<PAGE>





                                 EXHIBIT "10.0"


                               ADVISORY AGREEMENT
                                     BETWEEN
                         AMERICAN REALTY INVESTORS, INC.
                                       AND
                          PRIME ASSET MANAGEMENT, INC.


         This ADVISORY AGREEMENT is made and entered into as of this 1st day of
July, 2003, between AMERICAN REALTY INVESTORS, INC., a Nevada corporation (the
"Company") and PRIME ASSET MANAGEMENT, INC. (the "Advisor"), a Nevada
corporation.

                                   WITNESSETH:

         WHEREAS, the Company desires to avail itself of the experience, sources
of information, advice and assistance of the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, on behalf of
and subject to the supervision of the Board of Directors (the "Directors") of
the Company, all as provided herein; and

         WHEREAS, the Advisor is willing to undertake to render such services,
subject to the supervision of the Directors, on the terms and conditions
hereinafter set forth;

         NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:

                  1. Definitions. As used herein, the following terms shall have
the meanings set forth below:

                  (a) "Affiliate" shall mean (i) any Person directly or
         indirectly owning, controlling or holding with power to vote, five
         percent (5%) or more of the outstanding voting securities of such other
         Person; (ii) any person five percent (5%) or more of whose outstanding
         voting securities are directly or indirectly owned, controlled, or held
         with power to vote, by such other Person; (iii) any Person directly or
         indirectly controlling, controlled by, or under common control with,
         such other Person; or (iv) any officer, director, partner, copartner,
         or employee of such other Person.

                  (b) "Average Invested Assets" for any period shall mean the
         average of the aggregate book value of the assets of the Company,
         before reserves for depreciation or bad debts or other similar non-cash
         reserves. This figure will be computed by taking the average of such
         values at the end of each month during such period.




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                  (c) "Book Value" of an asset shall mean the value of such
         asset on the books of the Company, before allowance for depreciation or
         amortization.

                  (d) "Fiscal Year" shall mean any period for which an income
         tax return is submitted by the Company to the Internal Revenue Service
         and which is treated by the Internal Revenue Service as a reporting
         period for the Company.

                  (e) "Mortgage" shall mean a mortgage, a deed of trust or any
         other instrument creating a security interest in a Real Property.

                  (f) "Mortgage Loan" shall mean a loan evidenced by a Mortgage.

                  (g) "Net Income" for any period shall mean total revenues
         applicable to such period, less the expenses applicable to such period
         other than additions to reserves for depreciation or bad debts or other
         similar non-cash reserves.

                  (h) "Person" shall mean and include individuals, corporations,
         limited partnerships, general partnerships, joint stock companies or
         associations, joint ventures, associations, companies, trusts, banks,
         trust companies, land trusts, business trusts, or other entities and
         governments and agencies and political subdivisions thereof.

                  (i) "Real Property" shall mean improved and unimproved land,
         improvements, furniture and fixtures located on or used in connection
         with land, and any right or interest in any of the foregoing, including
         a leasehold interest, an interest in air, subterranean or mineral
         rights, but shall not include Mortgage Loans.

                  2. Duties of the Advisor. The Advisor agrees to act on a basis
which is fair and reasonable to the Company and its shareholders in selecting
from among the particular investment opportunities that come to it; provided,
however, that the Advisor shall not be required to present to the Company any
particular investment opportunity which comes to it even if the opportunity is
one which, if presented to the Company, could be taken by the Company. Subject
to the supervision of the Directors, the Advisor shall:

                  (a) use its best efforts to present and recommend to the
         Company a continuing and suitable investment program consistent with
         the investment policies and objectives of the Company;

                  (b) administer the Company's day-to-day investment operations
         and perform or supervise the performance of such other administrative
         functions in connection with the management of the Company as may be
         agreed upon by the Advisor and the Directors;





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                  (c) serve as the Company's investment adviser and consultant
         in connection with policy decisions to be made by the Directors and, as
         requested, furnish reports to the Directors and provide research and
         economic and statistical data in connection with the Company's
         investments and investment policies;

                  (d) investigate, select and conduct relations on behalf of the
         Company with consultants, borrowers, lenders, mortgagors and other
         mortgage and investment participants, accountants, mortgage loan
         originators, or brokers, correspondents and servicers, technical
         advisers, attorneys, underwriters, brokers and dealers, corporate
         fiduciaries, escrow agents, depositaries, custodians, agents for
         collection, insurers, insurance agents, banks, builders and developers,
         and persons acting in any other capacity deemed by the Directors
         necessary or desirable, and enter into appropriate contracts with,
         employ, retain and supervise services performed or to be performed by,
         any such parties in connection with investments which have been or may
         be acquired, sold or otherwise disposed of by the Company;

                  (e) consult with the Directors and present to them
         opportunities to acquire Mortgage Loans and other investments
         consistent with the investment policies and objectives of the Company
         and furnish the Directors with advice and recommendations with respect
         to the making, the acquiring (by purchase, investment, exchange or
         otherwise), the holding and the disposition (through sale, exchange or
         otherwise) of investments consistent with the policies and objectives
         of the Company, commitments therefor, loans secured by the pledge of
         mortgage loans as collateral, participations in any one of the
         foregoing, or Government or other securities or other investments of,
         or investments considered by, the Company;

                  (f) obtain for the Company such services as may be required
         for property management, mortgage servicing, construction and
         development loan disbursements and other activities relating to the
         investment portfolio of the Company, and act as the attorney-in-fact or
         agent of the Company in working with and supervising whomever is
         selected to perform such services; provided, however, that nothing
         herein shall be construed to require the Advisor to perform such
         services itself;

                  (g) act as attorney-in-fact or agent of the Company in
         acquiring and disposing of investments, disbursing and collecting the
         funds of the Company, paying the debts and fulfilling the obligations
         of the Company, and handling, prosecuting and settling of any claims of
         the Company, including foreclosing and otherwise enforcing mortgage and
         other liens securing investments, and exercise its own sound discretion
         in doing so;




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                  (h) assist in negotiations on behalf of the Company with
         investment banking firms, securities brokers or dealers and other
         institutions or investors for public or private sales of shares or
         other securities of the Company or public offerings or private
         placements by the Company of its securities, and obtain loans for the
         Company, but in no event in such a way that the Advisor would be deemed
         to be acting as a broker-dealer or underwriter;

                  (i) invest or reinvest any money of the Company;

                  (j) provide office space and office equipment, the use of
         accounting and computing equipment when required, and necessary
         executive, clerical and secretarial personnel for the performance of
         the foregoing services as Advisor;

                  (k) make reports to the Directors of its performance of the
         foregoing services and furnish advice and recommendations with respect
         to other aspects of the business and affairs of the Company from time
         to time or at any time requested by the Directors;

                  (l) in general, inform the Directors of any factors which come
         to its attention which would influence the policies of the Company; and

                  (m) assist in the preparation of reports and other documents
         necessary to satisfy the continuous reporting and other requirements of
         any governmental bodies or agencies and to maintain effective
         communications with stockholders of the Company.

                  3. Records. At all times, the Advisor shall keep proper books
of account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Company at any
time during ordinary business hours.

                  4. Other Activities of Advisor.

                  (a) Nothing herein contained shall prevent the Advisor, or any
         Affiliate of the Advisor, from acting as adviser to any other person or
         entity even though such entity may have investment policies similar to
         the Company; provided, however, that if, at any time, the Advisor
         serves as adviser to more than one real estate entity (including the
         Company) with similar investment policies, it will offer loans and
         investments which are appropriate to more than one such entity first to
         that entity which has had uninvested funds for the longest period of
         time.

                  (b) Affiliates of the Advisor may serve as Directors,
         officers, employees, agents, nominees or signatories for the Company.
         When





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         executing documents or otherwise acting in such capacities for the
         Company, such persons shall use their respective titles in the Company.

                  5. Additional Obligations of the Advisor.

                  Notwithstanding any other provision of this Agreement to the
contrary, the Advisor shall refrain from any action which, in its reasonable
judgment or any judgment of the Board of Directors of which the Advisor has
written notice would (a) violate any law, rule or regulation of any governmental
body or agency having jurisdiction over the Company or its securities or (b)
cause the Company to be required to register as an investment company under the
Investment Company Act of 1940. If any such action is ordered by the Board of
Directors, the Advisor shall promptly notify the Board of the Advisor's judgment
that such action would adversely affect such status or violate such law, rule or
regulation or require such registration and shall refrain from taking such
action pending further clarification or instruction from the Board of Directors.

                  6. Bond. The Advisor shall maintain a fidelity bond with a
responsible surety company in such amount as may be required by the Directors
from time to time, covering all officers, employees and agents of the Advisor
handling funds of the Company and any investment documents or records pertaining
to investments of the Company. Such bond shall inure to the benefit of the
Company in respect of losses of any such property from acts of such persons
through theft, embezzlement, fraud, negligence, error or omission or otherwise
(provided that such bond can be obtained for such acts at reasonable expense),
the premium for said bond to be at the expense of the Company.

                  7. Expenses of the Advisor. Without regard to the amount of
compensation received hereunder by the Advisor, the Advisor shall bear the
following expenses of the Company:

                  (a) all direct and indirect remuneration and all other
         employment expenses of employees of the Advisor, including but not
         limited to, salaries, wages, payroll taxes and the costs of employee
         benefit plans, but not including fees paid to Directors affiliated with
         the Advisor;

                  (b) rent, telephone, utilities, office furniture, equipment
         and machinery and other office expenses of the Advisor and the Company,
         except as any of such expenses relate to an office maintained by the
         Company separate from the office of the Advisor;

                  (c) costs including but not limited to travel, marketing,
         seminars, courier, business promotions, entertainment, advertising,
         office supplies, etc. where such costs are not directly identifiable to
         the Company's assets, liabilities, operations, business and financial
         affairs; and




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                  (d) miscellaneous administrative expenses relating to
         performance by the Advisor of its duties hereunder.

                  8. Compensation. The Advisor shall be paid for services
rendered by it under this Agreement as follows:

                  (a) Base Compensation. On or before the fifteenth (15th) day
         of each calendar month, the Company shall pay to the Advisor .0625%
         (.75% on an annualized basis) of Average Invested Assets of the Company
         during the preceding month.

                  (b) Incentive Compensation. In order to further reward the
         Advisor for performance hereunder, the Company shall pay to the Advisor
         on or before the ninetieth (90th) day after the close of each Fiscal
         Year an incentive fee equal to ten percent (10%) of Net Income for such
         Fiscal Year in excess of a ten percent (10%) return on shareholders'
         equity. The Advisor shall also receive ten percent (10%) of the excess,
         if any, of net capital gain over net capital loss, if any, realized for
         sales of assets.

                  (c) Mortgage Placement Fee. For originating or purchasing
         Mortgage Loans for the Company, the Advisor shall receive a mortgage
         placement fee equal to fifty percent (50%), measured on a cumulative
         basis, of the total amount of mortgage origination and placement fees
         for Mortgage Loans advanced by the Company for the Fiscal Year.

                  (d) Acquisition Commission. For locating, leasing or
         purchasing Real Property for the Company, the Advisor or an Affiliate
         shall receive an Acquisition Commission equal to the lesser of (i) up
         to 6% of costs of acquisition, inclusive of commissions, if any, paid
         to nonaffiliated brokers; or (ii) the compensation customarily charged
         in arm's-length transactions by others rendering similar property
         acquisition services as an ongoing public activity in the same
         geographical location and for comparable property.

                  (e) Disposition Fees. For the sale of each equity investment
         in Real Property, the Advisor or an Affiliate shall receive a
         Disposition Fee equal to the lesser of (i) 3% of the sales price of
         each property, exclusive of fees, if any, paid to nonaffiliated
         brokers; or (ii) the compensation customarily charged in arm's length
         transactions by others rendering similar services as an ongoing public
         activity in the same geographical location for comparable property.

                  (f) Loan Arrangement Fee. For arranging any loans to the
         Company, the Advisor shall receive a fee equal to 1% of the principal
         amount of any such loan. For purposes of this Section 8(f) the
         principal amount of any line of credit shall be the maximum
         availability under such line.




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                  9. Additional Services. If and to the extent that the Company
shall request the Advisor, or any director, officer, partner or employee of the
Advisor, to render services for the Company other than those required to be
rendered by the Advisor hereunder, such additional services, if performed, will
be compensated separately on terms agreed upon between such party and the
Company from time to time, subject to applicable law. In particular, but without
limitation, if the Company shall request that the Advisor perform property
management, mortgage servicing, loan disbursement or similar functions, the
Company and the Advisor shall enter into a separate agreement specifying the
obligations of the parties and providing for reasonable additional compensation
to the Advisor for performing such services.

                  10. Statements. The Advisor shall prepare, at the request of
the Directors, a statement showing the computation of the fee, if any, payable
with respect to any period so requested.

                  11. Information Furnished to Advisor. The Directors shall at
all times keep the Advisor fully informed with regard to the investment policy
of the Company, the capitalization policy of the Company, and generally their
then current intentions as to the future of the Company. In particular, the
Directors shall notify the Advisor promptly of their intention to sell or
otherwise dispose of any of the Company's investments, or to make any new
investment. The Company shall furnish the Advisor with a copy of all financial
statements, a signed copy of each report prepared by independent certified
public accountants, and such other information with regard to its affairs which
the Advisor from time to time may reasonably request.

                  12. Expenses of the Company. Except as expressly otherwise
provided in this Agreement, the Company shall pay all expenses not assumed by
the Advisor; including, but not limited to:

                  (a) To the extent the Advisor is not required to pay such
         expenses pursuant to Section 7 hereof, the salaries and other
         employment expenses of the Directors of and personnel employed by the
         Company and travel and related expenses of directors, officers and
         employees of the Advisor and of Directors, officers and employees of
         the Company relating to the business and financial affairs of the
         Company;

                  (b) the cost of borrowed money;

                  (c) taxes on income, taxes on property, assessments against
         property, and all other taxes and applicable to the Company;

                  (d) legal, audit, accounting, underwriting, brokerage,
         listing, registration and other fees, printing, engraving and other
         expenses and taxes incurred in connection with the issuance,
         distribution, transfer, registration and stock exchange listing of the
         Company's securities;



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                  (e) fees and expenses paid to independent advisers,
         independent contractors, consultants (including investor relations
         consultants), managers and other agents employed directly by the
         Company (other than through the Advisor);

                  (f) to the extent not paid by borrowers from the Company,
         costs of loan administration and mortgage servicing;

                  (g) expenses related to mortgage loans and connected with the
         acquisition, disposition, leasing and ownership of investments,
         including, to the extent not paid by others, but not limited to, legal
         fees and other expenses of professional services; the costs of
         foreclosure; costs of financings and refinancings; insurance premiums;
         legal or accounting services; taxes; title and abstract expenses;
         brokerage and sales commissions; maintenance, repair or improvement of
         property; architectural and engineering fees; expenses of managing real
         property equity interests and appraisal or inspection fees except when
         performed by employees of the Advisor;

                  (h) expenses related to real estate equity interests owned by
         the Company, including, but not limited to, insurance premiums; legal
         or accounting services; architectural and engineering fees; appraisal
         or inspection fees except when performed by employees of the Advisor;
         taxes; title and abstract expenses; brokerage and sales commissions;
         management fees and expenses; and costs of financings and refinancings;

                  (i) other insurance as required by the Directors (including
         Directors' liability insurance, if any);

                  (j) the expenses of dissolving the Company or of amending the
         Articles of Incorporation or Bylaws of the Company or of merging the
         Company with any other entity;

                  (k) expenses connected directly with payments to holders of
         securities of the Company and other bookkeeping and clerical work
         necessary in maintaining relations with holders of securities and the
         investment community in general, including the cost of preparing,
         printing and distributing proxy materials, reports to shareholders,
         news releases, and certificates for securities, and any legal
         assistance related thereto;

                  (l) transfer agents', registrars', warrant agents', dividend
         paying agents' and indenture trustees' fees and charges;

                  (m) advertising expenses incurred in seeking investments for
         the Company; and




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                  (n) all costs including but not limited to travel, marketing,
         seminars, courier, business promotions, entertainment, advertising,
         office supplies, etc. where such costs are directly attributable and
         identifiable to the Company's assets, liabilities, operations, business
         and financial affairs.

                  13. No Partnership or Joint Venture. The Company and the
Advisor are not partners or joint venturers with each other and nothing herein
shall be construed so as to make them such partners or joint venturers or impose
any liability as such on either of them.

                  14. Term of Agreement. This Agreement shall continue in force
for a period of twelve (12) months from July 1, 2003 and thereafter shall be
automatically renewed from year to year unless terminated in accordance with the
provisions of this Agreement.

                  15. Termination. Notwithstanding any other provision of this
Agreement to the contrary, this Agreement may be terminated by the Advisor
without penalty for any reason upon sixty (60) days' written notice to the
Company or may be terminated by the Company without penalty for any reason by
the Directors or by the holders of a majority in interest of the then
outstanding shares of the Company upon sixty (60) days' written notice to the
Advisor.

                  16. Assignment. The Advisor shall not assign this Agreement
without the written consent of the Company. The Company may terminate this
Agreement in the event of its assignment by the Advisor except in the event of
an assignment to a corporation, association, trust, or other successor
organization which may take over the property and carry on the affairs of the
Advisor, provided that following such assignment the entity which controlled the
operations of the Advisor immediately prior to the assignment shall control the
operations of the successor organization, including the performance of the
Advisor's duties under this Agreement, and it shall be bound by the same
restrictions by which it was bound prior to such assignment; however, if at any
time subsequent to such an assignment such entity shall cease to control the
operations of the successor organization, the Company may thereupon terminate
this agreement. Such an assignment or any other assignment of this Agreement by
the Advisor shall bind the assignee hereunder in the same manner as the Advisor
is bound hereunder. In addition, the Advisor may delegate, assign, or otherwise
discharge any of its obligations under this Agreement to or through any of its
wholly-owned subsidiaries or their wholly-owned subsidiaries, subject to the
same terms and conditions as are applicable to the Advisor itself under this
Agreement.

                  17. Default, Bankruptcy, etc. At the option solely of the
Directors, this Agreement shall be and become terminated immediately upon
written notice of termination from the Directors to the Advisor if any of the
following events shall occur:




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                  (a) if the Advisor shall violate any provision of this
         Agreement, and after notice of such violation shall not cure such
         default within thirty (30) days;

                  (b) if the Advisor shall be adjudged bankrupt or insolvent by
         a court of competent jurisdiction, or an order shall be made by a court
         of competent jurisdiction for the appointment of a receiver, liquidator
         or trustee of the Advisor or of all or substantially all of its
         property by reason of the foregoing, or approving any petition filed
         against the Advisor for its reorganization and such adjudication or
         order shall remain in full force or unstayed for a period of thirty
         (30) days; or

                  (c) if the Advisor shall institute proceedings for voluntary
         bankruptcy or shall file a petition seeking reorganization under the
         Federal bankruptcy laws, or for relief under any law for the relief of
         debtors, or shall consent to the appointment of a receiver of itself or
         all or substantially all its property, or shall make a general
         assignment for the benefit of its creditors, or shall admit in writing
         its inability to pay its debts generally as they become due.

                  The Advisor agrees that if any of the events specified in
subsections (b) or (c) of this Section 17 shall occur, it will give written
notice thereof to the Directors within seven (7) days after the occurrence of
such event.

                  18. Action Upon Termination. From and after the effective date
of expiration or termination of this Agreement, pursuant to Sections 14, 15, 16
or 17 hereof, the Advisor shall not be entitled to compensation for further
services hereunder but shall be paid all compensation accruing to the date of
expiration or termination. The Advisor shall forthwith upon any such event:

                  (a) pay over the Company all monies collected and held for the
         account of the Company pursuant to this Agreement;

                  (b) as soon as possible, deliver to the Directors a full
         accounting, including a statement showing all payments collected by it
         and a statement of all monies held by it, covering the period following
         the date of the last accounting furnished to the Directors;

                  (c) deliver to the Directors all property and documents of the
         Company then in the custody of the Advisor; and

                  (d) cooperate with the Company and take all reasonable steps
         requested by the Directors to assist the Directors in making an orderly
         transition.

                  19. Advisor's Liability. The Advisor assumes no responsibility
under this Agreement other than to render the services called for hereunder in




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good faith and to make decisions and advise courses of action that it
determines, in good faith, to be in the best interests of the Company, and the
Advisor shall not be responsible for any action of the Directors in following or
declining to follow any advice or recommendations of the Advisor. Neither the
Advisor nor its shareholders, directors, officers or employees shall be liable
to the Company, the Directors, the holders of securities of the Company or to
any successor or assign of the Company except by reason of acts constituting bad
faith, willful misfeasance, gross negligence or reckless disregard of their
duties.

                  20. Notices. Any notice, report or other communication
required or permitted to be given hereunder shall be in writing unless some
other method of giving such notice, report or other communication is accepted by
the party to whom it is given, and shall be given by being delivered or being
mailed, certified or registered mail, return receipt requested, to the following
addresses of the parties hereto:


         The Directors and                  American Realty Investors, Inc.
         The Company:                       1800 Valley View Lane
                                            Suite 300
                                            Dallas, Texas 75234
                                            Attn: President

         The Advisor                        Prime Asset Management, Inc.
                                            1800 Valley View Lane
                                            Suite 300
                                            Dallas, Texas 75234
                                            Attn: President

                  Either part may at any time give notice in writing to the
other party of a change of its address for the purpose of this Section 20.

                  21. Amendments. This Agreement shall not be changed, modified,
terminated or discharged in whole or in part except by an instrument in writing
signed by both parties hereto, or their respective successors or assigns, or
otherwise as provided herein.

                  22. Headings. The section headings hereof have been inserted
for convenience of reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.

                  23. Governing Law. This Agreement has been prepared,
negotiated and executed in the State of Texas. The provisions of this Agreement
shall be construed and interpreted in accordance with the laws of the State of
Texas applicable to agreements made and to be performed therein.




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                  24. Binding Effect. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns, subject to the provisions of Section 16 of this Agreement.

                  IN WITNESS WHEREOF, the Company and the Advisor have caused
this Agreement to be executed by their respective duly authorized officers as of
the day and year first above written.


                                        AMERICAN REALTY INVESTORS, INC.



                                        By:   /s/ Ronald E. Kimbrough
                                           ----------------------------
                                           Ronald E. Kimbrough
                                           Executive Vice President


                                        PRIME ASSET MANAGEMENT, INC.



                                        By:   /s/ Mark W. Branigan
                                           ----------------------------
                                           Mark W. Branigan
                                           Executive Vice President




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