage rents are
generally recognized when the tenants achieve the specified targets as defined
in their lease agreements. During the three months ended March 31, 2010 and
2009, we recognized percentage rents of $82,000 and $10,000, respectively. The
terms of certain leases require that the building/improvement portion of the
lease be accounted for under the direct financing method which treats the
building as if we had sold it to the lessee and entered into a long-term
financing arrangement with such lessee. This accounting method is appropriate
when the lessee has all of the benefits and risks of property ownership that they
otherwise would if they owned the building versus leasing it from us.

We recognize lease
termination fees in the period that the lease is terminated and collection of
the fees is reasonably assured. Upon early lease termination, we provide for
losses related to unrecovered intangibles and other assets. We did not
recognize any lease termination fee income during the three months ended March
31, 2010. During the three months ended March 31, 2009, we recognized $1.1
million in lease termination income related to a national tenant that declared
bankruptcy and subsequently defaulted upon their operating ground lease with
us. Upon default, ownership of the building transferred from the tenant to us
as the ground lessor. Accordingly, we recorded lease termination income in an
amount equal to the fair value of the building.

We have investments in real
estate partnerships and other affiliates that are accounted for under the
equity method because we exercise significant influence over such entities.
We record our percentage interest in the earnings and losses of these entities
in our accompanying consolidated statement of operations.

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We account for profit
recognition on sales of real estate in accordance with ASC 360, Property, Plant and Equipment. Pursuant to
ASC 360, profits from sales will not be recognized under the full accrual
method by the Company until certain criteria are met. Gains relating to
transactions which do not meet the criteria for full accrual method of
accounting are deferred and recognized when the full accrual method of
accounting criteria are met or by using the installment or deposit methods of
profit recognition, as appropriate in the circumstances.

We provide various real
estate services, including development, construction management, property
management, leasing and brokerage. The fees for these services are recognized
as services are provided and are generally calculated as a percentage of
revenues earned or to be earned or of property cost, as appropriate.
Construction management contracts are recognized only to the extent of the fee
revenue.

REAL ESTATE INVESTMENTS

Development
Properties  Land,
buildings and improvements are recorded at cost. Expenditures related to the
development of real estate are carried at cost which includes capitalized
carrying charges, acquisition costs and development costs. Carrying charges,
primarily interest, real estate taxes and loan acquisition costs, and direct
and indirect development costs related to buildings under construction, are
capitalized as part of construction in progress. The capitalization of such
costs ceases at the earlier of one year from the date of completion of major
construction or when the property, or any completed portion, becomes available
for occupancy. We capitalize as incurred costs associated with pending
acquisitions of raw land. Such costs are expensed if and when such land
acquisition becomes no longer probable. During the three months ended March 31,
2010, we had no capitalized interest and taxes on properties under development.
During the three months ended March 31, 2009, we had $20,000 of capitalized
interest and taxes on properties under development.

Acquired
Properties and Acquired Lease Intangibles  We account for operating real estate acquisitions pursuant to ASC 805, Business Combinationsas we believe that
most operating real estate meets the definition of a business pursuant to
this guidance. Accordingly, we allocate the purchase price of the acquired
properties to land, building and improvements, identifiable intangible assets
and to the acquired liabilities based on their respective fair values.
Identifiable intangibles include amounts allocated to acquire above and below
market leases, the value of in-place leases and customer relationship value, if
any. We determine fair value based on estimated cash flow projections that
utilize appropriate discount and capitalization rates and available market
information. Estimates of future cash flows are based on a number of factors
including the historical operating results, known trends and specific market
and economic conditions that may affect the property. Factors considered by
management in our analysis of determining the as-if-vacant property value
include an estimate of carrying costs during the expected lease-up periods
considering market conditions and costs to execute similar leases. In
estimating carrying costs, management includes real estate taxes, insurance and
estimates of lost rentals at market rates during the expected lease-up periods,
tenant demand and other economic conditions. Management also estimates costs to
execute similar leases including leasing commissions, tenant improvements,
legal and other related expenses. Intangibles related to above and in-place
lease value are recorded as acquired lease intangibles and are amortized as an
adjustment to rental revenue or amortization expense, respectively, over the
remaining terms of the underlying leases. Below market leases include
fixed-rate renewal. Premiums or discounts on debt are amortized to interest
expense over the remaining term of such debt. Costs related to acquiring
operating properties are expensed as incurred.

Depreciation  Depreciation is computed using the
straight-line method over an estimated useful life of up to 50 years for buildings,
up to 20 years for building and site improvements and over the term of the
lease for tenant specific improvements. Leasehold estate properties, properties
on which we own the building and improvements but not the related ground, are
amortized over the life of the lease. We re-evaluate the useful lives of our
buildings and improvements as warranted by changing conditions at our
properties. As part of this re-evaluation, we first consider whether such changing conditions indicate a
potential impairment, and we perform an impairment analysis as necessary, at the property level.
In the case of a property redevelopment, we reassess the useful
lives of specific buildings or other improvements to be demolished as part of that
redevelopment once the redevelopment is probable to occur.

Properties
Held for Sale  Properties are classified as held for sale if
we have decided to market the property for immediate sale in its present
condition with the belief that the sale will be completed within one year.
Properties held for sale are carried at the lower of cost or fair value less
cost to sell. Depreciation and amortization are suspended during the held for
sale period. As of March 31, 2010 and December 31, 2009, no properties were
classified as real estate held for sale.

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Our properties
generally have operations and cash flows that can be clearly distinguished from
the rest of the Company. The operations and gains on sales reported in
discontinued operations include those properties that have been sold or are
held for sale and for which operations and cash flows have been clearly
distinguished. The operations of these properties have been eliminated from
ongoing operations, and we will not have continuing involvement after
disposition. Prior period operating activity related to such properties has
been reclassified as discontinued operations in the accompanying consolidated
statements of operations.

Impairment  We review our properties for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets, including accrued rental income, may not be
recoverable through operations. We determine whether an impairment in value has
occurred by comparing the estimated future cash flows (undiscounted and without
interest charges), including the residual value of the property, with the
carrying value of the individual property. If impairment is indicated, a loss
will be recorded for the amount by which the carrying value of the asset
exceeds its fair value. No impairment charges were recognized for the three
months ended March 31, 2010 or 2009. Both the estimated undiscounted cash flow
analysis and fair value determination are based upon various factors which
require that complex and subjective judgments be made by management. Such
assumptions include projecting lease-up periods, holding periods, cap rates,
rental rates, operating expenses, lease terms, tenant credit-worthiness, tenant
improvement allowances, terminal sales value and certain macroeconomic factors
among other assumptions to be made for each property.

RECEIVABLES
AND ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS

Tenant receivables  Included in tenant
receivables are base rents, tenant reimbursements and receivables attributable
to recording rents on a straight-line basis. An allowance for the uncollectible
portion of accrued rents and accounts receivable is determined based upon
customer credit-worthiness (including expected recovery of our claim with
respect to any tenants in bankruptcy), historical bad debt levels, and current
economic trends. Bad debt expenses and any related recoveries related to tenant
receivables are included in property expense. Following is a summary of
activity within our allowance for uncollectible accounts:

|                      |  |                              |           |      |  |          |  
|--------------------- |  | ---------------------------- | --------- | ---- |  | -------- | -
|                      |  | Three months ended March 31, |          
|                      |  | 2010                         |           | 2009 | 
|                      |  |                              |           |      | 
|Beginning of period   |  |                              | 1,025,806 |      |  | 501,517  |  
|Additional reserves   |  |                              | 157,228   |      |  | 353,871  |  
|Collections/reversals |  |                              | (105,412  | )    |  | (117,845 | )
|Write-offs            |  |                              | (86,893   | )    |  | (20,724  | )
|Ending of period      |  |                              | 990,729   |      |  | 716,819  |  

Accounts receivableIncluded in accounts receivable are various receivables
that arise in the normal course of operating our business. Additionally, included in accounts receivable as of
March 31, 2010 is a $1.4 million receivable from the City of Pearland, Texas.
We acquired this receivable in June 2008 in conjunction with the acquisition of
Shadow Creek Ranch Shopping Center by our affiliated funds in February 2008.
The receivable is to be funded by one-third of the 1.5% sales tax that the City
of Pearland collects from the shopping center. During the three months ended March 31, 2010, we did not record any
bad debt expense related to miscellaneous receivables. During the three months
ended March 31, 2009, we recoded $105,000 in bad debt expense related to
miscellaneous receivables. Bad debt expense and any related recoveries on
general receivables are included in general and administrative expense.

Note receivable  Included in note receivable
is a $4.0 million note from the sale of a tract of land adjacent to our Uptown
Plaza  Dallas property located outside of downtown Dallas, Texas. In January
2010, we received a $50,000 extension fee from the buyer and extended the
maturity date of the loan until December 31, 2010. With a 30-day notice period,
the buyer has a one-time right to extend the maturity date of the loan until
December 31, 2011 with payment of a $25,000 extension fee and an executed
commitment for a construction loan on the property development.

Notes receivable  related party  Included in
related party notes receivable are loans made to our affiliated real estate
partnerships as part of our treasury management function whereby we place
excess cash in short term bridge loans for these affiliates related to the
acquisition or development of properties. We historically provided such
financing to our affiliates as a way of efficiently deploying our excess cash
and earning a higher return than we would in other short-term investments or
overnight funds. These loans bear interest at LIBOR plus a spread and are due upon
demand.

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DISCONTINUED
OPERATIONS

During the
third quarter of 2008, we exited the general contracting business and the
independent broker-dealer fund-raising business. These businesses have been
reflected as discontinued operations in the accompanying consolidated statement
of operations along with any operating properties that we have sold during the
reporting periods or that were held for sale. We ceased all of the general
contracting operations during 2009. We have no properties that were held for sale
as of March 31, 2010 and December 31, 2009. The following is a summary of our
discontinued operations for the three months ended March 31, 2010 and 2009 (in
thousands, except for per share data):

|                                                                |  |                              |   |      |   |       |  
|--------------------------------------------------------------- |  | ---------------------------- | - | ---- | - | ----- | -
|                                                                |  | Three months ended
 March 31 |  
|                                                                |  | 2010                         |   | 2009 |  
|Rental revenue                                                  |  | $                            |  |      | $ | (10   | )
|Construction revenues                                           |  |                              |  |      |   | 678   |  
|Interest and other income                                       |  |                              |  |      |   |      |  
|Gain on sale of real estate held for investment                 |  |                              |  |      |   | 2,875 |  
|Total revenues                                                  |  |                              |  |      |   | 3,543 |  
|                                                                |  |                              |   |      |   |       |  
|Other general and administrative                                |  |                              |  |      |   | (46   | )
|Property expense                                                |  |                              |  |      |   | 25    |  
|Construction costs                                              |  |                              |  |      |   | 659   |  
|Legal and professional                                          |  |                              |  |      |   | 10    |  
|Federal income tax expense                                      |  |                              |  |      |   | 987   |  
|Total expenses                                                  |  |                              |  |      |   | 1,635 |  
|Income from discontinued operations                             |  |                              |  |      |   | 1,908 |  
|Basic and diluted income from discontinued operations per share |  | $                            |  |      | $ | 0.36  |  

DERIVATIVE
FINANCIAL INSTRUMENTS

We account for
our derivative financial instruments pursuant to ASC 815, Derivatives and Hedging. ASC 815 requires
that all derivative instruments, whether designated in hedging relationships or
not, be recorded on the balance sheet at their fair value. Gains or losses
resulting from changes in the values of those derivatives are accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. Our use of derivative financial instruments to date has been
limited to the use of interest rate swaps to mitigate our interest rate risk on
variable-rate debt. We do not use derivative financial instruments for trading
or speculative purposes. In December 2008, we entered into an interest rate
swap for the purpose of hedging the interest rate risk on a variable-rate loan
placed in conjunction with the refinancing of one of our properties. We have
designated this interest rate swap as a cash flow hedge for financial reporting
purposes and have therefore recorded changes in the fair value of this hedge
instrument to other comprehensive income. The swap settles monthly with an
amount paid to or received from our counterparty being recorded as an
adjustment to interest expense.

ASC 815
requires that changes in fair value of derivatives that qualify as cash flow
hedges be recognized in other comprehensive income (OCI) while the
ineffective portion of the derivatives change in fair value be recognized in
the income statement as interest expense. Upon the settlement of a hedge, gains
and losses associated with the transaction are recorded in OCI and amortized
over the underlying term of the hedge transaction. We assess, both at inception
of the hedge and on an ongoing basis, whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in the cash
flows of the hedged items. All methods of assessing fair value result in a
general approximation of value, and such value may never actually be realized.

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DEFERRED COSTS

Deferred costs
include deferred leasing costs and deferred loan costs, net of amortization.
Deferred loan costs are incurred in obtaining financing and are amortized using
a method that approximates the effective interest method to interest expense
over the term of the debt agreements. Deferred leasing costs consist of
internal and external commissions associated with leasing our properties and
are amortized to depreciation and amortization expense over the lease term. Accumulated amortization related to
deferred loan costs as of March 31, 2010 and December 31, 2009 totaled $1.4
million and $1.3 million, respectively. Accumulated amortization related to
leasing costs as of March 31, 2010 and December 31, 2009 totaled $975,000 and
$902,000, respectively.

DEFERRED
COMPENSATION

Our deferred
compensation and long term incentive plan is designed to attract and retain the
services of our directors and employees that we consider essential to our
long-term growth and success. As such, it is designed to provide them with the
opportunity to own shares, in the form of restricted shares, in us. All long
term compensation awards are designed to vest over a period of three to seven years
and promote retention of our team members.

Restricted Share Issuances - Deferred
compensation includes grants of shares of restricted common stock to our
directors and employees as a form of long-term compensation. The share grants
vest over a period of three to seven years. We determine the fair value of the
restricted shares as the number of shares awarded multiplied by the fair value
per share of our common stock on the grant date. We amortize such fair value
ratably over the vesting periods of the respective awards. The following table
presents restricted share activity during the three months ended March 31,
2010.

|                    |  |                    |         |                                          |   |      | 
|------------------- |  | ------------------ | ------- | ---------------------------------------- | - | ---- | 
|                    |  | Non-vested
 Shares |         | Weighted Average
 grant
 date fair value |  
|Beginning of period |  |                    | 278,192 |                                          | $ | 8.20 | 
|Granted             |  |                    | 171,400 |                                          |   | 9.50 | 
|Vested              |  |                    | (18,353 | )                                        |   | 8.20 | 
|Forfeited           |  |                    | (11,422 | )                                        |   | 7.59 | 
|End of period       |  |                    | 419,817 |                                          | $ | 8.75 | 

The
weighted-average grant date fair value of shares issued under our deferred
compensation and long term incentive plan during the three months ended March
31, 2010 was $9.50 per share. The
total fair value of shares vested during the three months ended March 31, 2010
and 2009 was $138,000 and $320,000, respectively. Total compensation cost
recognized related to restricted shares during the three months ended March 31,
2010 and 2009 was $130,000 and $125,000, respectively. As of March 31, 2010,
total unrecognized compensation cost related to restricted shares was $3.6
million, and the weighted average period of time over which we expect this cost
to be recognized is 4.5 years.

General Partner Profit Participation Interests
- We have assigned up to 51% of the residual economic interest in certain of
our real estate partnerships to certain of our key employees. This economic
interest is received as, if and when we receive economic benefit from our
profit participation and after certain preferred returns have been paid to the
partnerships limited partners. This assignment of economic interest generally
vests over a period of five to seven years which allows us to align the
interest of our employees with the interest of our stockholders. Because any
future profits and earnings from the retail limited partnerships cannot be
reasonably predicted or estimated, and any employee benefit is contingent upon
the benefit received by the general partner of the retail limited partnerships,
we recognize expense associated with the assignment of economic interest in our
retail limited partnerships as we recognize the corresponding income from the associated
real estate partnerships. No portion of the economic interest in the real
estate partnerships that have provided profit participation to us to date have
been assigned to employees. Therefore, no compensation expense has been
recorded to date.

Tax-Deferred Retirement Plan (401(k)) - We
maintain a defined contribution 401(k) retirement plan for our employees. This
plan is available for all employees immediately upon employment. The plan
allows for contributions to be invested in an array of large, mid and small cap
mutual funds. We match 50% of the employees contribution up to a maximum
employee contribution of 4%. No portion of the employer matching contribution
can be comprised of our common stock.

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Share Options - We are authorized to grant options
for shares of our common stock as either incentive or non-qualified share
options, up to an aggregate of 6.0% of the total voting shares outstanding. As
of March 31, 2010 and December 31, 2009, no options have been granted.

INCOME TAXES

We account for
federal and state income taxes under the asset and liability method.

Federal  We have elected to be taxed as a
REIT under the Internal Revenue Code of 1986, as amended (the Code), and are,
therefore, not subject to federal income taxes to the extent of dividends paid,
provided that we meet all conditions specified by the Code for retaining our
REIT status, including the requirement that at least 90% of our REIT taxable
income be distributed to shareholders.

Our real
estate development and operating business, AmREIT Realty Investment Corporation
and its subsidiaries (ARIC), is a fully integrated and wholly-owned business
consisting of brokers and real estate professionals that provide development,
acquisition, brokerage, leasing, construction, asset and property management
services to our portfolio and real estate partnerships as well as to third
parties. ARIC and our wholly-owned corporations that serve as the general
partners of our real estate partnerships are treated for federal income tax purposes
as taxable REIT subsidiaries.

State  In May 2006, the State of Texas
adopted House Bill 3 which modified the states franchise tax structure and
replaced the previous tax based on capital or earned surplus with a tax based
on margin (often referred to as the Texas Margin Tax) effective beginning
with franchise tax reports filed on or after January 1, 2008. The Texas Margin
Tax is computed by applying the applicable tax rate (1% for us) to the profit
margin, which, generally, will be determined for us as total revenue less a 30%
standard deduction. Although House Bill 3 states that the Texas Margin Tax is
not an income tax, we believe that ASC 740 Income
Taxes, applies to the
Texas Margin Tax. We have recorded a margin tax provision of $58,000 and $86,000
for the Texas Margin Tax for the three months ended March 31, 2010 and 2009,
respectively.

Deferred Tax Assets - To the extent that we
are in net deferred tax asset position at period end, we will determine whether
it is more likely than not that we will generate sufficient future taxable
income in order to realize that net asset. In making that determination, we
will consider our current financial position, our result of operations for the
current and preceding years, and our expectation of future operations. We will
record a valuation allowance as necessary based on that assessment. As of March
31, 2010, we believe that we will realize our deferred tax asset through
generating sufficient taxable income from fees earned for services provided to
our managed funds, such as property management, construction management,
development, acquisition and disposition fees.

EARNINGS PER
SHARE

Basic earnings
per share has been computed by dividing net income (loss) available to
stockholders by the weighted average number of shares of common stock
outstanding. Diluted earnings per share has been computed by dividing net
income (as adjusted as appropriate) by the weighted average number of shares of
common stock outstanding plus the weighted average number of any dilutive
potential shares of common stock.

The following
table presents information necessary to calculate basic and diluted earnings
per share for the three months ended March 31, 2010 and 2009, respectively, as
indicated:

|                                                      |  |           |        |      |   |       | 
|----------------------------------------------------- |  | --------- | ------ | ---- | - | ----- | 
|                                                      |  | March
 31 |       
|                                                      |  | 2010      |        | 2009 |  
|Net income available to
 stockholders*                |  | $         | 677    |      | $ | 60    | 
|Weighted average shares of
 common stock outstanding* |  |           | 23,058 |      |   | 5,279 | 
|Basic and diluted income
 per share                   |  | $         | 0.03   |      | $ | 0.01  | 

* In thousands

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USE OF
ESTIMATES

The
preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the accompanying consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

FAIR VALUE
MEASUREMENTS

We account for
assets and liabilities measured at fair value in accordance with ASC 820, Fair Value Measurement and Disclosures.
ASC 820 emphasizes that fair value is a market-based measurement, not an
entity-specific measurement. Therefore, a fair value measurement should be
determined based on the assumptions that market participants would use in
pricing the asset or liability. As a basis for considering market participant
assumptions in fair value measurements, ASC 820 establishes a fair value
hierarchy that distinguishes between market participant assumptions based on
market data obtained from sources independent of the reporting entity
(observable inputs that are classified within Levels 1 and 2 of the hierarchy)
and the reporting entitys own assumptions about market participant assumptions
(unobservable inputs classified within Level 3 of the hierarchy). The three
levels of inputs used to measure fair value are as follows:

 Level 1 -
Quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access.

 Level 2 -
Inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly.

 Level 3 -
Unobservable inputs for the asset or liability, which are typically based on
the Companys own assumptions, as there is little, if any, related market
activity.

ASC 820
requires the use of observable market data, when available, in making fair
value measurements. Observable inputs that the market participants would use in
pricing the asset or liability are developed based on market data obtained from
sources independent of our own. Unobservable inputs are inputs that reflect our
assumptions about the assumptions market participants would use in pricing the
asset or liability developed based on the best information available in the
circumstances. When inputs used to measure fair value fall within different
levels of the hierarchy, the level within which the fair value measurement is
categorized is based on the lowest level input that is significant to the fair
value measurement.

Derivative Financial Instruments

In determining
the fair value of our derivative instruments, we consider whether credit
valuation adjustments are necessary to appropriately reflect both our own
nonperformance risk and the respective counterpartys nonperformance risk in
the fair value measurements. Although we have determined that the majority of
the inputs used to value our derivatives fall within level 2 of the fair value
hierarchy, the credit valuation assumptions associated with its derivatives utilize
Level 3 inputs, such as estimates of current credit spreads to evaluate the
likelihood of default by us and our counterparties. However, as of March 31,
2010, we have assessed the significance of the impact of the credit valuation
adjustments on the overall valuation of our derivative positions and have
determined that the credit valuation adjustments are not significant to the
overall valuation of our derivatives. As a result, we have determined that our
derivative valuations in their entirety are classified in Level 2 of the fair
value hierarchy.

The following
table presents our assets and liabilities and related valuation inputs within
the fair value hierarchy utilized to measure fair value as of March 31, 2010
(in thousands):

|                     |  |         |   |         |   |         |  |   |   | 
|-------------------- |  | ------- | - | ------- | - | ------- |  | - | - | 
|                     |  | Level 1 |   | Level 2 |   | Level 3 | 
|Derivative Liability |  | $       |  |         | $ | 451     |  | $ |  | 

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Notes Payable and Other Financial Instruments

Our
consolidated financial instruments consist primarily of cash and cash
equivalents, tenant receivables, accounts receivable, notes receivable, note
receivable related party, accounts payable and other liabilities and notes
payable. The carrying value of our consolidated financial instruments is
representative of their respective fair values due to the short-term maturity
of these instruments. The carrying value of the Companys variable rate notes
payable and the revolving line of credit approximate their carrying values. The
fair value of fixed rate loans are estimated using cash flows discounted at
current market rates which are available for debt with similar terms and
maturities. Fixed rate loans assumed in connection with real estate
acquisitions are recorded in the accompanying consolidated financial statements
at fair value at the time of acquisition. Based on our estimates, the fair
value of our fixed rate notes payable was approximately $133 million at March
31, 2010 and December 31, 2009, respectively.

NEW ACCOUNTING
STANDARDS

In June 2009,
the FASB amended the consolidation guidance applicable to variable interest
entities in ASC 810 - Consolidation.
The amendments will significantly affect the overall consolidation analysis
under FASB Interpretation No. 46(R), Consolidation
of Variable Interest Entitiesan interpretation of ARB No. 51, and
changes the way entities account for securitizations and variable interest
entities as a result of the elimination of the Qualified Special Purpose Entity
(QSPE) concept in SFAS No.166. SFAS No. 167 is effective as of the beginning
of the first fiscal year that begins after November 15, 2009 and early adoption
is prohibited. The adoption of SFAS 167 did not have an effect on our results
of operations or financial position.

STOCK ISSUANCE
COSTS

Issuance costs
incurred in the raising of capital through the sale of shares of common stock
are treated as a reduction of stockholders equity.

CASH AND CASH
EQUIVALENTS

We consider
all highly-liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. Cash and cash equivalents consist of
demand deposits at commercial banks and money market funds.

RECLASSIFICATIONS

Certain
amounts in the prior year consolidated financial statements have been
reclassified to conform to the presentation used in the current year
consolidated financial statement.

3. INVESTMENTS IN REAL ESTATE PARTNERSHIPS

AAA CTL Notes, Ltd.

AAA CTL Notes
I Corporation (AAA Corp), our wholly-owned subsidiary, invested as a general
partner and limited partner in AAA CTL Notes, Ltd. (AAA). AAA is a
majority-owned subsidiary through which we purchased 15 IHOP Corp. (IHOP)
leasehold estate properties and two IHOP fee simple properties. We have
consolidated AAA in our financial statements. Certain members of our management
team have been assigned a 51% aggregate interest in the income and cash flow of
AAAs general partner. Net sales proceeds from the liquidation of AAA will be
allocated to the limited partners and to the general partner pursuant to the
limited partnership agreement of AAA. During 2009, AmREIT Income and Growth
Fund, Ltd. (AIG) assigned to AmREIT its 19.6% ownership interest in AAA which
was valued at $1.2 million in exchange for a corresponding reduction in AIGs
note payable to AmREIT.

Real Estate Partnerships

As of March
31, 2010, we owned, through wholly-owned subsidiaries, interests in five real
estate limited partnerships which are accounted for under the equity method as
we exercise significant influence over, but do not control, the investee. In
each of the partnerships, the limited partners have the right, with or without
cause, to remove and replace the general partner by a vote of the limited
partners owning a majority of the outstanding units. These real estate
partnerships were formed to develop, own, manage and add value to properties
with an average holding period of two to four years. Our interests in these
real estate partnerships range from 2.1% to 3.0%. See Note 9 regarding
transactions we have entered into with our real estate partnerships.

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AmREIT Income & Growth Fund, Ltd. (AIG)
 AmREIT Income & Growth Corporation (AIGC), our wholly-owned subsidiary,
invested $200,000 as a limited partner and $1,000 as a general partner in AIG.
We currently own an approximate 2.0% limited partner interest in AIG. Pursuant
to the AIG limited partnership agreement, net sales proceeds from its
liquidation will be allocated to the limited partners and to AIGC as, if and
when the annual return thresholds have been achieved by the limited partners.

AmREIT Monthly Income & Growth Fund (MIG)
AmREIT
Monthly Income & Growth Corporation (MIGC), our wholly-owned subsidiary,
invested $200,000 as a limited partner and $1,000 as a general partner in MIG.
We currently own an approximate 1.3% limited partner interest in MIG. Pursuant
to the MIG limited partnership agreement, net sales proceeds from its
liquidation will be allocated to the limited partners and to MIGC as, if and
when the annual return thresholds have been achieved by the limited partners.

AmREIT Monthly Income & Growth Fund II (MIG II)AmREIT Monthly
Income & Growth II Corporation (MIGC II), our wholly-owned subsidiary,
invested $400,000 as a limited partner and $1,000 as a general partner in MIG
II. We currently own an approximate 1.6% limited partner interest in MIG II.
Pursuant to the MIG II limited partnership agreement, net sales proceeds from
its liquidation will be allocated to the limited partners and to MIGC II as, if
and when the annual return thresholds have been achieved by the limited
partners.

AmREIT Monthly Income & Growth Fund III (MIG III)AmREIT Monthly
Income & Growth III Corporation (MIGC III), our wholly-owned subsidiary,
invested $800,000 as a limited partner and $1,000 as a general partner in MIG
III. MIG III began raising equity capital in June 2005. The offering was closed
in October 2006, and the capital raised was approximately $71 million. Our
$800,000 investment represents a 1.1% limited partner interest in MIG III. Pursuant to the
MIG III limited partnership agreement, net sales proceeds from its liquidation
will be allocated to the limited partners and to MIGC III as, if and when the
annual return thresholds have been achieved by the limited partners.

AmREIT Monthly Income & Growth Fund IV (MIG IV)
- AmREIT Monthly Income & Growth IV Corporation (MIGC IV), our wholly-owned
subsidiary, invested $800,000 as a limited partner and $1,000 as a general
partner in MIG IV. MIG IV began raising equity capital in November 2006. The
offering was closed in March 2008, and the capital raised was approximately $50
million. Our $800,000 investment represents a 1.6% limited partner interest in
MIG IV. Pursuant to the MIG IV limited partnership agreement, net sales
proceeds from its liquidation will be allocated to the limited partners and to
the MIGC IV as, if and when the annual return thresholds have been achieved by
the limited partners.

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Table of Contents

Real estate partnerships  Financial
Information

The following
table sets forth certain financial information as of March 31, 2010 for the
AIG, MIG, MIG II, MIG III and MIG IV real estate partnerships:

|                            |  |  |                       |    |              |  |              |  |      |  |                   |  |                |  |               | 
|--------------------------- |  |  | --------------------- | -- | ------------ |  | ------------ |  | ---- |  | ----------------- |  | -------------- |  | ------------- | 
|                            |  |  |                       |    |              |  |              |  |      |  | Sharing Ratios(1) |  |                | 
|Merchant
 Development
 Fund |  |  | Capital
 under
 Mgmt. |    | LP
 Interest |  | GP
 Interest |  | LP   |  | GP                |  | LP
 Preference | 
|AIG                         |  |  | $                     | 3  | million      |  | 2.0%         |  | 1.0% |  | 99%               |  | 1%             |  | 8%            | 
|                            |  |  |                       |    |              |  |              |  |      |  | 90%               |  | 10%            |  | 10%           | 
|                            |  |  |                       |    |              |  |              |  |      |  | 80%               |  | 20%            |  | 12%           | 
|                            |  |  |                       |    |              |  |              |  |      |  | 70%               |  | 30%            |  | 15%           | 
|                            |  |  |                       |    |              |  |              |  |      |  | 0%                |  | 100%           |  | 40%
 Catch Up | 
|                            |  |  |                       |    |              |  |              |  |      |  | 60%               |  | 40%            |  | Thereafter    | 
|                            |  |  |                       |    |              |  |              |  |      |  |                   |  |                |  |               | 
|MIG                         |  |  | $                     | 15 | million      |  | 1.3%         |  | 1.0% |  | 99%               |  | 1%             |  | 8%            | 
|                            |  |  |                       |    |              |  |              |  |      |  | 90%               |  | 10%            |  | 10%           | 
|                            |  |  |                       |    |              |  |              |  |      |  | 80%               |  | 20%            |  | 12%           | 
|                            |  |  |                       |    |              |  |              |  |      |  | 0%                |  | 100%           |  | 40%
 Catch Up | 
|                            |  |  |                       |    |              |  |              |  |      |  | 60%               |  | 40%            |  | Thereafter    | 
|                            |  |  |                       |    |              |  |              |  |      |  |                   |  |                |  |               | 
|MIG
 II                     |  |  | $                     | 25 | million      |  | 1.6%         |  | 1.0% |  | 99%               |  | 1%             |  | 8%            | 
|                            |  |  |                       |    |              |  |              |  |      |  | 85%               |  | 15%            |  | 12%           | 
|                            |  |  |                       |    |              |  |              |  |      |  | 0%                |  | 100%           |  | 40%
 Catch Up | 
|                            |  |  |                       |    |              |  |              |  |      |  | 60%               |  | 40%            |  | Thereafter    | 
|                            |  |  |                       |    |              |  |              |  |      |  |                   |  |                |  |               | 
|MIG
 III                    |  |  | $                     | 71 | million      |  | 1.1%         |  | 1.0% |  | 99%               |  | 1%             |  | 10%           | 
|                            |  |  |                       |    |              |  |              |  |      |  | 0%                |  | 100%           |  | 40%
 Catch Up | 
|                            |  |  |                       |    |              |  |              |  |      |  | 60%               |  | 40%            |  | Thereafter    | 
|                            |  |  |                       |    |              |  |              |  |      |  |                   |  |                |  |               | 
|MIG
 IV                     |  |  | $                     | 50 | million      |  | 1.6%         |  | 1.0% |  | 99%               |  | 1%             |  | 8.5%          | 
|                            |  |  |                       |    |              |  |              |  |      |  | 0%                |  | 100%           |  | 40%
 Catch Up | 
|                            |  |  |                       |    |              |  |              |  |      |  | 60%               |  | 40%            |  | Thereafter    | 
|                            |  |  |                       |    |              |  |              |  |      |  |                   |  |                |  |               | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Using AIG as an example of
 how the sharing ratios and limited partner preference provisions are applied,
 the limited partners share in 99% of the cash distributions until they
 receive their original invested capital plus an 8% preferred return.
 Thereafter, the limited partners share in 90% of the cash distributions until
 they receive a 10% preferred return. This allocation process continues in
 accordance with the chart above.

Other Affiliates

We have
investments in entities other than the real estate partnerships that are
accounted for under the equity method because we exercise significant influence
over such entities. We record our pro rata share of income or loss from the
underlying entities based on our ownership interest.

AmREIT Woodlake, L.P. - In 2007, we invested
$3.4 million in AmREIT Woodlake LP, for a 30% limited partnership interest.
AmREIT Woodlake, LP was formed in 2007 to acquire, lease and manage Woodlake
Square, a grocery-anchored shopping center located in Houston, Texas at the
intersection of Westheimer and Gessner. In June 2008, we sold two-thirds (20%)
of our interest in Woodlake Square to MIG IV. Pursuant to the purchase
agreement, the interest in the property was sold at its carrying value,
resulting in no gain or loss to us. As of March 31, 2010, we held a 10%
interest in Woodlake Square.

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AmREIT Westheimer Gessner, L.P. - In 2007, we
invested $3.8 million in AmREIT Westheimer Gessner, LP for a 30% limited
partnership interest. AmREIT Westheimer Gessner, LP was formed in 2007 to
acquire, lease and manage Woodlake Pointe, a shopping center located in
Houston, Texas at the southeast intersection of Westheimer and Gessner. In June
2008, we sold two-thirds (20%) of our interest in Woodlake Pointe to MIG IV.
Pursuant to the purchase agreement, the interest in the property was sold at
its carrying value, resulting in no gain or loss to us. As of March 31, 2010,
we held a 10% interest in Woodlake Pointe.

AmREIT SPF Shadow Creek, L.P.  As part of the
AmREIT and REITPlus merger in November 2009, we acquired a 10% investment in
AmREIT SPF Shadow Creek, LP which was formed in 2008 to acquire, lease and
manage Shadow Creek Ranch, a shopping center located in Pearland, Texas at the
intersection of Highway 288 and FM 518. The investment was recorded at $5.8
million on the date of the acquisition, net of acquisitions costs of $441,000,
which were recorded as an other-than-temporary impairment.

4. ACQUIRED LEASE INTANGIBLES

In accordance
with ASC 805, Business Combinations, we have identified and recorded the value
of intangibles at the property acquisition date. Such intangibles include the
value of acquired in-place leases and above and below market leases. Acquired
lease intangible assets (in-place leases and above-market leases), are
amortized over the leases remaining terms, which range from one month to 20
years. The amortization of above-market leases is recorded as a reduction of
rental income and the amortization of in-place leases is recorded to
amortization expense. The amortization expense related to in-place leases was
$396,000 and $491,000 during the three months ended March 31, 2010 and 2009,
respectively. The amortization of above-market leases, which was recorded as a
reduction of rental income, was $48,000 and $84,000 during the three months
ended March 31, 2010 and 2009, respectively. Acquired lease intangible
liabilities (below-market leases) are accreted over the leases remaining
terms, which range from one month to 20 years. Accretion of below-market leases
was $88,000 and $97,000 during the three months ended March 31, 2010 and 2009,
respectively. Such accretion is recorded as an increase to rental income. No
new intangibles were recorded during 2010.

In-place and
above-market lease amounts and their respective accumulated amortization are as
follows (in thousands):

|                                               |  |                 |         |                    |   |         |  
|---------------------------------------------- |  | --------------- | ------- | ------------------ | - | ------- | -
|                                               |  | March 31,
 2010 |         | December 31,
 2009 |  
|Acquired lease intangible assets:              |  |                 |         |                    |   |         |  
|In-place leases                                |  | $               | 16,939  |                    | $ | 17,080  |  
|In-place leases  accumulated amortization     |  |                 | (10,420 | )                  |   | (10,165 | )
|Above-market leases                            |  |                 | 1,983   |                    |   | 1,983   |  
|Above-market leases  accumulated amortization |  |                 | (1,752  | )                  |   | (1,704  | )
|Acquired leases intangibles, net               |  | $               | 6,750   |                    | $ | 7,194   |  
|                                               |  |                 |         |                    |   |         |  
|Acquired lease intangible liabilities:         |  |                 |         |                    |   |         |  
|Below-market leases                            |  | $               | 3,790   |                    | $ | 3,840   |  
|Below-market leases  accumulated amortization |  |                 | (2,146  | )                  |   | (2,108  | )
|Acquired below-market lease intangibles, net   |  | $               | 1,644   |                    | $ | 1,732   |  

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5. NOTES PAYABLE

Our
outstanding debt at March 31, 2010 and December 31, 2009 consists of the
following (in thousands):

|                                      |  |                |         |                   |   |         | 
|------------------------------------- |  | -------------- | ------- | ----------------- | - | ------- | 
|                                      |  | March 31, 2010 |         | December 31, 2009 |  
|                                     
|Fixed-rate mortgage loans (1)         |  | $              | 151,007 |                   | $ | 151,406 | 
|Variable-rate secured line
 of credit |  |                | 21,929  |                   |   | 19,529  | 
|Variable-rate secured loans           |  |                | 11,970  |                   |   | 12,041  | 
|Total                                 |  | $              | 184,906 |                   | $ | 182,976 | 

(1) Included in
Fixed-rate mortgage loans is a $17 million variable-rate debt instrument that
has been effectively converted to a fixed-rate instrument pursuant to an
interest rate swap agreement entered into with a third party.

In December
2009, we procured a $25.0 million secured credit facility (the Facility), the
proceeds of which are to be used for the acquisition of properties and for
working capital needs. The Facilitys interest rate is LIBOR plus a spread of
3.50%, with a floor of 5.00%, and we paid the lender a financing fee of
approximately $163,000. The term of the Facility is one year, and the Facility
can be converted at our option to a three-year amortizing loan (20-year
amortization) at the end of the first year, provided that there are no existing
and continuing events of default at that time that we pay an extension fee. The
Facilitys borrowing base is determined based on the properties that are
pledged as security against the Facility. The Facility contains covenants
applicable to those pledged properties which, among other restrictions, require
us to maintain a minimum net worth and, in certain cases of the occurrence of
default, limit distributions to our stockholders. As of March 31, 2010, we were
in compliance with all covenants. As of March 31, 2010 the interest rate was
5.00%, and we had $21.9 million outstanding under the Facility. We had
approximately $1.6 million available under the Facility subject to the
covenants above, and we had $1.0 million in letters of credit outstanding related
to various properties, which reduced our availability under the Facility by a
corresponding amount. In April, 2010, the $1.0 million letter of credit was
released, thereby increasing our borrowing base availability to $2.6 million.

As of March
31, 2010, the weighted average interest rate on our fixed-rate debt is 5.91%,
and the weighted average remaining life of such debt is 4.9 years. During the
three months ended March 31, 2010, we added no new fixed-rate debt. During the
year ended December 31, 2009, we procured $7.0 million of long-term financing
secured by five of our properties located in The Woodlands, Texas.
Additionally, we extended the maturity date of a variable rate construction
loan on a Walgreens property in San Antonio, Texas, originally maturing in
September 2009, for one year.As of March 31, 2010, scheduled principal
repayments on notes payable and the Facility were as follows (in thousands):

|                             |  |                                |        |                       |   |                |  |   |         |  
|---------------------------- |  | ------------------------------ | ------ | --------------------- | - | -------------- |  | - | ------- | -
|Scheduled
 Payments by
 Year |  | Scheduled
 Principal
 Payments |        | Term-Loan
 Maturities |   | Total Payments | 
|2010                         |  | $                              | 23,092 | *                     |   | 5,066          |  |   | 28,158  | *
|2011                         |  |                                | 1,816  |                       |   | 19,866         |  |   | 21,682  |  
|2012                         |  |                                | 1,308  |                       |   | 12,811         |  |   | 14,119  |  
|2013                         |  |                                | 425    |                       |   | 22,824         |  |   | 23,249  |  
|2014                         |  |                                | 461    |                       |   |               |  |   | 461     |  
|Thereafter                   |  |                                | 1,133  |                       |   | 95,804         |  |   | 96,937  |  
|Unamortized debt premiums    |  |                                | 300    |                       |   |               |  |   | 300     |  
|Total                        |  | $                              | 28,535 |                       | $ | 156,371        |  | $ | 184,906 |  

* $21,929
represents the outstanding balance on the Facility that can be extended for
three years as described above.

6. CONCENTRATIONS

As of March
31, 2010, Uptown Park in Houston, Texas accounted for approximately 20% and
MacArthur Park accounted for 15% of our consolidated total assets. Consistent
with our strategy of investing in geographic areas that we know well, 15 of our
properties are located in the Houston metropolitan area. These Houston
properties represent 67% of our base rental income for the three months ended
March 31, 2010. Houston is Texas largest city and the fourth largest city in
the United States.

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The following
are the base rents generated by our top tenants for the three months ended
March 31, 2010 and 2009 (in thousands):

|                  |  |                              |       |  |      |       |  | 
|----------------- |  | ---------------------------- | ----- |  | ---- | ----- |  | 
|                  |  | Three months ended
 March 31 |      
|Tenant            |  |                              | 2010  |  | 2009 |      
|Kroger            |  | $                            | 548   |  | $    | 529   | 
|IHOP Corporation  |  |                              | 547   |  |      | 553   | 
|CVS               |  |                              | 230   |  |      | 230   | 
|Walgreens         |  |                              | 180   |  |      | 147   | 
|Landrys           |  |                              | 126   |  |      | 126   | 
|Hard Rock Cafe    |  |                              | 124   |  |      | 111   | 
|TGI Fridays       |  |                              | 113   |  |      | 109   | 
|Champps Americana |  |                              | 106   |  |      | 106   | 
|Golden Corral     |  |                              | 105   |  |      | 105   | 
|Paesanos          |  |                              | 103   |  |      | 89    | 
|                  |  | $                            | 2,182 |  | $    | 2,105 | 

The above base
rents have been recorded in the accompanying consolidated statement of
operations as rental income from operating leases or earned income from direct
financing leases as appropriate (see Note 2).

7. DERIVATIVE INSTRUMENTS

In order to
manage the volatility relating to interest rate risk, we may enter into
interest rate swaps from time to time. We do not use derivative financial
instruments for trading or speculative purposes. In December 2008, we entered
into an interest rate swap with a notional amount of $17 million and a fixed
rate of 5.11% to hedge the interest rate risk on the $17 million variable-rate
loan that was procured in conjunction with the 2008 refinancing of the
MacArthur Park property. The fair value of the swap was a liability of $451,000
and $384,000 at March 31, 2010 and December 31, 2009, respectively, and is recorded in
accrued liabilities on the accompanying consolidated balance sheet. The swap
settles monthly with an amount paid to or received from our counterparty being
recorded as an adjustment to interest expense. For the three months ended March
31, 2010 and 2009, we have paid $90,000 and $81,000, respectively, related to
this swap which is included in interest expense in the accompanying
consolidated statement of operations.

Valuations are
not actual market prices on which an offer would be made for unwinding any
transactions but rather are calculated mathematical approximations of market
values derived from proprietary models as of a given date. These valuations are
calculated on a mid-market basis and do not include bid/offered spread that
would be reflected in an actual price quotations; therefore, actual price
quotations for unwinding our transactions would be different. These valuations
and models rely on certain assumptions regarding past, present, and future
market conditions. All methods of assessing fair value result in a general
approximation of value, and such value may never actually be realized.

We have
designated this interest rate swap as a hedge for financial reporting purposes.
Accordingly, gains or losses resulting from changes in the value of our
derivatives are recorded as an adjustment to stockholders equity.

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8. STOCKHOLDERS EQUITY AND NONCONTROLLING
INTEREST

Recapitalization and merger On November 24,
2009, the AmREIT Class C and D common shares were converted into AmREIT Class A
common shares pursuant to the AmREIT Declaration of Trust. The AmREIT Class A
shares were then simultaneously exchanged on a 1:1 basis for shares of AmREIT,
Inc. stock. Upon consummation of the Merger, AmREIT, Inc. had and has a single
class of common stock outstanding as further described below.

Common Stock- Our charter authorizes us to
issue 1,050,000,000 shares of capital stock, of which 1,000,000,000 shares of
capital stock are designated as common stock with a par value of $0.01 per
share and 50,000,000 shares of capital stock are designated as preferred stock
with a par value of $0.01 per share. As of March 31, 2010, there were
23,108,196 shares of our common stock outstanding. Our payment of any future
dividends to our common stockholders is dependent upon applicable legal and
contractual restrictions, as well as our earnings and financial needs.

Stock Redemption Program  Subject to certain
restrictions and limitations, our stock redemption program allows stockholders
to redeem their shares. We are not obligated to redeem shares of our common
stock under the stock redemption plan, and stock redemptions and the share
price paid will be made at the sole discretion of our Board of Directors.

Incentive Plans - Under the AmREIT, Inc. 2007
Independent Directors Stock Incentive Plan, the aggregate number of shares of
our common stock subject to options, restricted stock awards, stock purchase
rights, stock appreciation rights or other awards to our independent directors
will be no more than 2,000,000 shares, all of which are available for issuance.
Under the AmREIT, Inc. 1999 Flexible Incentive Plan, 1,288,739 shares of our
common stock are available for awards of stock options, restricted stock
awards, stock appreciation rights and other awards to our employees and
non-employee directors.

Noncontrolling Interest  Noncontrolling
interest represents a third-party interest in entities that we consolidate as a
result of our controlling financial interest in such investees.

9. RELATED PARTY TRANSACTIONS

See Note 3
regarding investments in real estate partnerships and other affiliates and Note
2 regarding notes receivable from affiliates.

We earn real
estate fee income by providing property acquisition, leasing, property
management, construction (discontinued) and construction management services to
our real estate partnerships and joint ventures. We are the sole owners of the
companies that serve as the general partner for the funds. Real estate fee
income of $384,000 and $690,000 was paid by the funds to the Company for the
three months ended March 31, 2010 and 2009, respectively. Additionally,
construction revenues (included in discontinued operations) of $0 and $678,000
were earned from the real estate partnerships during the three months ended
March 31, 2010 and 2009, respectively. Construction management fee income of
$77,000 and $38,000 were earned from the real estate partnerships during the
three months ended March 31, 2010 and 2009, respectively. The Company earns
asset management fees from the funds for providing accounting related services,
investor relations, facilitating the deployment of capital, and other services
provided in conjunction with operating the real estate partnerships and joint
ventures. Asset management fees of $370,000 and $384,000 were paid by the funds
to us during the three months ended March 31, 2010 and 2009, respectively.
Additionally, during the three months ended March 31, 2010 and 2009, we were
reimbursed by the real estate partnerships $228,000 and $259,000, respectively,
for reimbursements of administrative costs incurred on behalf of those funds.

As a sponsor
of our real estate partnerships, we maintain a 1% general partner interest in
the investment funds that we sponsor. The funds are typically structured such
that the limited partners receive 99% of the available cash flow until 100% of
their original invested capital has been returned and a preferred return has
been paid. Once limited partner capital has been returned and the limited
partners preferred return has been paid, the general partner thereafter shares
in the available cash flow at various promoted levels.

10. REAL ESTATE ACQUISITIONS AND DISPOSITIONS

There were no
acquisitions or dispositions in the three months ended March 31, 2010 and 2009.

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11. COMMITMENTS AND CONTINGENCIES

In August
2009, we signed a new lease agreement for our office facilities which expires
on August 31, 2010. In addition, we lease various office equipment for daily
activities. Rental expense for the three months ended March 31, 2010 and 2009
was $95,000 and $96,000, respectively.

We are
involved in various matters of litigation arising in the normal course of
business. While we are unable to predict with certainty the amounts involved,
our management and counsel are of the opinion that, when such litigation is
resolved, any additional liability, if any, will not have a material effect on
our consolidated financial statements.

12. SUBSEQUENT EVENTS

We have evaluated all events or transactions as of the date through
which the financial statements were made available for issuance. During this period, we did not have any material subsequent events
that impacted our consolidated financial statements.

13. SEGMENT REPORTING

The operating
segments presented are the segments for which separate financial information is
available, and the revenues and operating performance of each segment is
evaluated regularly by senior management in deciding how to allocate resources
and in assessing performance. However, this operating performance data might
not be indicative of what a third party would assess or evaluate for purposes
of determining fair value of our segments.

The portfolio
segment consists of our portfolio of single and multi-tenant shopping center
projects. This segment consists of 45 properties located in 15 states. Expenses
for this segment include depreciation, interest, noncontrolling interest, legal
costs directly related to the portfolio of properties and property level
expenses. Substantially all of our consolidated assets are in this segment.

Our real
estate development and operating business is a fully integrated and
wholly-owned business consisting of brokers and real estate professionals that
provide development, acquisition, brokerage, leasing, and asset and property
management services to our Irreplaceable Corner portfolio and real estate
partnerships as well as to third parties. Our asset advisory group consists of
active management of five real estate partnership funds which were formed to
develop, own, manage and add value to properties with an average holding period
of two to four years. We invest in these partnerships as both the general
partner and as a limited partner (see Note 3). We, as the general partner,
manage the funds and, in return, receive management fees as well as potential
profit participation.

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Segment
results for the three ended March 31, 2010 and 2009 are as follows:

|                                                       |  |           |        |                         |   |                        |   |       |      |   |   |        |  
|------------------------------------------------------ |  | --------- | ------ | ----------------------- | - | ---------------------- | - | ----- | ---- | - | - | ------ | -
|For the
 quarter ended
 March 31, 2010
 (in thousands) |  | Portfolio |        | Real Estate
 Operations |   | Asset
 Advisory
 Group |   | Total |     
|Rental
 income                                         |  | $         | 7,650  |                         | $ | 126                    |   | $     |     |   | $ | 7,776  |  
|Real estate
 fee income                                |  |           |       |                         |   | 423                    |   |       |     |   |   | 423    |  
|Construction
 management fee income                    |  |           |       |                         |   | 77                     |   |       |     |   |   | 77     |  
|Asset
 management fee income                           |  |           |       |                         |   |                       |   |       | 370  |   |   | 370    |  
|Total
 revenue                                         |  |           | 7,650  |                         |   | 626                    |   |       | 370  |   |   | 8,646  |  
|                                                       |  |           |        |                         |   |                        |   |       |      |   |   |        |  
|General and
 administrative                            |  |           | 420    |                         |   | 836                    |   |       | 31   |   |   | 1,287  |  
|Property
 expense                                      |  |           | 1,696  |                         |   |                       |   |       |     |   |   | 1,696  |  
|Legal and
 professional                                |  |           | 247    |                         |   | 11                     |   |       | 1    |   |   | 259    |  
|Real estate
 commissions                               |  |           | 1      |                         |   |                        |   |       |     |   |   | 1      |  
|Depreciation
 and amortization                         |  |           | 1,700  |                         |   | 22                     |   |       |     |   |   | 1,722  |  
|Total
 expenses                                        |  |           | 4,064  |                         |   | 869                    |   |       | 32   |   |   | 4,965  |  
|                                                       |  |           |        |                         |   |                        |   |       |      |   |   |        |  
|Interest
 expense                                      |  |           | (2,737 | )                       |   |                       |   |       |     |   |   | (2,737 | )
|Other
 income/ (expense)                               |  |           | 165    |                         |   | 68                     |   |       | (489 | ) |   | (256   | )
|                                                       |  |           |        |                         |   |                        |   |       |      |   |   |        |  
|Income (loss) from continuing operations               |  | $         | 1,014  |                         | $ | (175                   | ) | $     | (151 | ) | $ | 688    |  

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|                                                       |  |           |        |                         |   |                        |   |       |      |   |   |        |  
|------------------------------------------------------ |  | --------- | ------ | ----------------------- | - | ---------------------- | - | ----- | ---- | - | - | ------ | -
|For the
 quarter ended
 March 31, 2009
 (in thousands) |  | Portfolio |        | Real Estate
 Operations |   | Asset
 Advisory
 Group |   | Total |     
|Rental
 income                                         |  | $         | 7,923  |                         | $ | 129                    |   | $     |     |   | $ | 8,052  |  
|Lease
 termination fee income                          |  |           | 1,065  |                         |   |                       |   |       |     |   |   | 1,065  |  
|Real estate
 fee income                                |  |           |       |                         |   | 777                    |   |       |     |   |   | 777    |  
|Construction
 management fee income                    |  |           |       |                         |   | 38                     |   |       |     |   |   | 38     |  
|Asset
 management fee income                           |  |           |       |                         |   |                       |   |       | 384  |   |   | 384    |  
|Total revenue                                          |  |           | 8,988  |                         |   | 944                    |   |       | 384  |   |   | 10,316 |  
|                                                       |  |           |        |                         |   |                        |   |       |      |   |   |        |  
|General and
 administrative                            |  |           | 891    |                         |   | 1,760                  |   |       | 32   |   |   | 2,683  |  
|Property
 expense                                      |  |           | 2,099  |                         |   | 9                      |   |       |     |   |   | 2,108  |  
|Legal and
 professional                                |  |           | 196    |                         |   | 526                    |   |       | 14   |   |   | 736    |  
|Real estate
 commissions                               |  |           | 1      |                         |   |                        |   |       |     |   |   | 1      |  
|Depreciation
 and amortization                         |  |           | 1,843  |                         |   | 22                     |   |       |     |   |   | 1,865  |  
|Inpairment
 Charge                                     |  |           |       |                         |   |                       |   |       |     |   |   |       |  
|Total expenses                                         |  |           | 5,030  |                         |   | 2,317                  |   |       | 46   |   |   | 7,393  |  
|                                                       |  |           |        |                         |   |                        |   |       |      |   |   |        |  
|Interest
 expense                                      |  |           | (2,594 | )                       |   |                       |   |       |     |   |   | (2,594 | )
|Other
 income/ (expense)                               |  |           | 989    |                         |   | (450                   | ) |       | (156 | ) |   | 383    |  
|                                                       |  |           |        |                         |   |                        |   |       |      |   |   |        |  
|Income from continuing operations                      |  | $         | 2,353  |                         | $ | (1,823                 | ) | $     | 182  |   | $ | 712    |  

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

References to we, us, our and the Company refer to
AmREIT and our consolidated subsidiaries, except where the context otherwise
requires.

FORWARD-LOOKING STATEMENTS

Certain information
presented in this Quarterly Report on Form 10-Q constitutes 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. Although
we believe that the expectations reflected in such forward-looking statements
are based upon reasonable assumptions, our actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference include the following: changes in
general economic conditions, changes in real estate market conditions,
continued availability of proceeds from our debt or equity capital, our ability
to locate suitable tenants for our properties, the ability of tenants to make
payments under their respective leases, timing of acquisitions, development
starts and sales of properties, the ability to meet development schedules and
other risks, uncertainties and assumptions. Any forward-looking statement speaks
only as of the date on which it was made, and the Company undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operation results over time.

The following discussion
should be read in conjunction with our accompanying consolidated financial
statements and notes thereto appearing elsewhere in this report, as well as our
2009 consolidated financial statements and notes thereto included in our filing
on Annual Report on Form 10-K for the year ended December 31, 2009. Historical
results and trends which might appear should not be taken as indicative of
future operations.

EXECUTIVE OVERVIEW

We were organized by our
predecessor, AmREIT, in April 2007 as REITPlus, Inc. (REITPlus), a Maryland
corporation that elected to be taxed as a real estate investment trust
(REIT). REITPlus was structured as an externally managed and advised REIT,
with a wholly-owned subsidiary of AmREIT providing investment advisory and
property and corporate management services.

During 2007, AmREIT
initiated a strategic plan referred to as Vision 2010. Vision 2010 was
designed to create a more conforming business platform that would reduce the
earnings volatility of AmREITs business model and that would also simplify its
capital structure, with the ultimate goal of growing its portfolio of
properties and providing liquidity for investors. Vision 2010 includes the
following three phases:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Phase I consisted of
 business model changes which were designed to reduce the earnings volatility
 created by certain of AmREITs transactional operating subsidiaries. In
 connection with Phase I, AmREIT simplified its operating platform and reduced
 its transactional volatility by exiting the general contracting business and
 the independent broker-dealer fund-raising business. Additionally, it
 terminated the best efforts equity offering of REITPlus. Together, these
 restructuring initiatives resulted in a one-time restructuring charge of
 approximately $2.5 million during 2008, but reduced AmREITs annual overhead
 and general and administrative expenses.                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Phase II consisted of
 changes which were designed to simplify AmREITs equity capital structure. As
 the first step in Phase II, in December 2008, AmREIT voluntarily de-listed
 its Class A common shares of beneficial interest from trading on the NYSE
 Alternext Exchange. As the last step in Phase II, at separate special
 meetings held on November 24, 2009, both AmREIT and REITPlus shareholders
 approved the merger of AmREIT with and into REITPlus (the Merger),
 resulting in a combined, conforming entity with a single class of common
 stock, which was renamed AmREIT, Inc. We believe that this simplified capital
 structure will better position us to raise Wall Street and/or institutional
 capital either through joint ventures at the entity level or through an
 initial public offering and re-listing of our shares.

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| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | For the combined company,
 Phase III will consist of growing our portfolio of properties and identifying
 additional sources of liquidity for stockholders as the United States begins
 to exit the current recession and into recovery.

Following our strategic
combination with our predecessor, AmREIT, all of the independent members of the
boards of both AmREIT and REITPlus, as well as H. Kerr Taylor, who served as
chairman and chief executive officer of both companies, now comprise our
seven-member Board of Directors. Since the Merger, we are and have been
internally managed by the former management team of AmREIT. Accordingly, the
following discussion describes the business of AmREIT, Inc. which is comprised
of the combined businesses previously conducted by AmREIT and REITPlus. As
further discussed in Note 2 to the accompanying consolidated financial
statements, for accounting purposes, the Merger was treated as an asset
acquisition, with AmREIT being the accounting acquirer deemed to have acquired
the net assets of REITPlus. As a result, the accompanying consolidated financial
statements reflect the historical financial position and results of operations
of AmREIT prior to the Merger and those of the combined company following the
Merger effective November 24, 2009.

AmREIT, Inc. owns, operates and creates value on Irreplaceable Corners in Texas,
which is home to three of the top six major growth markets throughout the United States and has the
12th largest economy in the world based on GDP (ahead of Mexico, Russia and India). For over 25 years,
we have provided our clients and investors with financial transparency, reliability and creation of value for
future real estate investment growth. We have access to a variety of capital markets, including public and private
financial companies and institutional investors, and our platform has grown from approximately $100 million in assets
in 2002 to approaching $1 billion today. We have elected to be taxed as a real estate investment trust (REIT) for
federal income tax purposes. AmREIT, Inc. is headquartered in Houston, Texas, and has an office in Dallas, Texas.

Our core portfolio consists
of Todays Irreplaceable Corners. These are corner properties in top U.S.
growth markets with high barriers to entry, high daytime and evening
population, high rate of cars per day and high household incomes within 3-5
miles of the property. To provide future growth and investment opportunities,
our advisory business invests in and advises various real estate partnerships
and joint ventures that own, develop and manage Tomorrows Irreplaceable
Corners. These are properties that are located on dominant regional
intersections within fast growing markets. We create value for our clients and
investors through our expertise in development, redevelopment and daily
operation of these properties.

Our Structure

Our structure consists of an
institutional grade portfolio of Irreplaceable Corners and our advisory
business, each of which is supported by our real estate development and
operating group. For our results of operations by segment, see the accompanying
Notes to Consolidated Financial Statements.

Portfolio of Todays Irreplaceable Corners

Our core portfolio consists
of Todays Irreplaceable Corners. These are corner properties, primarily
located in the top Texas markets with the following characteristics:

| |   |                                                       
| | - | ------------------------------------------------------
| |  | Located on a corner in
 major metropolitan area;      
| |   |                                                       
| |  | High barriers to entry;                               
| |   |                                                       
| |  | High daytime and evening
 population;                 
| |   |                                                       
| |  | High count of cars per
 day; and                      
| |   |                                                       
| |  | High average household
 income within 3-5 mile radius.

As of March 31, 2010, we
owned a real estate portfolio consisting of 45 properties located in 15 states.
Leased to national, regional and local tenants, our properties are primarily
located throughout Texas. We are currently focused on Houston, Dallas and San
Antonio each of which represent three of the top six population and job growth
markets in the United States. As owners and operators of real estate, we
implement high standards of excellence in maintaining the value, aesthetics,
tenant mix and safety of each of our properties. As of March 31, 2010, our
operating properties were leased at 91.9% occupancy based on leasable square
footage as compared to 91.0% as of December 31, 2009.

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Advisory Business

For 26 years, we have
created financial solutions for our investors by offering real estate
investment opportunities as a stable and dependable source of income and
portfolio growth. We have successfully formed, invested in and advised 17
private and public investment vehicles over the past two and a half decades
that have led to the acquisition, development and redevelopment of Tomorrows
Irreplaceable Corners properties throughout the United States. Tomorrows
Irreplaceable Corners are properties that are located on dominant regional
intersections within fast growing markets. We create value for our clients and
investors through our expertise in the development, redevelopment and daily
operation of these properties.

Our advisory business
invests in and actively manages five real estate partnership funds, which were
formed to develop, own, manage, and add value to properties with an average
holding period of two to four years. We invest in the limited partnerships that
we manage as both the general partner and as a limited partner. We, as the
general partner or advisor, manage the funds and, in return, receive management
fees as well as potential profit participation interests. The funds are
structured such that the general partner does not receive a significant profit
until after the limited partners in the funds have received or are deemed to
have received their targeted return.

Real Estate Development and Operating Group

Our real estate operating
and development business is comprised of a fully integrated real estate team
that works directly with landlords, builders and developers. This team is
primarily focused on managing, leasing and creating value for our owned and
managed portfolio of Irreplaceable Corners and gives us a competitive edge on
pricing and development opportunities. Having a full complement of real estate
professionals helps secure strong tenant relationships for both our portfolio
and the merchant development portfolios managed by our advisory business.

Liquidity and Capital Resources

Due to the nature of our
business and strategy, we typically generate significant amounts of cash from operations.
The cash generated from operations is primarily paid to our common and
preferred shareholders in the form of dividends. As a REIT, we must generally
make annual distributions to shareholders of at least 90% of our REIT taxable
income.

Our short-term liquidity
requirements consist primarily of normal recurring operating expenses, debt
service requirements, recurring expenditures to maintain our properties,
non-recurring expenditures (such as tenant improvements and other tenant lease
costs) and dividends to our shareholders. We anticipate that cash on hand and
cash flows from operating activities will be sufficient to meet these
short-term needs with the exception of approximately $1.3 million of our
non-recurring expenditures, which we will fund through borrowings under our
credit facility. During the three months ended March 31, 2010 and 2009, we
generated cash provided by operating activities of $1.4 million and $3.7
million, respectively. The primary driver of the reduction in operating cash flows
was the timing of our property tax payments. We paid our 2009 property taxes
during the first quarter of 2010, but paid no property taxes during the similar
period in 2009 as we made payment on our 2008 property taxes during December
2008.

We have a $25.0 million
secured credit facility (the Facility), the proceeds of which are to be used
for the acquisition of properties and for working capital needs. The Facilitys
interest rate is LIBOR plus a spread of 3.50%, with a floor of 5.00%. The term
of the Facility is one year, and the Facility can be converted at our option to
a three-year amortizing loan (20-year amortization) at the end of the first
year, provided that there are no existing and continuing events of default at
that time that we pay an extension fee. The Facilitys borrowing base is
determined based on the properties that are pledged as security against the
Facility. The Facility contains covenants applicable to those pledged
properties which, among other restrictions, require us to maintain a minimum
net worth and, in certain cases of the occurrence of default, limit
distributions to our stockholders. As of March 31, 2010, we were in compliance
with all covenants. As of March 31, 2010 the interest rate was 5.00%, and we
had $21.9 million outstanding under the Facility. We had approximately $1.6
million available under the Facility subject to the covenants above, and we had
$1.0 million in letters of credit outstanding related to various properties,
which reduced our availability under the Facility by a corresponding amount. In
April 2010, the $1.0 million letter of credit was released, thereby increasing
our borrowing base availability to $2.6 million. Amounts outstanding under the
Facility are retired as needed with proceeds from the issuance of long-term
debt, cash generated from disposition of properties and cash flow generated by
our operating properties. We expect to retire approximately $6.8 million under
the Facility during the second quarter, using the proceeds from the anticipated
placement of long-term debt on one of our unencumbered properties. Taking into
consideration this debt placement and other forecasted financing activities,
including the potential restructuring of certain long-term property-level debt,
we expect to have approximately $5.0 million available on the Facility at
yearend 2010.

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Our long-term capital
requirements consist primarily of maturities under our long-term debt
agreements and potential acquisitions. The primary sources of capital for
funding any debt maturities and acquisitions are our revolving credit facility,
proceeds from both secured and unsecured debt issuances, proceeds from equity
issuances, cash generated from the sale of property and the formation of joint
ventures and cash flow generated by our operating properties.

We intend to continue
managing our debt prudently and conservatively so as to maintain a conservative
capital structure. As of March 31, 2010, our ratio of debt to assets
(un-depreciated book value) is 56%, and approximately 82% of our debt is fixed,
long-term mortgage financing. Of the $28.2 million in debt maturing in 2010,
$21.9 million represents the Facility which can be converted, at our option, to
a three-year loan, provided that there are no existing and continuing events of
default. We were in compliance with our covenants at March 31, 2010 and expect
to remain in compliance for the foreseeable future. Additionally, we have a
$5.1 million secured loan on a property leased to Walgreens in San Antonio,
Texas that matures in September 2010. We expect to be able to refinance that
property with long-term debt or to dispose of the property in advance of the
debt maturity. In the short and long term, we may seek to obtain funds through
the issuance of additional equity, unsecured and/or secured debt financings,
joint venture relationships relating to existing properties or new
acquisitions, and property dispositions that are consistent with this
conservative structure.

As of March 31, 2010 and
December 31, 2009, our cash and cash equivalents totaled $586,000 and $1.1
million, respectively. Cash flows provided by (used in) operating activities,
investing activities and financing activities for the three months ended March
31, are as follows (in thousands):

|                     |  |      |       |      |    |       |  
|-------------------- |  | ---- | ----- | ---- | -- | ----- | -
|                     |  | 2010 |       | 2009 |   
|Operating activities |  | $    | 1,395 |      | $  | 3,658 |  
|Investing activities |  | ($   | 904   | )    | ($ | 683   | )
|Financing activities |  | ($   | 972   | )    | ($ | 4,730 | )

Until we acquire additional
properties, any excess cash will be invested in short-term investments or
overnight funds. This investment strategy provides us with the liquidity to
acquire properties at such time as those suitable for acquisition are sourced.

Investing Activities

We acquired no real estate
assets during the three months ended March 31, 2010. Capital expenditures for additions
to the existing portfolio totaled $682,000 and $663,000 for the first three
months of 2010 and 2009, respectively. Cash flows associated with loans to our
real estate partnerships were a net outflow of $241,000 during the 2010 period
as compared to a net outflow of $67,000 during the 2009 period. As of March 31,
2010, we have notes receivable in the amount of $4.9 million due from our real
estate partnerships. We made these loans to the partnerships for the purpose of
acquiring and/or developing properties. These loans bear interest at LIBOR plus
a spread of 3.5% and are due upon demand. Of the balances outstanding, $1.0
million is secured by the real estate partnerships ownership interest in
unencumbered properties. We expect to receive payments on these notes
receivable as the partnerships generate liquidity from property dispositions
and from financings with third parties.

Financing Activities

Debt

During the three months
ended March 31, 2010, we had approximately $1.9 million in net proceeds from
notes payable. We drew down on our credit facility in order to fund costs
associated with the Merger, capital improvements on our real estate properties
and for general working capital needs. See further discussion above regarding
the terms of our Facility that we use for the acquisition of properties and for
our working capital needs.

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Equity

During the three months
ended March 31, 2010, we declared dividends to our stockholders of $2.9 million
as compared to $3.2 million in the three months ended March 31, 2009. All share
classes receive monthly dividends. The dividends paid are as follows (in
thousands):

|                    |  |              |       |                     |   |         |  |         |       |    |   |       |   
|------------------- |  | ------------ | ----- | ------------------- | - | ------- |  | ------- | ----- | -- | - | ----- | --
|                    |  | Post Merger  |       | Pre Merger - AmREIT |  
|                    |  | AmREIT, Inc. |       | Class A             |   | Class C |  | Class D |      
|2010 First Quarter  |  | $            | 2,867 |                     |   | n/a     |  |         | n/a   |    |   | n/a   |   
|                    |  |              |       |                     |   |         |  |         |       |    |   |       |   
|2009 Fourth Quarter |  | $            | 964   | *                   | $ | 1,192   |  | $       | 4,383 | ** | $ | 6,626 | **
|Third
 Quarter      |  |              | n/a   |                     | $ | 660     |  | $       | 724   |    | $ | 1,782 |   
|Second
 Quarter     |  |              | n/a   |                     | $ | 660     |  | $       | 724   |    | $ | 1,782 |   
|First
 Quarter      |  |              | n/a   |                     | $ | 655     |  | $       | 724   |    | $ | 1,783 |   

* The fourth quarter
dividends include dividends for the months of November and December.

** The fourth quarter
dividends include a $4.1 million premium (class C) and a $6.0 million premium
(class D) associated with the share conversion of the Class C and D shares in
relation to the Merger which was accounted for as an additional dividend in
accordance with GAAP.

The United States has
undergone and may continue to experience a prolonged recession that has been
marked by pervasive and fundamental disruptions in the financial markets.
Continued concerns regarding the uncertainty of whether the U.S. economy will
be adversely affected by inflation, deflation or stagflation and the systemic
impact of increased unemployment, volatile energy costs, geopolitical issues,
the availability and cost of credit, the U.S. mortgage market and a severely
distressed real estate market have contributed to increased market volatility
and weakened business and consumer confidence. The United States may not
experience a sustained recovery and could suffer pronounced instability and
decreased economic activity for an extended period of time. Our operations are
sensitive to changes in overall economic conditions that impact our tenants,
including, among other things, increased bad debts due to such recessionary
pressures. A general reduction in the level of tenant leasing or shifts in
tenant leasing practices could adversely affect our revenues, profitability and
results of operations. It is difficult to determine the breadth and duration of
the financial market problems and the many ways in which they may affect our
tenants and our business in general. While we believe that we have sufficient
cash on hand to meet our contractual obligations, a significant additional deterioration
in the U.S. economy or the bankruptcy or insolvency of one or more of our
significant tenants could cause our 2010 cash resources to be insufficient to
meet our obligations. If necessary, we have the ability to defer capital
improvements and to defer payment of certain operating costs, including
property taxes, until sufficient cash resources are available.

Off Balance Sheet Arrangements

As of March 31, 2010, none
of our off balance sheet arrangements had or are reasonably likely to have a
material effect on our liquidity or availability of, or requirement for, our
capital resources. Letters of credit totaling $1.0 million and $1.0 million
were outstanding under the Facility at March 31, 2010 and December 31, 2009,
respectively. In April 2010, the $1.0 million letter of credit was released.

We own interests in several
unconsolidated real estate partnerships which are accounted for under the
equity method as we exercise significant influence over, but do not control,
the investee. We have made loans to some of these affiliates as discussed above
under Investing Activities.

Results of Operations 
Comparison of the three months ended March 31, 2010 to the three months ended
March 31, 2009

Revenues

Total revenues decreased by
$1.7 million, for the three months ended March 31, 2010 as compared to the same
period in 2009. This decrease was primarily attributable to decreases in rental
income, lease termination fee income and related party real estate fee income.

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Rental income
from operating leases decreased by $287,000, or 4%, for the three months ended
March 31, 2010 as compared to the same period in 2009 ($7.2 million in 2010
versus $7.5 million in 2009). This decrease is attributable to a reduction of
rental revenues associated with expense reimbursements resulting from a
favorable property tax appeal relating to one of our properties. This reduction
was offset by a corresponding reduction in property expense during 2010.

Lease
termination fee income from operating leases decreased by $1.1 million, or
100%, for the three months ended March 31, 2010 as compared to the same period
in 2009 ($0 in 2010 versus $1.1 million in 2009). This decrease is primarily
attributable to a national tenant declaring bankruptcy in 2009 and subsequently
defaulting upon their ground lease with us. Upon default, ownership of the
building transferred from the tenant to us as the land owner. Lease termination
income for the quarter ended March 31, 2009 represents the fair value of the building.

Real estate
fee income- related party decreased by $306,000, or 44%, for the three months
ended March 31, 2010 as compared to the same period in 2009 ($384,000 in 2010
versus $690,000 in 2009). This decrease is primarily attributable to a decrease
in development fees and leasing commissions earned on the properties that we
manage within our affiliated real estate partnerships.

|                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Expenses                                                                                                                                                                                                                                                                                                                                                
|Total
 operating expenses decreased by $2.4 million, or 33%, for the three months
 ended March 31, 2010 as compared to the same period in 2009 ($5.0 million in
 2010 versus $7.4 million in 2009). This decrease was primarily attributable
 to decreases in general and administrative expenses, property expense and
 legal and professional expense.

General and
administrative expense decreased by $1.4 million, or 52%, for the three months
ended March 31, 2010 as compared to the same period in 2009 ($1.3 million in
2010 versus $2.7 million in 2009). The decrease was primarily due to the timing
of accruing our 2009 incentive compensation in order to match the earnings for
the period with the related compensation expense. Our 2010 incentive
compensation accrual was lower than 2009 as a result of lower earnings for the
period.

Property
expense decreased by $412,000, or 20%, for the three months ended March 31,
2010 as compared to the same period in 2009 ($1.7 million in 2010 versus $2.1
million in 2009). The decrease is primarily attributable to a decrease in bad
debt reserves recorded on our tenant receivables and a decrease in property
taxes.

Legal and
professional fee expense decreased by $477,000, or 65%, for the three months
ended March 31, 2010 as compared to the same period in 2009 ($259,000 in 2010
versus $736,000 in 2009). This decrease is mainly attributable to legal costs
incurred in 2009 associated with a matter which was resolved in February 2010
to the mutual satisfaction of us and the other party to the litigation.

Other Income (expense)

Interest
expense increased by $143,000, or 6%, for the three months ended March 31, 2010
as compared to the same period in 2009 ($2.7 million in 2010 versus $2.6
million in 2009). This increase is primarily attributable to a higher rate of
interest on the debt on the MacArthur Park property that was refinanced in
2009.

Loss from merchant
development funds decreased by $452,000, or 508%, for the three months ended
March 31, 2010 (loss of $541,000 in 2010 versus a loss of $89,000 in 2009). The
decrease is primarily attributable increased depreciation expense resulting
from the impending redevelopment of the Woodlake Square property. We have
reassessed and shortened the estimated useful lives of various buildings
consistent with our current plan to demolish such buildings as part of the
redevelopment.

Loss from
discontinued operations decreased by $1.9 million, or 100%, for the three
months ended March 31, 2010 ($0 in 2010 versus $1.9 million in 2009). The
decrease is primarily attributed to the recognition of a $1.9 million deferred
gain in the first quarter of 2009 (net of taxes) resulting from the 2008 sale
of an undeveloped 0.9 acre piece of property contiguous to Uptown Plaza in
Dallas.

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Funds From Operations

We consider
funds from operations (FFO), a non-GAAP measure, to be an appropriate measure
of the operating performance of an equity REIT. The National Association of
Real Estate Investment Trusts (NAREIT) defines FFO as net income (loss)
computed in accordance with GAAP, excluding gains or losses from sales of
property held for investment, plus real estate related depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. See Discontinued Operations discussion in Footnote 1 to our
accompanying consolidated financial statements for detail of discontinued
operations included in FFO. In addition, NAREIT recommends that extraordinary
items not be considered in arriving at FFO. We calculate our FFO in accordance
with this definition. Most industry analysts and equity REITs, including us,
consider FFO to be an appropriate supplemental measure of operating performance
because, by excluding gains or losses on dispositions and excluding
depreciation, FFO is a helpful tool that can assist in the comparison of the
operating performance of a companys real estate between periods or as compared
to different companies. Management uses FFO as a supplemental measure to
conduct and evaluate our business because there are certain limitations
associated with using GAAP net income as the primary measure of our operating
performance. Historical cost accounting for real estate assets in accordance
with GAAP implicitly assumes that the value of real estate assets diminishes
predictably over time. Because real estate values instead have historically
risen or fallen with market conditions, management believes that the
presentation of operating results for real estate companies that use historical
cost accounting is insufficient by itself. There can be no assurance that FFO
presented by us is comparable to similarly titled measures of other REITs. FFO should
not be considered as an alternative to net income or other measurements under
GAAP as an indicator of our operating performance or to cash flows from
operating, investing or financing activities as a measure of liquidity.

Below is the
calculation of FFO and the reconciliation to net income, which we believe is
the most comparable GAAP financial measure to FFO, in thousands:

|                                                              |  |                               |       |      |   |        |  
|------------------------------------------------------------- |  | ----------------------------- | ----- | ---- | - | ------ | -
|                                                              |  | Three Months
 Ended March 31, |      
|                                                              |  | 2010                          |       | 2009 |  
|Income from continuing
 operations                            |  | $                             | 688   |      | $ | 712    |  
|Income (loss) from
 discontinued operations                   |  |                               |      |      |   | 1,908  |  
|Non-controlling interest                                      |  |                               | (11   | )    |   | (53    | )
|                                                              |  |                               |       |      |   |        |  
|Plus depreciation of real
 estate assets - from operations    |  |                               | 1,696 |      |   | 1,826  |  
|                                                              |  |                               |       |      |   |        |  
|Adjustments for
 nonconsolidated affiliates                   |  |                               | 690   |      |   | 127    |  
|Less Class C and D distributions
 shareholder                 |  |                               |      |      |   | (2,507 | )
|                                                              |  |                               |       |      |   |        |  
|Total Funds From Operations
 available to common stockholders |  | $                             | 3,063 |      | $ | 2,013  |  

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

Not
applicable.

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

Evaluation of Disclosure Controls and
Procedures

Under the
supervision and with the participation of our Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), management has evaluated the effectiveness
of the design and operation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act) as of
March 31, 2010. Based on that evaluation, our CEO and CFO concluded that, as of
March 31, 2010, our disclosure controls and procedures were effective in
causing material information relating to us (including our consolidated
subsidiaries) to be recorded, processed, summarized and reported by management
on a timely basis and to ensure the quality and timeliness of our public disclosures
with SEC disclosure obligations

Changes in Internal Controls

There has been
no change to our internal control over financial reporting during the quarter
ended March 31, 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

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Part II  OTHER INFORMATION

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

We are
involved in various matters of litigation arising in the normal course of
business. While we are unable to predict with certainty the amounts involved,
our management and counsel are of the opinion that, when such litigation is
resolved, any additional liability, if any, will not have a material effect on
our consolidated financial statements.

|         |                                                              
|-------- | -------------------------------------------------------------
|Item
 2. | Unregistered Sales of Equity Securities
 and Use of Proceeds.

Our shares are
no longer actively traded on an exchange. We do not currently have a public
stock buyback program in place. However, our Board of Directors has authorized
redemptions of up to $500,000 in cases where our shareholders initiate a
redemption request due to financial hardship. As of March 31, 2010, we have
redeemed approximately $115,000 of common stock in the aggregate for these
cases.

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

None.

|         |                        
|-------- | -----------------------
|Item
 4. | [Removed and Reserved.]

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

None.

|         |          
|-------- | ---------
|Item
 6. | Exhibits.

The exhibits
listed on the accompanying Exhibit Index are filed, furnished or incorporated
by reference (as stated therein) as part of this Report.

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SIGNATURES

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

|                    |  |                                                                     | 
|------------------- |  | ------------------------------------------------------------------- | 
|                    |  | AmREIT, Inc.                                                        | 
|                    |  |                                                                     | 
|                    |  | /s/ H. Kerr
 Taylor                                                 | 
|Date: May
 12, 2010 |  | H. Kerr
 Taylor,President and Chief Executive Officer               | 
|                    |  |                                                                     | 
|                    |  | /s/ Chad C.
 Braun                                                  | 
|Date: May
 12, 2010 |  | Chad C.
 Braun,Executive Vice President and Chief Financial Officer | 

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Exhibit Index

|             |  |  |                                                                                                                                                                                                        | 
|------------ |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|Exhibit
 No. |  |  |                                                                                                                                                                                                       
|3.1          |  |  | Articles of
 Amendment and Restatement (included as Exhibit 3.1 Amendment No. 3 to
 REITPluss Registration Statement on Form S-4, filed on September 9, 2009,
 and incorporated herein by reference).
|             |  |  |                                                                                                                                                                                                       
|3.2          |  |  | Amended and
 Restated By-laws (included as Exhibit 3.2 to the Amendment No. 1 to
 REITPluss Registration Statement on Form S-11, filed July 20, 2007, and
 incorporated herein by reference).        
|             |  |  |                                                                                                                                                                                                       
|31.1         |  |  | Certification
 pursuant to Rule 13a-14(a) of Chief Executive Officer (filed herewith).                                                                                                                
|             |  |  |                                                                                                                                                                                                       
|31.2         |  |  | Certification
 pursuant to Rule 13a-14(a) of Chief Financial Officer (filed herewith).                                                                                                                
|             |  |  |                                                                                                                                                                                                       
|32.1         |  |  | Chief
 Executive Officer certification pursuant to 18 U.S.C. Section 1350, adopted
 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished
 herewith).                                  
|             |  |  |                                                                                                                                                                                                       
|32.2         |  |  | Chief
 Financial Officer certification pursuant to 18 U.S.C. Section 1350, adopted
 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished
 herewith).                                  

34

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