##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|           |  |                                                                                          |                                            |                                           
|---------- |  | ---------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------------
|(Mark One) |  |                                                                                         
|þ          |  |                                                                                          | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 | (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the fiscal year ended December 31, 2005                                             
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period from          to                                              

Commission file number: 0-50261





G REIT, Inc.


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Maryland                                                           |  | 52-2362509                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

1551 N. Tustin Avenue, Suite 200


Santa Ana, California 92705


(Address of principal executive offices)


(877) 888-7348


(Registrants telephone number, including area code)





Securities registered pursuant to Section 12(b) of the
Act:


|                     |  |                                          
|-------------------- |  | -----------------------------------------
|Title of Each Class: |  | Name of Each Exchange on Which Registered
|                     |  |                                          
|None                 |  | None                                     

Securities registered pursuant to Section 12(g) of the
Act:


Title of Class:





Common Stock


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o o þ


12b-2 o þ














---



##### 










G REIT, INC.


(A Maryland Corporation)


TABLE OF CONTENTS


|             |  |                                                                                                                      |     |      |    | 
|------------ |  | -------------------------------------------------------------------------------------------------------------------- | --- | ---- | -- | 
|             |  |                                                                                                                      |     | Page |   
|             |  |                                                                                                                      |     |      |   
|PART I      
|Item 1.      |  | Business                                                                                                             |     |      | 1  | 
|Item 1A.     |  | Risk Factors                                                                                                         |     |      | 8  | 
|Item 2.      |  | Properties                                                                                                           |     |      | 24 | 
|Item 3.      |  | Legal Proceedings                                                                                                    |     |      | 31 | 
|Item 4.      |  | Submission of Matters to a Vote of Security
    Holders                                                              |     |      | 32 | 
|            
|PART II     
|Item 5.      |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |     |      | 32 | 
|Item 6.      |  | Selected Financial Data                                                                                              |     |      | 33 | 
|Item 7.      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |     |      | 35 | 
|Item 7A.     |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |     |      | 58 | 
|Item 8.      |  | Financial Statements and Supplementary
    Data                                                                      |     |      | 59 | 
|Item 9.      |  | Changes in and Disagreements With
    Accountants on Accounting and Financial Disclosure                             |     |      | 59 | 
|Item 9A.     |  | Controls and Procedures                                                                                              |     |      | 59 | 
|Item 9B.     |  | Other Information                                                                                                    |     |      | 60 | 
|            
|PART III    
|Item 10.     |  | Directors and Executive Officers of the
    Registrant                                                               |     |      | 61 | 
|Item 11.     |  | Executive Compensation                                                                                               |     |      | 68 | 
|Item 12.     |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |     |      | 69 | 
|Item 13.     |  | Certain Relationships and Related
    Transactions                                                                   |     |      | 70 | 
|Item 14.     |  | Principal Accounting Fees and Services                                                                               |     |      | 72 | 
|            
|PART IV     
|Item 15.     |  | Exhibits, Financial Statement Schedules                                                                              |     |      | 73 | 
|SIGNATURES   |  |                                                                                                                      | 115 |     
|EXHIBIT 31.1
|EXHIBIT 31.2
|EXHIBIT 32.1
|EXHIBIT 32.2





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##### Table of Contents






PART I


FORWARD  LOOKING STATEMENTS







|        |         
|------- | --------
|Item 1. | Business

Significant events occurring since November 14, 2005
(the filing date of the
Form 10-Q for the
third quarter of 2005) include:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On December 19, 2005, our board of directors approved a
    plan of liquidation which was thereafter approved by our
    stockholders at a Special Meeting of Stockholders held on
    February 27, 2006. Our plan of liquidation contemplates the
    orderly sale of all of our assets, the payment of our
    liabilities and the winding up of operations and the dissolution
    of our company. We engaged a financial advisor, Robert A.
    Stanger & Co., Inc., or Stanger, to assist us in
    identifying, and evaluating the strategic alternatives available
    to us, and to prepare an estimated per share net asset value
    analysis of our business. Stanger also rendered an opinion
    stating that our net real estate liquidation value range
    estimate and our estimated per share distribution range were
    reasonable at the time our board of directors approved our plan
    of liquidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | On December 19, 2005, Anthony W. Thompson, our chairman of
    the board of directors, chief executive officer and president,
    voluntarily resigned as the chief executive officer and
    president of G REIT, Inc. to dedicate additional time to his
    other business, and philanthropic and educational interests.
    Effective as of December 19, 2005, Scott D. Peters, our
    former executive vice-president and chief financial officer, was
    appointed as our chief executive officer and president. In
    addition to his other qualifications, Mr. Peters brings
    substantial focus, direction and experience to the liquidation
    process based on his past experience as a chief financial
    officer of a publicly-traded real estate investment trust, or
    REIT, that also adopted a plan of liquidation. Mr. Thompson
    will continue to be actively involved on our behalf as our
    chairman of the board of directors and as the chief executive
    officer and chairman of Triple Net Properties, LLC, our Advisor.                                                                                                                                                                                                                                                                                                                         
|
| |  | On January 13, 2006, we filed a Current Report on
    Form 8-K and a
    definitive proxy in which we included the Revised Prior
    Performance Tables (as defined below). As we previously
    disclosed in our public filings, the prior performance
    information included in our prospectuses dated July 22,
    2002 through January 23, 2004 and delivered to investors
    who purchased an aggregate of 43,865,000 shares of our
    common stock in our public offerings, or Prospectuses, contained
    certain errors. In these Prospectuses, we presented information
    on the prior performance of other real estate investment
    programs advised, sponsored or managed by our Advisor. Certain
    of the prior performance tables contained in the Prospectuses,
    or the Historical Tables, contained errors which in some cases
    had the effect of misstating the revenue generated by, and other
    financial data of, these programs. Our Advisor, with the
    assistance of outside financial consultants, has reviewed the
    Historical Tables and has provided revised prior performance
    information, or the Revised Prior Performance Tables, to revise
    the incorrect information in the Prospectuses. The Revised Prior
    Performance Tables were filed as Exhibit 99.1 to the
    Form 8-K and
    Exhibit C to the definitive proxy.
|
| |  | On January 25, 2006, we entered into a Second Amended and
    Restated Credit Agreement, or the Amended Credit Agreement, for
    a secured credit facility, or Credit Facility, in the amount of
    $58,369,000, with lenders: (i) LaSalle Bank National
    Association, or LaSalle; (ii) Bank of America, National
    Association; and (iii) Citizens Financial Bank, for the
    purpose of facilitating our plan of liquidation. The Amended
    Credit Agreement amends and restates our former Credit Facility
    under that certain Amended and Restated Credit Agreement dated
    July 17, 2003, and subsequent amendments, or the Original
    Credit Agreement, entered into between us and LaSalle and other
    lenders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

1



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OUR COMPANY








day-to month-to


PLAN OF LIQUIDATION






24-month 24-month


2



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24-month






Public Offering of Equity Securities; Use of Proceeds






3



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CURRENT INVESTMENT OBJECTIVES AND POLICIES


General






| |   |                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | hold our income producing real property (or interests therein)
    generally through equity investments in a manner which permits
    us to continue to qualify as a REIT for federal income tax
    purposes;
|
| |  | generate cash through the sale of our properties;                                                                                                                                                             
|
| |  | preserve and protect stockholder capital; and                                                                                                                                                                 
|
| |  | realize capital appreciation upon the ultimate sale of our
    properties.                                                                                                                                    





Disposition Strategies






| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | the ability to sell our properties at the highest possible price
    in order to maximize the return to our stockholders;
|
| |  | the ability of our buyers to finance the transactions; and                                                               
|
| |  | the ability to complete the transactions within the timeframe of
    our plan of liquidation.                            

Operating Strategies






| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | managing costs and seeking to minimize operating expenses by
    centralizing management, leasing, marketing, financing,
    accounting, renovation and data processing activities;
|
| |  | aggressively leasing available space through targeted marketing
    augmented, where possible, by our Advisors local asset and
    property management offices;                   
|
| |  | improving rental income and cash flow by aggressively marketing
    rentable space and raising rents when feasible;                                                                
|
| |  | emphasizing regular maintenance and periodic renovation to meet
    the needs of tenants and to maximize returns; and                                                              
|
| |  | refinancing properties when favorable financing terms are
    available to increase the cash flow.                                                                                 

4



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FINANCING POLICIES


debt-to debt-to


TAX STATUS






DISTRIBUTION POLICY




COMPETITION




5



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GOVERNMENT REGULATIONS




Costs of Compliance with the Americans with Disabilities
Act.


Costs of Government Environmental Regulation and Private
Litigation.


Use of Hazardous Substances by Some of Our Tenants.


Other Federal, State and Local Regulations.


6



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##### Table of Contents





SIGNIFICANT TENANTS








| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | General Services Administration (EPA) at Hawthorne Plaza,
    at 7.7%;                     
|
| |  | Federal Deposit Insurance Corp. at Pacific Place, at 5.4%;                                 
|
| |  | City of San Diego at 600 B St. San Diego, at 4.0%;                                         
|
| |  | Jacobs Engineering at One Financial Plaza, at 3.3%;                                        
|
| |  | General Services Administration (IRS) at North Pointe Corporate
    Center, at 2.7%;       
|
| |  | General Services Administration at Public Ledger Building, at
    2.7%;                    
|
| |  | Radian International at AmberOaks Corporate Center, at 2.4%;                               
|
| |  | American Honda Finance Corporation at Madrona, at 2.4%;                                    
|
| |  | General Services Administration (U.S. Bankruptcy Court) at
    824 Market St., at 2.1%; and
|
| |  | Stifel, Nicolaus and Company at One Financial, at 1.8%.                                    





EMPLOYEES




FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS




7



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|         |             
|-------- | ------------
|Item 1A. | Risk Factors

RISKS RELATED TO OUR LIQUIDATION




| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to find buyers for our assets at our
    expected sales prices, our liquidating distributions may be
    delayed or reduced.





| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Decreases in property values may reduce the amount that we
    receive upon a sale of our assets.





| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | adverse changes in economic conditions;                                                                                      
|
| |  | the financial performance of our tenants, and the ability of our
    tenants to satisfy their obligations under their leases;
|
| |  | potential major repairs which are not presently contemplated;                                                                
|
| |  | terminations and renewals of leases by our tenants;                                                                          
|
| |  | changes in interest rates and the availability of financing;                                                                 
|
| |  | competition; and                                                                                                             
|
| |  | changes in real estate tax rates and other operating expenses.                                                               





| |                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to maintain the occupancy rates of
    currently leased space and lease currently available space, if
    tenants default under their leases or other obligations to us
    during the liquidation process or if our cash flow during the
    liquidation is otherwise less than we expect, our liquidating
    distributions may be delayed or reduced.



8



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| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | If our liquidation costs or unpaid liabilities are greater
    than we expect, our liquidating distributions may be delayed or
    reduced.





| |                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If any of the parties to our future sale agreements
    default thereunder, or if these sales do not otherwise close,
    our liquidating distributions may be delayed or reduced.





| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pursuing our plan of liquidation may cause us to fail to
    qualify as a REIT, which would dramatically lower the amount of
    our liquidating distributions.



9



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| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | not be allowed a deduction for dividends paid to stockholders in
    computing our taxable income;                                                
|
| |  | be subject to federal income tax, including any applicable
    alternative minimum tax, on our taxable income at regular
    corporate rates;     
|
| |  | be subject to increased state and local taxes; and                                                                                                
|
| |  | be disqualified from treatment as a REIT for the taxable year in
    which we lose our qualification and for the four following
    taxable years.





| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pursuing our plan of liquidation may cause us to be
    subject to federal income tax, which would reduce the amount of
    our liquidating distributions.





| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The sale of our assets may cause us to be subject to a
    100% excise tax on prohibited transactions, which
    would reduce the amount of our liquidating distributions.





| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | The pending SEC investigation of our Advisor could result
    in lawsuits or other actions against us or our
    affiliates.

In the
matter of Triple Net Properties, LLC.


10



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| |                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to retain our Advisor, our executives and
    sufficient staff members to complete our plan of liquidation,
    our liquidating distributions might be delayed or
    reduced.

day-to month-to






| |                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our stockholders may not receive any profits resulting
    from the sale of one or more of our properties, or receive such
    profits in a timely manner, because we may provide financing to
    the purchaser of such property.



11



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| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Our entity value may be adversely affected by our adoption
    of our plan of liquidation.

winding-up




| |                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There can be no assurance that our plan of liquidation
    will result in greater returns to our stockholders on their
    investment within a reasonable period of time than our
    stockholders would receive through other alternatives reasonably
    available to us at this time.





| |                                                                       
| | ----------------------------------------------------------------------
| | Our board of directors may amend our approved plan of
    liquidation.





| |                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our board of directors will have the authority to sell our
    assets under terms less favorable that those assumed for the
    purpose of estimating our net liquidation value range.





| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | Approval of our plan of liquidation may lead to
    stockholder litigation which could result in substantial costs
    and distract our management.



12



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| |                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our officers and directors and our Advisor have conflicts
    of interest that may influence their implementation of our plan
    of liquidation and may cause them to manage our liquidation in a
    manner not solely in the best interests of our
    stockholders.



















13



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| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | Distributing interests in a liquidating trust may cause
    our stockholders to recognize gain prior to the receipt of
    cash.

24-month 24-month 24-month


14



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| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | Our adoption of our plan of liquidation caused our
    accounting basis to change, which could require us to write-down
    our assets.









| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Stockholders could be liable to the extent of liquidating
    distributions received if contingent reserves are insufficient
    to satisfy our liabilities.







| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | We may have underestimated the amount of prepayment fees
    or defeasance charges on our mortgages.



15



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| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We expect to incur increasingly significant costs in
    connection with Sarbanes-Oxley compliance and we may become
    subject to liability for any failure to comply.





RISKS OF OUR BUSINESS




| |                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Erroneous disclosures in the prior performance tables in
    our public offerings could result in lawsuits or other actions
    against us which could have a material adverse effect upon our
    business and results of operations.





| |                                                         
| | --------------------------------------------------------
| | Distributions by us may include a return of
    capital.





| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Due to the risks involved in the ownership of real estate,
    there is no guarantee of any return on our stockholders
    investments and our stockholders may lose some or all of their
    investment.



16



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| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | changes in the general economic climate;                                                                        
|
| |  | changes in local conditions such as an oversupply of space or
    reduction in demand for real estate;          
|
| |  | changes in interest rates and the availability of
    financing; and                                            
|
| |  | changes in laws and governmental regulations, including those
    governing real estate usage, zoning and taxes.





| |                                             
| | --------------------------------------------
| | Our properties face significant competition.





| |                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend upon our tenants to pay rent, and their
    inability to pay rent may substantially reduce our revenues and
    cash available for distribution to our stockholders.





| |   |                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | downturns in national, regional or local economic conditions
    where our properties are located, which generally will
    negatively impact the demand for office space and rental rates;                                                                                                                            
|
| |  | changes in local market conditions such as an oversupply of
    office properties, including space available by sublease, or a
    reduction in demand for office properties, making it more
    difficult for us to lease space at attractive rental rates or at
    all;                                             
|
| |  | competition from other available office properties, which could
    cause us to lose current or prospective tenants or cause us to
    reduce rental rates;                                                                                                                                                            
|
| |  | the ability to pay for adequate maintenance, insurance, utility,
    security and other operating costs, including real estate taxes
    and debt service payments, that are not necessarily reduced when
    circumstances such as market factors and competition cause a
    reduction in income from a property; and
|
| |  | changes in federal, state or local regulations and controls
    affecting rents, prices of goods, interest rates, fuel and
    energy consumption.                                                                                                                                                                     

17



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| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Lack of diversification and illiquidity of real estate may
    make it difficult for us to sell underperforming properties or
    recover our investment in one or more properties.





| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Lack of geographic diversity may expose us to regional
    economic downturns that could adversely impact our operations or
    our ability to recover our investment in one or more
    properties.





| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | Our properties depend upon the California and Texas
    economies and the demand for office space.



18



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| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Losses for which we either could not or did not obtain
    insurance will adversely affect our earnings and we may be
    unable to comply with insurance requirements contained in
    mortgage or other agreements due to high insurance costs.





| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our co-ownership arrangements with affiliated entities may
    not reflect solely our stockholders best interests and may
    subject these investments to increased risks.





| |   |                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the risk that the co-owner(s) in the investment might become
    bankrupt;                                                                                                                                                                           
|
| |  | the risk that the co-owner(s) may at any time have economic or
    business interests or goals which are inconsistent with our
    business interests or goals;                                                                                      
|
| |  | the risk that the co-owner(s) may be unable to make required
    payments on loans under which we are jointly and severally
    liable; or                                                                                                           
|
| |  | the risk that the co-owner(s) may be in a position to take
    action contrary to our instructions or requests or contrary to
    our policies or objectives, such as selling a property at a time
    when it would have adverse consequences to us.





| |                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There is currently no public market for our common stock.
    Therefore, it will likely be difficult for our stockholders to
    sell their shares and, if our stockholders are able to sell
    their shares they will likely do so at a substantial discount
    from the price they paid.



19



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| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | Our success will be dependent on the performance of our
    Advisor as well as key employees of our Advisor.

day-to




| |                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our use of borrowings to partially fund improvements on
    properties could result in foreclosures and unexpected debt
    service expenses upon refinancing, both of which could have an
    adverse impact on our operations and cash flow, and restrictive
    covenants in our loan documents may restrict our operating or
    acquisition activities.





debt-to debt-to




20



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| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The pending SEC investigation of our Advisor could result
    in defaults or alleged defaults under our loan documents or
    limit our ability to obtain debt financing in the future.





| |                                                                              
| | -----------------------------------------------------------------------------
| | The real estate we purchased may not appreciate or may
    decrease in value.





| |                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because some of our principal tenants are
    U.S. government and state agencies, our properties may have
    a higher risk of terrorist attack than similar properties leased
    to non-governmental tenants.





| |                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on the U.S. government for a significant
    portion of our revenues. Any failure by the U.S. government
    to perform its obligations or renew its leases upon expiration
    may harm our cash flow and ability to pay distributions.





| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | An increase in the operating costs of our
    government-leased properties would harm our cash flow and
    ability to pay distributions.



21



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| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Since our cash flow is not assured, we may not pay
    distributions in the future.





| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Our board of directors may alter our investment policies
    at any time without stockholder approval.





| |                                                                             
| | ----------------------------------------------------------------------------
| | Our Advisors past performance is not a predictor of
    our future results.





| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | Certain provisions of Maryland law and our charter and
    bylaws could hinder, delay or prevent a change in
    control.





| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | The conflicts of interest described below may mean we will
    not be managed solely in the best interests of our
    stockholders.





| |   |                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limit the time and services that our Advisor devotes to us,
    because our Advisor will be providing similar services to T
    REIT, Inc., NNN 2002 Value Fund, LLC and NNN 2003 Value Fund,
    LLC and other real estate programs and properties;

22



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| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | impair our ability to compete for tenants in geographic areas
    where other properties are advised by our Advisor and its
    affiliates; and                 
|
| |  | impair our ability to compete for the acquisition of properties
    with other real estate entities that are also advised by our
    Advisor and its affiliates.





| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The absence of arms length bargaining may mean that
    our agreements are not as favorable to our stockholders as these
    agreements otherwise would have been.





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | If we fail to qualify as a REIT, our stockholders could be
    adversely affected.





| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | that the gross income and investments of a REIT are largely real
    estate related, including mortgages secured by real estate;
|
| |  | that a REIT distributes substantially all its ordinary taxable
    income to its stockholders on a current basis; and           
|
| |  | that the REITs equity ownership is not overly concentrated.                                                                    







| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to meet, or we may need to incur
    borrowings that would otherwise not be incurred to meet, REIT
    minimum distribution requirements.





23



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| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | the amount of the cash available for distribution;                                                                           
|
| |  | the impact of such distribution on other partners of the
    Operating Partnership;                                          
|
| |  | the Operating Partnerships financial condition;                                                                             
|
| |  | the Operating Partnerships capital expenditure
    requirements and reserves therefore; and                                 
|
| |  | the annual distribution requirements contained in the Code
    necessary to qualify and maintain our qualification as a REIT.







| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | We may be harmed by changes in tax laws applicable to
    REITs, or the reduced 15% tax rate on certain corporate
    dividends.










|        |           
|------- | ----------
|Item 2. | Properties



24



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##### Table of Contents





|                                       |       |                   |                    |               |         |  |           |        |  |   |       |     |      |          |       |        |         |  |           |          |  |          |              |         |          |          |      |     |  |  |       |       |  |   |       |       | 
|-------------------------------------- | ----- | ----------------- | ------------------ | ------------- | ------- |  | --------- | ------ |  | - | ----- | --- | ---- | -------- | ----- | ------ | ------- |  | --------- | -------- |  | -------- | ------------ | ------- | -------- | -------- | ---- | --- |  |  | ----- | ----- |  | - | ----- | ----- | 
|                                       |       |                   |                    |               |         |  |           |        |  |   |       |     |      | % Total  |       |        |         |  | Annual    |         
|                                       |       |                   |                    | GLA           |         |  | % of      |        |  | % |       |     | Date |          |       | Annual |         |  | of Annual |          |  | Physical |              |         | Rent per |         
|Property                               |       | Property Location |                    |               | (Sq Ft) |  |           | GLA    |  |   | Owned |     |      | Acquired |       |        | Rent(1) |  |           | Rent     |  |          | Occupancy(2) |         |          | Sq Ft(3) |     
|                                       |       |                   |                    |               |         |  |           |        |  |   |       |     |      |          |       |        |         |  |           |          |  |          |              |         |          |          |     
|5508 West Hwy. 290 Building            |       |                   | Austin, TX         |               |         |  | 74,000    |        |  |   | 1.3   | %   |      |          | 100.0 | %      |         |  | 09/13/02  |          |  | $        | 1,222,000    |         |          |          | 1.3  | %   |  |  | 98.8  | %     |  | $ | 16.61 |      
|Two Corporate Plaza                    |       |                   | Clear Lake, TX     |               |         |  | 161,000   |        |  |   | 2.8   |     |      |          | 100.0 |        |         |  | 11/27/02  |          |  |          | 2,418,000    |         |          |          | 2.6  |     |  |  | 88.5  |       |  |   | 16.93 |      
|Atrium Building                        |       |                   | Lincoln, NE        |               |         |  | 167,000   |        |  |   | 3.0   |     |      |          | 100.0 |        |         |  | 01/31/03  |          |  |          | 1,391,000    |         |          |          | 1.5  |     |  |  | 81.0  |       |  |   | 10.29 |      
|Department of Children & Family Campus |       |                   | Plantation, FL     |               |         |  | 124,000   |        |  |   | 2.2   |     |      |          | 100.0 |        |         |  | 04/25/03  |          |  |          | 1,367,000    |         |          |          | 1.5  |     |  |  | 63.0  |       |  |   | 17.49 |      
|Gemini Plaza                           |       |                   | Houston, TX        |               |         |  | 159,000   |        |  |   | 2.8   |     |      |          | 100.0 |        |         |  | 05/02/03  |          |  |          | 1,467,000    |         |          |          | 1.6  |     |  |  | 100.0 |       |  |   | 9.25  |      
|Bay View Plaza                         |       |                   | Alameda, CA        |               |         |  | 61,000    |        |  |   | 1.1   |     |      |          | 97.7  |        |         |  | 07/31/03  |          |  |          | 1,298,000    |         |          |          | 1.4  |     |  |  | 93.0  |       |  |   | 22.71 |      
|North Pointe Corporate Center          |       |                   | Sacramento, CA     |               |         |  | 133,000   |        |  |   | 2.4   |     |      |          | 100.0 |        |         |  | 08/11/03  |          |  |          | 2,920,000    |         |          |          | 3.2  |     |  |  | 82.6  |       |  |   | 26.56 |      
|824 Market St.                         |       |                   | Wilmington, DE     |               |         |  | 202,000   |        |  |   | 3.6   |     |      |          | 100.0 |        |         |  | 10/10/03  |          |  |          | 3,982,000    |         |          |          | 4.3  |     |  |  | 86.0  |       |  |   | 22.95 |      
|Sutter Square Galleria                 |       |                   | Sacramento, CA     |               |         |  | 61,000    |        |  |   | 1.1   |     |      |          | 100.0 |        |         |  | 10/28/03  |          |  |          | 1,225,000    |         |          |          | 1.3  |     |  |  | 99.2  |       |  |   | 20.20 |      
|One World Trade Center                 |       |                   | Long Beach, CA     |               |         |  | 573,000   |        |  |   | 10.1  |     |      |          | 100.0 |        |         |  | 12/05/03  |          |  |          | 11,167,000   |         |          |          | 12.1 |     |  |  | 86.9  |       |  |   | 22.41 |      
|Centerpoint Corporate Park             |       |                   | Kent, WA           |               |         |  | 436,000   |        |  |   | 7.7   |     |      |          | 100.0 |        |         |  | 12/30/03  |          |  |          | 4,583,000    |         |          |          | 5.0  |     |  |  | 66.8  |       |  |   | 15.75 |      
|AmberOaks Corporate Center             |       |                   | Austin, TX         |               |         |  | 282,000   |        |  |   | 5.0   |     |      |          | 100.0 |        |         |  | 01/20/04  |          |  |          | 3,040,000    |         |          |          | 3.3  |     |  |  | 92.2  |       |  |   | 11.69 |      
|Public Ledger Building                 |       |                   | Philadelphia, PA   |               |         |  | 467,000   |        |  |   | 8.3   |     |      |          | 100.0 |        |         |  | 02/13/04  |          |  |          | 7,000,000    |         |          |          | 7.6  |     |  |  | 81.9  |       |  |   | 18.30 |      
|Madrona Buildings                      |       |                   | Torrance, CA       |               |         |  | 211,000   |        |  |   | 3.7   |     |      |          | 100.0 |        |         |  | 03/31/04  |          |  |          | 4,601,000    |         |          |          | 5.0  |     |  |  | 87.0  |       |  |   | 25.02 |      
|Brunswig Square                        |       |                   | Los Angeles, CA    |               |         |  | 136,000   |        |  |   | 2.4   |     |      |          | 100.0 |        |         |  | 04/05/04  |          |  |          | 2,791,000    |         |          |          | 3.0  |     |  |  | 94.4  |       |  |   | 21.74 |      
|North Belt Corporate Center            |       |                   | Houston, TX        |               |         |  | 157,000   |        |  |   | 2.8   |     |      |          | 100.0 |        |         |  | 04/08/04  |          |  |          | 2,538,000    |         |          |          | 2.7  |     |  |  | 99.1  |       |  |   | 16.36 |      
|Hawthorne Plaza                        |       |                   | San Francisco, CA  |               |         |  | 422,000   |        |  |   | 7.5   |     |      |          | 100.0 |        |         |  | 04/20/04  |          |  |          | 10,762,000   |         |          |          | 11.6 |     |  |  | 88.1  |       |  |   | 28.49 |      
|Pacific Place                          |       |                   | Dallas, TX         |               |         |  | 324,000   |        |  |   | 5.7   |     |      |          | 100.0 |        |         |  | 05/26/04  |          |  |          | 5,059,000    |         |          |          | 5.5  |     |  |  | 99.7  |       |  |   | 15.65 |      
|600 B Street                           |       |                   | San Diego, CA      |               |         |  | 339,000   |        |  |   | 6.0   |     |      |          | 100.0 |        |         |  | 06/14/04  |          |  |          | 7,815,000    |         |          |          | 8.5  |     |  |  | 99.1  |       |  |   | 23.28 |      
|Western Place I & II                   |       |                   | Fort Worth, TX     |               |         |  | 431,000   |        |  |   | 7.6   |     |      |          | 78.5  |        |         |  | 07/23/04  |          |  |          | 6,346,000    |         |          |          | 6.9  |     |  |  | 87.0  |       |  |   | 16.91 |      
|One Financial Plaza                    |       |                   | St. Louis, MO      |               |         |  | 434,000   |        |  |   | 7.7   |     |      |          | 77.6  |        |         |  | 08/06/04  |          |  |          | 6,657,000    |         |          |          | 7.2  |     |  |  | 94.0  |       |  |   | 16.30 |      
|Pax River Office                       |       |                   | Lexington Park, MD |               |         |  | 172,000   |        |  |   | 3.0   |     |      |          | 100.0 |        |         |  | 08/06/04  |          |  |          | 1,495,000    |         |          |          | 1.6  |     |  |  | 65.3  |       |  |   | 13.31 |      
|Opus Plaza at Ken                      |       |                   |                    |               |         |  |           |        |  |   |       |     |      |          |       |        |         |  |           |          |  |          |              |         |          |          |      |     |  |  |       |       |  |   |       |      
|                                       | Caryl |                   |                    | Littleton, CO |         |  |           | 62,000 |  |   |       | 1.1 |      |          |       | 100.0  |         |  |           | 09/12/05 |  |          |              | 739,000 |          |          |      | 0.8 |  |  |       | 100.0 |  |   |       | 11.89 | 
|Eaton Freeway                          |       |                   | Phoenix, AZ        |               |         |  | 62,000    |        |  |   | 1.1   |     |      |          | 100.0 |        |         |  | 10/21/05  |          |  |          | 530,000      |         |          |          | 0.6  |     |  |  | 100.0 |       |  |   | 8.52  |      
|                                       |       |                   |                    |               |         |  |           |        |  |   |       |     |      |          |       |        |         |  |           |          |  |          |              |         |          |          |     
|Totals                                 |       |                   |                    |               |         |  | 5,650,000 |        |  |   |       |     |      |          |       |        |         |  |           |          |  | $        | 92,413,000   |         |          |          |      |     |  |  | 87.4  | %     |  | $ | 18.71 |      
|                                       |       |                   |                    |               |         |  |           |        |  |   |       |     |      |          |       |        |         |  |           |          |  |          |              |         |          |          |     






|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(1) | Annualized rental income is based on contractual base rent from
    leases in effect as of December 31, 2005.
|   
|(2) | As of December 31, 2005, approximately 87.4% of the total
    GLA in our consolidated properties was leased. 

25



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|    |                                                                          
|--- | -------------------------------------------------------------------------
|(3) | Average annual rent per occupied square foot as of
    December 31, 2005.





| |   |                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we believe all of our properties are adequately covered by
    insurance and are suitable for their intended purposes;                                                                                                                                                                                                                                                           
|
| |  | we have no plans for any material renovations, improvements or
    development of our properties, except in accordance with planned
    budgets;                                                                                                                                                                                                                                 
|
| |  | our properties are located in markets where we are subject to
    competition in attracting new tenants and retaining current
    tenants; and                                                                                                                                                                                                                                   
|
| |  | prior to the adoption of our plan of liquidation, depreciation
    was provided on a straight-line basis over the estimated useful
    lives of the buildings, ranging primarily from 15 to
    39 years and over the shorter of the lease term or useful
    lives of the tenant improvements. Properties cease to be
    depreciated under the liquidation basis of accounting.

G REIT, Inc.


The following is a summary of our organizational structure
and the properties we own and hold interests in as of
December 31, 2005:





26



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Congress Center Ownership







Bay View Plaza Ownership







27



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Western Place I & II Ownership







28



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##### Table of Contents



One Financial Plaza Ownership







Lease Expiration Table




|                        |       |           |    |           |          |  |         |                  |             |            |          |             |   |                |            |            |  |  |      |      |  
|----------------------- | ----- | --------- | -- | --------- | -------- |  | ------- | ---------------- | ----------- | ---------- | -------- | ----------- | - | -------------- | ---------- | ---------- |  |  | ---- | ---- | -
|                        |       |           |    |           |          |  |         |                  |             | % of Total |         
|                        |       |           |    | Total Sq. |          |  |         |                  | Annual Rent |            |          | Annual Rent |  
|                        |       | Number    |    |           | Ft. of   |  |         | % of Leased Area |             |            | Under    |             |   | Represented by |           
|                        |       | of Leases |    |           | Expiring |  |         | Represented by   |             |            | Expiring |             |   | Expiring       |           
|Year Ending December 31 |       | Expiring  |    |           | Leases   |  |         | Expiring Leases  |             |            | Leases   |             |   | Leases(1)      |           
|                        |       |           |    |           |          |  |         |                  |             |            |          |             |   |                |           
|2006                    |       |           | 92 |           |          |  | 441,000 |                  |             |            | 9.4      | %           |   | $              | 8,133,000  |            |  |  | 8.8  | %   
|2007                    |       |           | 91 |           |          |  | 965,000 |                  |             |            | 20.7     |             |   |                | 17,595,000 |            |  |  | 19.0 |     
|2008                    |       |           | 78 |           |          |  | 567,000 |                  |             |            | 12.1     |             |   |                | 11,149,000 |            |  |  | 12.1 |     
|2009                    |       |           | 80 |           |          |  | 616,000 |                  |             |            | 13.2     |             |   |                | 14,077,000 |            |  |  | 15.2 |     
|2010                    |       |           | 65 |           |          |  | 429,000 |                  |             |            | 9.2      |             |   |                | 7,944,000  |            |  |  | 8.6  |     
|2011                    |       |           | 33 |           |          |  | 621,000 |                  |             |            | 13.3     |             |   |                | 8,869,000  |            |  |  | 9.6  |     
|2012                    |       |           | 33 |           |          |  | 479,000 |                  |             |            | 10.3     |             |   |                | 9,525,000  |            |  |  | 10.3 |     
|2013                    |       |           | 18 |           |          |  | 331,000 |                  |             |            | 7.1      |             |   |                | 7,847,000  |            |  |  | 8.5  |     
|2014                    |       |           | 7  |           |          |  | 65,000  |                  |             |            | 1.4      |             |   |                | 824,000    |            |  |  | 0.9  |     
|2015                    |       |           | 8  |           |          |  | 140,000 |                  |             |            | 3.0      |             |   |                | 3,150,000  |            |  |  | 3.4  |     
|Thereafter              |       |           | 1  |           |          |  | 14,000  |                  |             |            | 0.3      |             |   |                | 277,000    |            |  |  | 0.3  |     
|                        |       |           |    |           |          |  |         |                  |             |            |          |             |   |                |           
|                        | Total |           |    | 506       |          |  |         | 4,668,000        |             |            |          | 100         | % |                | $          | 89,390,000 |  |  |      | 96.7 | %
|                        |       |           |    |           |          |  |         |                  |             |            |          |             |   |                |           

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|    |                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The annual rent percentage is based on the total annual base
    rent as of December 31, 2005, which, in addition to leases
    with scheduled expirations as included in this table, include
    certain tenants that have leases extended on a monthly basis.

Concentration of Tenants




|                               |  |          |                   |             |      |      |            |        |  |          |             |   |       |            |           |         |         |  |            |  |  |  |            | 
|------------------------------ |  | -------- | ----------------- | ----------- | ---- | ---- | ---------- | ------ |  | -------- | ----------- | - | ----- | ---------- | --------- | ------- | ------- |  | ---------- |  |  |  | ---------- | 
|                               |  |          |                   |             |      | % of |            |        |  |          |             |   |      
|                               |  |          |                   | Current     |      |      | Total      |        |  |          |             |   |       |           
|                               |  |          |                   | Annual Base |      |      | Rental     |        |  | Rentable |             |   | Lease |            |           | Renewal |        
|Lessee                         |  | Property |                   |             | Rent |      |            | Income |  |          | Square Feet |   |       | Expiration |           |         | Options | 
|                               |  |          |                   |             |      |      |            |        |  |          |             |   |       |            |           |         |         | 
|GSA (EPA)(*)                   |  |          | Hawthorne Plaza   |             |      | $    | 7,123,000  |        |  |          | 7.7         | % |       |            | 259,000   |         |         |  | 9/30/2009  |  |  |  | None       | 
|FDIC(*)                        |  |          | Pacific Place     |             |      |      | 5,019,000  |        |  |          | 5.4         |   |       |            | 321,000   |         |         |  | 11/30/2007 |  |  |  | None       | 
|City of San Diego(*)           |  |          | 600 B St.         |             |      |      | 3,660,000  |        |  |          | 4.0         |   |       |            | 168,000   |         |         |  | 5/31/2013  |  |  |  | Two 5 year | 
|Jacobs Engineering             |  |          | One Financial     |             |      |      | 3,031,000  |        |  |          | 3.3         |   |       |            | 178,000   |         |         |  | 9/30/2012  |  |  |  | One 5 year | 
|GSA (IRS)(*)                   |  |          | North Pointe      |             |      |      | 2,510,000  |        |  |          | 2.7         |   |       |            | 92,000    |         |         |  | 8/17/2007  |  |  |  | None       | 
|GSA(*)                         |  |          | Public Ledger     |             |      |      | 2,462,000  |        |  |          | 2.7         |   |       |            | 131,000   |         |         |  | 4/23/2008  |  |  |  | None       | 
|Radian International           |  |          | AmberOaks         |             |      |      | 2,262,000  |        |  |          | 2.4         |   |       |            | 174,000   |         |         |  | 7/30/2011  |  |  |  | Two 5 year | 
|American Honda Finance Corp.   |  |          | Madrona           |             |      |      | 2,235,000  |        |  |          | 2.4         |   |       |            | 87,000    |         |         |  | 3/31/2015  |  |  |  | One 5 year | 
|GSA (U.S. Bankruptcy Court)(*) |  |          | 824 Market Street |             |      |      | 1,910,000  |        |  |          | 2.1         |   |       |            | 69,000    |         |         |  | 08/05/2013 |  |  |  | None       | 
|Stifel, Nicolaus and Company   |  |          | One Financial     |             |      |      | 1,643,000  |        |  |          | 1.8         |   |       |            | 97,000    |         |         |  | 04/30/2011 |  |  |  | Two 5 year | 
|                               |  |          |                   |             |      |      |            |        |  |          |             |   |       |            |           |         |         | 
|                               |  |          |                   |             |      | $    | 31,855,000 |        |  |          | 34.5        | % |       |            | 1,576,000 |         |         |  |            |  |  |  |            | 
|                               |  |          |                   |             |      |      |            |        |  |          |             |   |       |            |           |         |         | 






Geographic Diversification; Concentration Table




|             |       |            |   |           |             |  |             |               |  |             |             |       |      |             |            |            |  |  |      |       |  
|------------ | ----- | ---------- | - | --------- | ----------- |  | ----------- | ------------- |  | ----------- | ----------- | ----- | ---- | ----------- | ---------- | ---------- |  |  | ---- | ----- | -
|             |       |            |   |           |             |  |             |               |  | Approximate |            
|             |       |            |   | Aggregate |             |  | Approximate |               |  | Current     |             |       | % of |            
|             |       | No. of     |   |           | Rentable    |  |             | % of Rentable |  |             | Annual Base |       |      | Aggregate   |           
|State        |       | Properties |   |           | Square Feet |  |             | Square Feet   |  |             | Rent        |       |      | Annual Rent |           
|             |       |            |   |           |             |  |             |               |  |             |             |       |      |             |           
|Arizona      |       |            | 1 |           |             |  | 62,000      |               |  |             | 1.1         | %     |      | $           | 530,000    |            |  |  | 0.6  | %    
|California   |       |            | 8 |           |             |  | 1,936,000   |               |  |             | 34.3        |       |      |             | 42,579,000 |            |  |  | 46.1 |      
|Colorado     |       |            | 1 |           |             |  | 62,000      |               |  |             | 1.1         |       |      |             | 739,000    |            |  |  | 0.8  |      
|Delaware     |       |            | 1 |           |             |  | 202,000     |               |  |             | 3.6         |       |      |             | 3,982,000  |            |  |  | 4.3  |      
|Florida      |       |            | 1 |           |             |  | 124,000     |               |  |             | 2.2         |       |      |             | 1,367,000  |            |  |  | 1.5  |      
|Maryland     |       |            | 1 |           |             |  | 172,000     |               |  |             | 3.0         |       |      |             | 1,495,000  |            |  |  | 1.6  |      
|Missouri     |       |            | 1 |           |             |  | 434,000     |               |  |             | 7.7         |       |      |             | 6,657,000  |            |  |  | 7.1  |      
|Nebraska     |       |            | 1 |           |             |  | 167,000     |               |  |             | 3.0         |       |      |             | 1,391,000  |            |  |  | 1.5  |      
|Pennsylvania |       |            | 1 |           |             |  | 467,000     |               |  |             | 8.3         |       |      |             | 7,000,000  |            |  |  | 7.6  |      
|Texas        |       |            | 7 |           |             |  | 1,588,000   |               |  |             | 28.0        |       |      |             | 22,090,000 |            |  |  | 23.9 |      
|Washington   |       |            | 1 |           |             |  | 436,000     |               |  |             | 7.7         |       |      |             | 4,583,000  |            |  |  | 5.0  |      
|             |       |            |   |           |             |  |             |               |  |             |             |       |      |             |           
|             | Total |            |   | 24        |             |  |             | 5,650,000     |  |             |             | 100.0 | %    |             | $          | 92,413,000 |  |  |      | 100.0 | %
|             |       |            |   |           |             |  |             |               |  |             |             |       |      |             |           

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Indebtedness









|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

SEC Investigation


In the matter of Triple Net Properties, LLC.


Accounting for
Contingencies.


Prior Performance Tables




8-K


Litigation




31



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|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities

Market Information








Stockholders




Distributions








32



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Equity Compensation Plan Information




|                                                           |  |                      |         |  |                      |   |            |                      |  |  |           | 
|---------------------------------------------------------- |  | -------------------- | ------- |  | -------------------- | - | ---------- | -------------------- |  |  | --------- | 
|                                                           |  | Number of Securities |         |  |                      |   |           
|                                                           |  | to be Issued Upon    |         |  | Weighted-Average     |   |            |                     
|                                                           |  | Exercise of          |         |  | Exercise Price of    |   |            | Number of Securities | 
|                                                           |  | Outstanding Options, |         |  | Outstanding Options, |   |            | Remaining Available  | 
|Plan Category                                              |  | Warrants and Rights  |         |  | Warrants and Rights  |   |            | for Future Issuance  | 
|                                                           |  |                      |         |  |                      |   |            |                      | 
|Equity compensation plans approved by security holders(1)  |  |                      | 475,000 |  |                      | $ | 9.00-$9.05 |                      |  |  | 6,025,000 | 
|Equity compensation plans not approved by security holders |  |                      |        |  |                      |   |            |                      |  |  |          | 
|                                                           |  |                      |         |  |                      |   |            |                      | 
|Total                                                      |  |                      | 475,000 |  |                      |   |            |                      |  |  | 6,025,000 | 
|                                                           |  |                      |         |  |                      |   |            |                      | 






|    |                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Each of our independent director and officer/employee stock
    option plans was approved at our Annual Meeting of Stockholders
    held on June 28, 2003. Our 2004 incentive award plan was
    approved at our Annual Meeting of Stockholders held on
    June 29, 2004.








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



SELECTED FINANCIAL DATA


G REIT, INC.


(a Maryland corporation)


|                                                           |  |                    |             | 
|---------------------------------------------------------- |  | ------------------ | ----------- | 
|                                                           |  | Liquidation Basis  |            
|                                                           |  | As of December 31, |            
|Selected Financial Data(1)                                 |  | 2005               |            
|                                                           |  |                    |            
|STATEMENT OF NET ASSETS:                                   |  |                    |             | 
|Total assets                                               |  | $                  | 887,499,000 | 
|Mortgage loans payable, including properties held for sale |  |                    | 350,402,000 | 
|Credit facility and other debt                             |  |                    | 60,964,000  | 
|Net assets in liquidation                                  |  |                    | 453,459,000 | 
|Net asset value per share                                  |  | $                  | 10.34       | 

33



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##### Table of Contents



|                                                           |  |                     |             |  |      |   |             |      |  |   |            |  |  |   |     | 
|---------------------------------------------------------- |  | ------------------- | ----------- |  | ---- | - | ----------- | ---- |  | - | ---------- |  |  | - | --- | 
|                                                           |  | Going Concern Basis |            
|                                                           |  | As of December 31,  |            
|                                                           |  |                     |            
|Selected Financial Data(1)                                 |  | 2004                |             |  | 2003 |   |             | 2002 |  |   | 2001       | 
|                                                           |  |                     |             |  |      |   |             |      |  |   |            | 
|BALANCE SHEET DATA:                                        |  |                     |             |  |      |   |             |      |  |   |            |  |  |   |     | 
|Total assets                                               |  | $                   | 915,050,000 |  |      | $ | 345,399,000 |      |  | $ | 36,461,000 |  |  | $ | 100 | 
|Mortgage loans payable, including properties held for sale |  |                     | 442,275,000 |  |      |   | 97,257,000  |      |  |   | 16,860,000 |  |  |   |    | 
|Credit facility and other debt                             |  |                     | 58,369,000  |  |      |   | 81,534,000  |      |  |   |           |  |  |   |    | 
|Stockholders equity                                       |  |                     | 357,025,000 |  |      |   | 150,522,000 |      |  |   | 18,350,000 |  |  |   |    | 

|                                                              |                   |                          |              |            |                   |   |              |            |  |   |              |           |  |                   |             |         |  |   |     |    | 
|------------------------------------------------------------- | ----------------- | ------------------------ | ------------ | ---------- | ----------------- | - | ------------ | ---------- |  | - | ------------ | --------- |  | ----------------- | ----------- | ------- |  | - | --- | -- | 
|                                                              |                   | Going Concern Basis      |              |            | Period from       |  
|                                                              |                   | Years Ended December 31, |              |            | December 18, 2001 |  
|                                                              |                   |                          |              |            | through           |  
|                                                              |                   | 2005                     |              |            | 2004              |   |              | 2003       |  |   | 2002         |           |  | December 31, 2001 |            
|                                                              |                   |                          |              |            |                   |   |              |            |  |   |              |           |  |                   |            
|OPERATING DATA (BY YEAR):                                     |                   |                          |              |            |                   |   |              |            |  |   |              |           |  |                   |             |         |  |   |     |   
|General and administrative expense                            |                   | $                        | 4,006,000    |            |                   | $ | 2,419,000    |            |  | $ | 1,287,000    |           |  | $                 | 142,000     |         |  | $ |    |   
|Interest (including amortization of deferred financing costs) |                   |                          | 2,054,000    |            |                   |   | 1,243,000    |            |  |   | 293,000      |           |  |                   | 15,000      |         |  |   |    |   
|Income from discontinued operations, including gain on sale   |                   |                          | 6,335,000    |            |                   |   | 1,225,000    |            |  |   | 1,337,000    |           |  |                   | 166,000     |         |  |   |    |   
|Net income (loss)                                             |                   |                          | 2,629,000    |            |                   |   | (1,876,000   | )          |  |   | 78,000       |           |  |                   | 26,000      |         |  |   |    |   
|Income (loss) per common share, basic and diluted(2):         |                   |                          |              |            |                   |   |              |            |  |   |              |           |  |                   |             |         |  |   |     |   
|Loss from continuing operations                               |                   |                          | (0.08        | )          |                   |   | (0.08        | )          |  |   | (0.15        | )         |  |                   | (0.35       | )       |  |   |     |   
|Income (loss) from discontinued operations                    |                   |                          | 0.14         |            |                   |   | 0.03         |            |  |   | 0.16         |           |  |                   | 0.41        |         |  |   |     |   
|Net income (loss)                                             |                   |                          | 0.06         |            |                   |   | (0.05        | )          |  |   | 0.01         |           |  |                   | 0.06        |         |  |   |    |   
|Distributions declared                                        |                   |                          | 32,888,000   |            |                   |   | 28,042,000   |            |  |   | 6,211,000    |           |  |                   | 280,000     |         |  |   |    |   
|Distributions per common share(2)                             |                   | $                        | 0.75         |            |                   | $ | 0.75         |            |  | $ | 0.74         |           |  | $                 | 0.69        |         |  |   |    |   
|Weighted-average number of shares outstanding(2):             |                   |                          |              |            |                   |   |              |            |  |   |              |           |  |                   |             |         |  |   |     |   
|                                                              | Basic and diluted |                          |              | 43,867,000 |                   |   |              | 37,336,000 |  |   |              | 8,243,000 |  |                   |             | 405,000 |  |   |     | 10 | 
|OTHER DATA:                                                   |                   |                          |              |            |                   |   |              |            |  |   |              |           |  |                   |             |         |  |   |     |   
|Cash flows provided by (used in) operating activities         |                   | $                        | 19,697,000   |            |                   | $ | 39,905,000   |            |  | $ | 7,878,000    |           |  | $                 | (609,000    | )       |  |   |    |   
|Cash flows provided by (used in) investing activities         |                   |                          | 80,432,000   |            |                   |   | (563,218,000 | )          |  |   | (291,418,000 | )         |  |                   | (26,101,000 | )       |  |   |    |   
|Cash flows (used in) provided by financing activities         |                   |                          | (110,351,000 | )          |                   |   | 525,347,000  |            |  |   | 290,694,000  |           |  |                   | 35,089,000  |         |  |   | 100 |   
|Funds from operations(2)(3)                                   |                   | $                        | 30,661,000   |            |                   | $ | 33,818,000   |            |  | $ | 5,019,000    |           |  | $                 | 128,000     |         |  |   |    |   
|Number of consolidated properties                             |                   |                          | 24           |            |                   |   | 23           |            |  |   | 11           |           |  |                   | 2           |         |  |   |    |   
|Rentable square feet                                          |                   |                          | 5,650,000    |            |                   |   | 5,972,000    |            |  |   | 2,146,000    |           |  |                   | 235,000     |         |  |   |    |   
|Occupancy of portfolio                                        |                   |                          | 87           | %          |                   |   | 88           | %          |  |   | 88           | %         |  |                   | 96          | %       |  |   |    |   






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The above selected financial data should be read in conjunction
    with the historical consolidated financial statements and
    related notes appearing elsewhere in this report.                                                                                                                                                                                                                                              
|   
|(2) | Net income (loss) and distributions per share are based upon the
    weighted-average number of shares of common stock outstanding.
    Distributions by us of the current and accumulated earnings and
    profits for federal income tax purposes are taxable to our
    stockholders as ordinary income. Distributions in excess of
    these earnings and profits generally are treated as a
    non-taxable reduction of our

34



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | stockholders basis in the shares of common stock to the
    extent thereof (a return of capital for tax purposes), and
    thereafter as taxable gain. These distributions in excess of
    earnings and profits will have the effect of deferring taxation
    of the distributions until the sale of the stockholders
    shares. For the years ended December 31, 2005, 2004, 2003
    and 2002, 53.54%, 51.64%, 53.61% and 34.71%, respectively,
    represented a return of capital for tax purposes. In order to
    maintain our qualification as a REIT, we must make annual
    distributions to our stockholders of at least 90% of our REIT
    taxable income. REIT taxable income does not include net capital
    gains. Under certain circumstances, we may be required to make
    distributions in excess of cash available for distribution in
    order to meet the REIT distribution requirements. Distributions
    are determined by our board of directors and are dependent on a
    number of factors, including the amount of funds available for
    distribution, our financial condition, any decision by our board
    of directors to reinvest funds rather than to distribute funds,
    our capital expenditures, the annual distribution required to
    maintain REIT status under the Code and other factors our board
    of directors may deem relevant.
|   
|(3) | Prior to the adoption of our plan of liquidation, one of our
    objectives was to provide cash distributions to our stockholders
    from cash generated from operations. We consider Funds From
    Operations, or FFO, to be an appropriate supplemental measure of
    a REITs operating performance as it is based on a net
    income analysis of property portfolio performance that excludes
    non-cash items such as depreciation. We compute FFO in
    accordance with the White Paper on FFO approved by the Board of
    Governors of the National Association of Real Estate Investment
    Trusts, or NAREIT, as revised in February 2004. The White Paper
    defines FFO as net income or loss computed in accordance with
    GAAP excluding extraordinary items, as defined by GAAP, and
    gains and losses from sales of depreciable operating property,
    but including real estate related depreciation and amortization
    (excluding amortization of deferred financing costs and
    depreciation of non-real estate assets), and after adjustment
    for unconsolidated partnerships and joint ventures. Other REITs
    may use different methodologies for calculating FFO and,
    accordingly, our FFO calculations may not be comparable to other
    REITs.                                                                                            



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because FFO excludes depreciation and amortization, gains and
    losses from property dispositions and extraordinary items, it
    provides a performance measure that, when compared year over
    year, reflects the impact to operations from trends in occupancy
    rates, rental rates, operating costs, development activities,
    general and administrative expenses and interest costs,
    providing a perspective not immediately apparent from net
    income. In addition, we believe FFO provides useful information
    to the investment community about our financial performance when
    compared to other REITs since FFO is generally recognized as the
    industry standard for reporting the operations of REITs.
|
| | However, FFO should not be viewed as an alternative measure of
    our operating performance since it does not reflect either
    depreciation and amortization costs or the level of capital
    expenditures and leasing costs necessary to maintain the
    operating performance of our properties, which are significant
    economic costs and could materially impact our results of
    operations.                                                                                                                                                                                                                                                                                                                                 



| |                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Non-cash adjustments to arrive at FFO consisted of adjustments
    for, depreciation and amortization and net gain (loss) from the
    sale of real estate and a joint venture. For additional
    information, see Funds from Operations, which
    includes a reconciliation of our GAAP net income available to
    our stockholders to FFO for the years ended December 31,
    2005 and 2004.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Forward-Looking Statements




35



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##### Table of Contents





Overview and Background






day-to month-to


36



---



##### Table of Contents



Business Strategy and Plan of Liquidation










Acquisitions in 2005






| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Opus Plaza at Ken Caryl  Littleton,
    Colorado  September 12,
    2005  we own 100%
|
| | Eaton Freeway  Phoenix,
    Arizona  October 21,
    2005  we own 100%               



37



---



##### Table of Contents



Business Combinations


Dispositions in 2005






| |                                                                               
| | ------------------------------------------------------------------------------
| | 525 B Street  San Diego,
    California  August 10,
    2005  we owned 100%
|
| | Park Sahara  Las Vegas,
    Nevada  December 20,
    2005  we owned 4.75%  



Acquisitions in 2004






| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | AmberOaks Corporate Center  Austin,
    Texas  January 20, 2004  we
    own 100%          
|
| | Public Ledger Building  Philadelphia,
    Pennsylvania  February 13,
    2004  we own 100%
|
| | Madrona Buildings  Torrance,
    California  March 31,
    2004  we own 100%              
|
| | Brunswig Square  Los Angeles,
    California  April 5,
    2004  we own 100%              
|
| | North Belt Corporate Center  Houston,
    Texas  April 8, 2004  we
    own 100%           
|
| | Hawthorne Plaza  San Francisco,
    California  April 20,
    2004  we own 100%           
|
| | Pacific Place  Dallas,
    Texas  May 26, 2004  we own
    100%                           
|
| | 525 B Street (Golden Eagle)  San Diego,
    California  June 14,
    2004  we own 100%    
|
| | 600 B Street (Comerica)  San Diego,
    California  June 14,
    2004  we own 100%        
|
| | Western Place
    I & II  Fort Worth,
    Texas  July 23, 2004  we
    own 78.50%         
|
| | Pax River Office Park  Lexington Park,
    Maryland  August 6,
    2004  we own 100%      

38



---



##### Table of Contents





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | One Financial Plaza  St. Louis,
    Missouri  August 6,
    2004  we own 77.63%



Acquisitions in 2003






| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Atrium Building  Lincoln,
    Nebraska  January 31,
    2003  we own 100%                               
|
| | Department of Children and Families
    Campus  Plantation,
    Florida  April 25, 2003  we
    own 100%
|
| | Gemini Plaza  Houston,
    Texas  May 2, 2003  we own
    100%                                          
|
| | Bay View Plaza  Alameda,
    California  July 31,
    2003  we own 97.68%                               
|
| | North Pointe Corporate Center  Sacramento,
    California  August 11,
    2003  we own 100%             
|
| | 824 Market Street  Wilmington,
    Delaware  October 10,
    2003  we own 100%                          
|
| | Sutter Square  Sacramento,
    California  October 28,
    2003  we own 100%                            
|
| | One World Trade Center  Long Beach,
    California  December 5,
    2003  we own 100%                   
|
| | Centerpoint Corporate Center  Kent,
    Washington  December 30,
    2003  we own 100%                  



39



---



##### Table of Contents





Critical Accounting Policies




| |                 
| | ----------------
| | Use of Estimates





| |                                
| | -------------------------------
| | Liquidation Basis of Accounting

-in




| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Liability for Estimated Costs in Excess of Estimated
    Receipts During Liquidation



40



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##### Table of Contents





|                                                                                           |                                                                                     |              |             |             |  
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------- | ------------ | ----------- | ----------- | -
|                                                                                           |                                                                                     | December 31, |            
|                                                                                           |                                                                                     | 2005         |            
|                                                                                           |                                                                                     |              |            
|Assets:                                                                                    |                                                                                     |              |             |            
|                                                                                           | Estimated net inflows from consolidated and unconsolidated
    operating activities |              | $           | 24,390,000  |  
|Liabilities:                                                                               |                                                                                     |              |             |            
|                                                                                           | Liquidation costs                                                                   |              |             | (4,418,000  | )
|                                                                                           | Distributions                                                                       |              |             | (8,226,000  | )
|                                                                                           | Capital expenditures                                                                |              |             | (13,265,000 | )
|                                                                                           |                                                                                     |              |            
|                                                                                           |                                                                                     |              | (25,909,000 | )          
|                                                                                           |                                                                                     |              |            
|Total liability for estimated costs in excess of estimated
    receipts during liquidation |                                                                                     | $            | (1,519,000  | )          
|                                                                                           |                                                                                     |              |            



| |                          
| | -------------------------
| | Net Assets in Liquidation



|                                                                                     |  |   |             |  
|------------------------------------------------------------------------------------ |  | - | ----------- | -
|Stockholders equity as of December 31,
    2005  going concern basis               |  | $ | 327,078,000 |  
|Increase due to estimated net realizable value of operating
    properties           |  |   | 180,852,000 |  
|Increase due to estimated net realizable value of unconsolidated
    investment      |  |   | 4,895,000   |  
|Decrease due to the write-off of intangible assets and
    liabilities               |  |   | (57,847,000 | )
|Liability for estimated costs in excess of estimated receipts
    during liquidation |  |   | (1,519,000  | )
|                                                                                     |  |   |            
|Adjustment to reflect the change to the liquidation basis of
    accounting          |  |   | 126,381,000 |  
|                                                                                     |  |   |            
|Estimated value of net assets in liquidation as of
    December 31, 2005             |  | $ | 453,459,000 |  
|                                                                                     |  |   |            





| |                         
| | ------------------------
| | Properties Held for Sale

Accounting for the Impairment or
Disposal of Long Lived Assets




41



---



##### Table of Contents







| |                                                            
| | -----------------------------------------------------------
| | Revenue Recognition and Allowance for Doubtful
    Accounts





| |           
| | ----------
| | Impairment





| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | significant negative industry or economic trend;                                                    
|
| |  | a significant underperformance relative to historical or
    projected future operating results; and
|
| |  | a significant change in the manner in which the asset is used.                                      







| |                          
| | -------------------------
| | Purchase Price Allocation

Business Combinations


42



---



##### Table of Contents



lease-up










| |                
| | ---------------
| | Deferred Assets





| |                        
| | -----------------------
| | Qualification as a REIT







| |                                          
| | -----------------------------------------
| | Recently Issued Accounting Pronouncements

Accounting Changes and Error
Corrections  A Replacement of APB Opinion No. 20
and SFAS No. 3.


43



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##### Table of Contents





04-05, Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights 04-05). 04-05 04-05


Accounting for
Certain Investments in Debt and Equity Securities.


Factors Which May Influence Future Changes in Net Assets in
Liquidation




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





| |                            
| | ---------------------------
| | Scheduled Lease Expirations







| |                   
| | ------------------
| | Sarbanes-Oxley Act



44



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##### Table of Contents





Results of Operations






| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Comparison of the year ended December 31, 2005 to the
    year ended December 31, 2004

|                                                               |                                                                                         |                         |            |            |      |   |            |            |   |   |                |           |   |  |         |         |   
|-------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------- | ---------- | ---------- | ---- | - | ---------- | ---------- | - | - | -------------- | --------- | - |  | ------- | ------- | --
|                                                               |                                                                                         | Year Ended December 31, |            |            |      |   |           
|                                                               |                                                                                         |                         |            |            |      |   |           
|                                                               |                                                                                         | 2005                    |            |            | 2004 |   |            | Change     |   |   | Percent Change |          
|                                                               |                                                                                         |                         |            |            |      |   |            |            |   |   |                |          
|Expenses:                                                      |                                                                                         |                         |            |            |      |   |            |            |   |   |                |           |   |  |         |        
|                                                               | General and administrative                                                              |                         | $          | 4,006,000  |      |   | $          | 2,419,000  |   |   | $              | 1,587,000 |   |  |         | 65.61   | % 
|                                                               |                                                                                         |                         |            |            |      |   |            |            |   |   |                |          
|Operating loss                                                 |                                                                                         |                         | (4,006,000 | )          |      |   | (2,419,000 | )          |   |   | (1,587,000     | )         |   |  | 65.61   | %      
|Other (expense) income:                                        |                                                                                         |                         |            |            |      |   |            |            |   |   |                |           |   |  |         |        
|                                                               | Interest (including amortization of deferred financing costs)                           |                         |            | (2,054,000 | )    |   |            | (1,243,000 | ) |   |                | (811,000  | ) |  |         | 65.25   | % 
|                                                               | Interest and dividend income                                                            |                         |            | 695,000    |      |   |            | 332,000    |   |   |                | 363,000   |   |  |         | 109.34  | % 
|                                                               | Gain on sale of marketable securities, unconsolidated real
    estate and joint venture |                         |            | 572,000    |      |   |            | 1,231,000  |   |   |                | (659,000  | ) |  |         | (53.53  | )%
|                                                               | Equity in earnings (losses) of unconsolidated real estate                               |                         |            | 1,337,000  |      |   |            | (604,000   | ) |   |                | 1,941,000 |   |  |         | (321.36 | )%
|                                                               | Income taxes                                                                            |                         |            |           |      |   |            | (398,000   | ) |   |                | 398,000   |   |  |         | (100.00 | )%
|                                                               | Other expense, net                                                                      |                         |            | (250,000   | )    |   |            |           |   |   |                | (250,000  | ) |  |         |        |   
|                                                               |                                                                                         |                         |            |            |      |   |            |            |   |   |                |          
|Loss from continuing operations before discontinued operations |                                                                                         |                         | (3,706,000 | )          |      |   | (3,101,000 | )          |   |   | (605,000       | )         |   |  | 19.51   | %      
|Discontinued operations:                                       |                                                                                         |                         |            |            |      |   |            |            |   |   |                |           |   |  |         |        
|Gain on sale of real estate                                    |                                                                                         |                         | 10,550,000 |            |      |   |           |            |   |   | 10,550,000     |           |   |  |        |        
|Income (loss) from discontinued operations                     |                                                                                         |                         | (4,215,000 | )          |      |   | 1,225,000  |            |   |   | (5,440,000     | )         |   |  | (444.08 | )%     
|                                                               |                                                                                         |                         |            |            |      |   |            |            |   |   |                |          
|                                                               |                                                                                         |                         | 6,335,000  |            |      |   | 1,225,000  |            |   |   | 5,110,000      |           |   |  | 417.14  | %      
|                                                               |                                                                                         |                         |            |            |      |   |            |            |   |   |                |          
|Net income (loss)                                              |                                                                                         | $                       | 2,629,000  |            |      | $ | (1,876,000 | )          |   | $ | 4,505,000      |           |   |  | (240.14 | )%     
|                                                               |                                                                                         |                         |            |            |      |   |            |            |   |   |                |          



| |                                    
| | -----------------------------------
| | General and Administrative Expenses





| |                 
| | ----------------
| | Interest Expense



45



---



##### Table of Contents







| |                             
| | ----------------------------
| | Interest and Dividend Income





| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Gain on Sale of Marketable Securities, Unconsolidated Real
    Estate and Joint Venture





| |                                                          
| | ---------------------------------------------------------
| | Equity in Earnings (Losses) of Unconsolidated Real Estate





| |             
| | ------------
| | Income Taxes





| |              
| | -------------
| | Other Expense





| |                                
| | -------------------------------
| | Loss From Continuing Operations



46



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##### Table of Contents





| |                                           
| | ------------------------------------------
| | Income (Loss) from Discontinued Operations





| |                                                          
| | ---------------------------------------------------------
| | Gain on Sale of Real Estate  Discontinued
    operations





| |                  
| | -----------------
| | Net Income (Loss)





| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Comparison of the year ended December 31, 2004 to the
    year ended December 31, 2003



|                                                               |                                                               |                         |            |            |      |   |            |           |   |   |                |           |   |  |           |         |   
|-------------------------------------------------------------- | ------------------------------------------------------------- | ----------------------- | ---------- | ---------- | ---- | - | ---------- | --------- | - | - | -------------- | --------- | - |  | --------- | ------- | --
|                                                               |                                                               | Year Ended December 31, |            |            |      |   |           
|                                                               |                                                               |                         |            |            |      |   |           
|                                                               |                                                               | 2004                    |            |            | 2003 |   |            | Change    |   |   | Percent Change |          
|                                                               |                                                               |                         |            |            |      |   |            |           |   |   |                |          
|Expenses:                                                      |                                                               |                         |            |            |      |   |            |           |   |   |                |           |   |  |           |        
|                                                               | General and administrative                                    |                         | $          | 2,419,000  |      |   | $          | 1,287,000 |   |   | $              | 1,132,000 |   |  |           | 87.96   | % 
|                                                               |                                                               |                         |            |            |      |   |            |           |   |   |                |          
|Operating loss                                                 |                                                               |                         | (2,419,000 | )          |      |   | (1,287,000 | )         |   |   | (1,132,000     | )         |   |  | 87.96     | %      
|Other (expense) income:                                        |                                                               |                         |            |            |      |   |            |           |   |   |                |           |   |  |           |        
|                                                               | Interest (including amortization of deferred financing costs) |                         |            | (1,243,000 | )    |   |            | (293,000  | ) |   |                | (950,000  | ) |  |           | 324.23  | % 
|                                                               | Interest and dividend income                                  |                         |            | 332,000    |      |   |            | 117,000   |   |   |                | 215,000   |   |  |           | 183.76  | % 
|                                                               | Gain on sale of marketable securities and joint venture       |                         |            | 1,231,000  |      |   |            |          |   |   |                | 1,231,000 |   |  |           |        |   
|                                                               | Equity in earnings (losses) of unconsolidated real estate     |                         |            | (604,000   | )    |   |            | 204,000   |   |   |                | (808,000  | ) |  |           | (396.08 | )%
|                                                               | Income taxes                                                  |                         |            | (398,000   | )    |   |            |          |   |   |                | (398,000  | ) |  |           |        |   
|                                                               |                                                               |                         |            |            |      |   |            |           |   |   |                |          
|Loss from continuing operations before discontinued operations |                                                               |                         | (3,101,000 | )          |      |   | (1,259,000 | )         |   |   | (1,842,000     | )         |   |  | 146.31    | %      
|Discontinued operations:                                       |                                                               |                         |            |            |      |   |            |           |   |   |                |           |   |  |           |        
|Income from discontinued operations                            |                                                               |                         | 1,225,000  |            |      |   | 1,337,000  |           |   |   | (112,000       | )         |   |  | (8.38     | )%     
|                                                               |                                                               |                         |            |            |      |   |            |           |   |   |                |          
|                                                               |                                                               |                         | 1,225,000  |            |      |   | 1,337,000  |           |   |   | (112,000       | )         |   |  | (8.38     | )%     
|                                                               |                                                               |                         |            |            |      |   |            |           |   |   |                |          
|Net income (loss)                                              |                                                               | $                       | (1,876,000 | )          |      | $ | 78,000     |           |   | $ | (1,954,000     | )         |   |  | (2,505.13 | )%     
|                                                               |                                                               |                         |            |            |      |   |            |           |   |   |                |          



| |                                    
| | -----------------------------------
| | General and Administrative Expenses



47



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##### Table of Contents







| |                 
| | ----------------
| | Interest Expense





| |                             
| | ----------------------------
| | Interest and Dividend Income





| |                                                        
| | -------------------------------------------------------
| | Gain on Sale of Marketable Securities and Joint Venture





| |                                                          
| | ---------------------------------------------------------
| | Equity in Earnings (Losses) of Unconsolidated Real Estate





| |             
| | ------------
| | Income Taxes





| |                                
| | -------------------------------
| | Loss From Continuing Operations





| |                                    
| | -----------------------------------
| | Income from Discontinued Operations



48



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##### Table of Contents





| |                  
| | -----------------
| | Net Income (Loss)



Liquidity and Capital Resources






| |                                         
| | ----------------------------------------
| | Current Sources of Capital and Liquidity







| |                                                                        
| | -----------------------------------------------------------------------
| | Factors Which May Influence Future Sources of Capital and
    Liquidity



| |                  
| | -----------------
| | SEC Investigation

In the matter of Triple Net Properties, LLC.


Accounting for Contingencies.




| |                         
| | ------------------------
| | Prior Performance Tables



49



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8-K




| |               
| | --------------
| | Debt Financing





|                                                  |                                |                     |             |             |                       |           |             |             |  |  |      |      |  |  |      |      | 
|------------------------------------------------- | ------------------------------ | ------------------- | ----------- | ----------- | --------------------- | --------- | ----------- | ----------- |  |  | ---- | ---- |  |  | ---- | ---- | 
|                                                  |                                |                     |             |             |                       | Weighted- |            
|                                                  |                                |                     |             | Average     |                      
|                                                  |                                | Total Debt          |             |             | Interest Rate         |          
|                                                  |                                | December 31,        |             |             | December 31,          |          
|                                                  |                                |                     |             |             |                       |          
|                                                  |                                | 2005                |             |             | 2004                  |           |             | 2005        |  |  | 2004 |     
|                                                  |                                |                     |             |             |                       |           |             |             |  |  |      |     
|                                                  |                                | (Liquidation basis) |             |             | (Going-concern basis) |           |             |             |  | 
|Mortgage, credit facility and other debt Mortgage |                                | $                   | 350,402,000 |             |                       | $         | 442,275,000 |             |  |  | 5.5% |      |  |  | 4.4% |     
|                                                  | Credit facility and other debt |                     | $           | 60,964,000  |                       |           | $           | 58,369,000  |  |  |      | 6.4% |  |  |      | 4.5% | 
|Fixed rate and variable rate                      |                                |                     |             |             |                       |           |             |             |  |  |      |      |  |  |      |     
|                                                  | Fixed rate                     |                     | $           | 269,062,000 |                       |           | $           | 87,264,000  |  |  |      | 5.3% |  |  |      | 5.4% | 
|                                                  | Variable rate                  |                     | $           | 142,304,000 |                       |           | $           | 413,380,000 |  |  |      | 6.3% |  |  |      | 4.2% | 







|         |            |  |                |   |            |  |      |     |  |          |       |  |  |  |            | 
|-------- | ---------- |  | -------------- | - | ---------- |  | ---- | --- |  | -------- | ----- |  |  |  | ---------- | 
|Notional |            |  |                |   |            |  |      |     | 
|Amount   |            |  | Carrying Value |   | Instrument |  | Rate |     |  | Maturity |      
|         |            |  |                |   |            |  |      |     |  |          |      
|$        | 75,000,000 |  |                | $ |           |  |      | Cap |  |          | 5.75% |  |  |  | 01/31/2006 | 
|         | 14,000,000 |  |                |   |           |  |      | Cap |  |          | 5.00% |  |  |  | 03/01/2006 | 
|         |            |  |                |   |            |  |      |     |  |          |       | 
|$        | 89,000,000 |  |                | $ |           |  |      |     |  |          |       |  |  |  |            | 
|         |            |  |                |   |            |  |      |     |  |          |       | 



50



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| |                      
| | ---------------------
| | Other Liquidity Needs













51



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|                  |  |              |            |      |  |  |        |   |  |   |            |  |  |  |        |   |  |   |           |  |  |  |        |  
|----------------- |  | ------------ | ---------- | ---- |  |  | ------ | - |  | - | ---------- |  |  |  | ------ | - |  | - | --------- |  |  |  | ------ | -
|                  |  | 2005         |            |      |  |  |        |   |  |   |           
|                  |  |              |            |      |  |  |        |   |  |   |           
|                  |  |              |            | 2004 |  |  |        |   | 
|                  |  |              |            |      |  |  |        |   | 
|                  |  | December 31, |           
|                  |  |              |           
|                  |  |              |            | 2003 | 
|                  |  |              |            |      | 
|Ordinary income   |  | $            | 3,333,000  |      |  |  | 10.12  | % |  | $ | 12,774,000 |  |  |  | 48.36  | % |  | $ | 2,432,000 |  |  |  | 46.39  | %
|Capital gain      |  |              | 11,963,000 |      |  |  | 36.34  | % |  |   |           |  |  |  |       |   |  |   |          |  |  |  |       |  
|Return of capital |  |              | 17,628,000 |      |  |  | 53.54  | % |  |   | 13,642,000 |  |  |  | 51.64  | % |  |   | 2,810,000 |  |  |  | 53.61  | %
|                  |  |              |            |      |  |  |        |   |  |   |            |  |  |  |        |   |  |  
|                  |  | $            | 32,924,000 |      |  |  | 100.00 | % |  | $ | 26,416,000 |  |  |  | 100.00 | % |  | $ | 5,242,000 |  |  |  | 100.00 | %
|                  |  |              |            |      |  |  |        |   |  |   |            |  |  |  |        |   |  |  







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



| |                                       
| | --------------------------------------
| | Years Ended December 31, 2005 and 2004







52



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| |                                       
| | --------------------------------------
| | Years Ended December 31, 2004 and 2003











| |                  
| | -----------------
| | Capital Resources



| |        
| | -------
| | General









53



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| |          
| | ---------
| | Financing













| |                    
| | -------------------
| | Unconsolidated Debt



54



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##### Table of Contents







| |          
| | ---------
| | Insurance



| |                                                                     
| | --------------------------------------------------------------------
| | Property Damage, Business Interruption, Earthquake and
    Terrorism



|                                          |  |                                                                                                                                               |  |  |  | 
|----------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Type of Insurance Coverage                |  | Loss Exposure/Deductible                                                                                                                      |  | 
|                                          |  |                                                                                                                                               |  | 
|Property damage and business interruption |  | $300 million per occurrence loss limit, subject to a
    $10,000 per occurrence deductible                                                    |  |  |  | 
|Boiler and machinery                      |  | $100 million per occurrence loss limit, subject to a
    $10,000 per occurrence deductible                                                    |  |  |  | 
|Property Terrorism                        |  | $100 million per occurrence loss limit, subject to a
    $10,000 per occurrence deductible                                                    |  |  |  | 
|Earthquake (all states, except CA & OK)   |  | $20 million annual aggregate loss sublimit, subject to a
    $50,000 per occurrence deductible                                                |  |  |  | 
|Earthquake (California properties only)   |  | $100 million annual aggregate loss sublimit, subject to a
    5% ($100,000 minimum) per occurrence deductible                                 |  |  |  | 
|Flood  named storm                       |  | $35 million annual aggregate loss, subject to a 5% total
    insurable value of the property ($100,000 minimum) per
    occurrence deductible |  |  |  | 
|Flood  Zone A                            |  | $20 million annual aggregate loss sublimit, subject to a 5%
    ($1,000,000 minimum) per occurrence deductible                                |  |  |  | 
|Flood  Zone B                            |  | $35 million annual aggregate loss sublimit, subject to a 5%
    $(25,000 minimum/$100,000 maximum) per occurrence deductible                  |  |  |  | 
|Flood  all other                         |  | $100 million annual aggregate loss sublimit, subject to a
    5% ($25,000 minimum/$100,000 maximum) per occurrence deductible                 |  |  |  | 
|General liability                         |  | $1 million each occurrence limit of liability and
    $25 million annual general aggregate limit of liability,
    including terrorism        |  |  |  | 
|Automobile liability                      |  | $1 million per accident for all Owned, Hired and
    Non  Owned                                                                              |  |  |  | 
|Umbrella (excess liability)               |  | $100 million annual aggregate limit of liability excess of
    underlying General Liability, including terrorism                              |  |  |  | 



| |                          
| | -------------------------
| | Debt Service Requirements



55



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|           |  |        |             | 
|---------- |  | ------ | ----------- | 
|Year       |  | Amount |            
|           |  |        |            
|2006       |  | $      | 118,968,000 | 
|2007       |  |        | 30,069,000  | 
|2008       |  |        | 2,199,000   | 
|2009       |  |        | 31,499,000  | 
|2010       |  |        | 2,769,000   | 
|Thereafter |  |        | 225,862,000 | 
|           |  |        |            
|           |  | $      | 411,366,000 | 
|           |  |        |            



| |                        
| | -----------------------
| | Contractual Obligations



|                                                                                             |  |                                            |             |  |             |   |            |             |  |   |              |  |  |       |             |  |  |   |             | 
|-------------------------------------------------------------------------------------------- |  | ------------------------------------------ | ----------- |  | ----------- | - | ---------- | ----------- |  | - | ------------ |  |  | ----- | ----------- |  |  | - | ----------- | 
|                                                                                             |  | Payments Due by Period (Liquidation Basis) |            
|                                                                                             |  |                                            |            
|                                                                                             |  | Less Than                                  |             |  |             |   | More Than  |             |  |  
|                                                                                             |  | 1 Year                                     |             |  | 1-3 Years   |   |            | 3-5 Years   |  |   | 5 Years      |  |  |      
|                                                                                             |  | (2006)                                     |             |  | (2007-2008) |   |            | (2009-2010) |  |   | (After 2010) |  |  | Total |            
|                                                                                             |  |                                            |             |  |             |   |            |             |  |   |              |  |  |       |            
|Principal payments  variable rate debt                                                      |  | $                                          | 117,810,000 |  |             | $ | 19,116,000 |             |  | $ | 5,378,000    |  |  | $     |            |  |  | $ | 142,304,000 | 
|Principal payments  fixed rate debt                                                         |  |                                            | 1,158,000   |  |             |   | 13,152,000 |             |  |   | 28,890,000   |  |  |       | 225,862,000 |  |  |   | 269,062,000 | 
|Interest payments  variable rate debt (based on rate
    in effect as of December 31, 2005) |  |                                            | 3,044,000   |  |             |   | 1,210,000  |             |  |   | 25,000       |  |  |       |            |  |  |   | 4,279,000   | 
|Interest payments  fixed rate debt                                                          |  |                                            | 14,722,000  |  |             |   | 28,595,000 |             |  |   | 24,310,000   |  |  |       | 44,805,000  |  |  |   | 112,432,000 | 
|Ground lease obligations                                                                     |  |                                            | 371,000     |  |             |   | 742,000    |             |  |   | 742,000      |  |  |       | 665,000     |  |  |   | 2,520,000   | 
|Tenant improvement and lease commission obligations                                          |  |                                            | 6,003,000   |  |             |   |           |             |  |   |             |  |  |       |            |  |  |   | 6,003,000   | 
|                                                                                             |  |                                            |             |  |             |   |            |             |  |   |              |  |  |       |            
|Total                                                                                        |  | $                                          | 143,108,000 |  |             | $ | 62,815,000 |             |  | $ | 59,345,000   |  |  | $     | 271,332,000 |  |  | $ | 536,600,000 | 
|                                                                                             |  |                                            |             |  |             |   |            |             |  |   |              |  |  |       |            

56



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| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements





| |          
| | ---------
| | Inflation



Funds from Operations








57



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|                                                                              |                                                               |                   |             |            |                   |   |            |                   |  |   |           |           | 
|----------------------------------------------------------------------------- | ------------------------------------------------------------- | ----------------- | ----------- | ---------- | ----------------- | - | ---------- | ----------------- |  | - | --------- | --------- | 
|                                                                              |                                                               | Year Ended        |             |            | Year Ended        |   |            | Year Ended        | 
|                                                                              |                                                               | December 31, 2005 |             |            | December 31, 2004 |   |            | December 31, 2003 | 
|                                                                              |                                                               |                   |             |            |                   |   |            |                   | 
|Net income (loss)                                                             |                                                               | $                 | 2,629,000   |            |                   | $ | (1,876,000 | )                 |  | $ | 78,000    |          
|Add:                                                                          |                                                               |                   |             |            |                   |   |            |                   |  |   |           |          
|                                                                              | Depreciation and amortization  discontinued operations       |                   |             | 38,519,000 |                   |   |            | 34,730,000        |  |   |           | 3,718,000 | 
|                                                                              | Depreciation and amortization  unconsolidated
    properties |                   |             | 195,000    |                   |   |            | 1,457,000         |  |   |           | 1,223,000 | 
|Less:                                                                         |                                                               |                   |             |            |                   |   |            |                   |  |   |           |          
|Gain on sale of real estate and joint venture (net of related
    income tax) |                                                               |                   | (10,682,000 | )          |                   |   | (493,000   | )                 |  |   |          |          
|                                                                              |                                                               |                   |             |            |                   |   |            |                   | 
|Funds from operations                                                         |                                                               | $                 | 30,661,000  |            |                   | $ | 33,818,000 |                   |  | $ | 5,019,000 |          
|                                                                              |                                                               |                   |             |            |                   |   |            |                   | 
|Weighted-average common shares outstanding  basic and
    diluted            |                                                               |                   | 43,867,000  |            |                   |   | 37,336,000 |                   |  |   | 8,243,000 |          
|                                                                              |                                                               |                   |             |            |                   |   |            |                   | 
|Gain on the sale of investments included in net income (loss)
    and FFO     |                                                               | $                 | 440,000     |            |                   | $ | 251,000    |                   |  | $ |          |          
|                                                                              |                                                               |                   |             |            |                   |   |            |                   | 

Subsequent Events











|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk



58



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|                                                                                             |  |                        |             |   |      |   |            |      |  |   |           |   |  |      |            |   |            |   |           |       |  |   |             |   |  |   |             |   |  |   |             | 
|-------------------------------------------------------------------------------------------- |  | ---------------------- | ----------- | - | ---- | - | ---------- | ---- |  | - | --------- | - |  | ---- | ---------- | - | ---------- | - | --------- | ----- |  | - | ----------- | - |  | - | ----------- | - |  | - | ----------- | 
|                                                                                             |  | Expected Maturity Date |            
|                                                                                             |  |                        |            
|                                                                                             |  | 2006                   |             |   | 2007 |   |            | 2008 |  |   | 2009      |   |  | 2010 |            |   | Thereafter |   |           | Total |  |   | Fair Value  |  
|                                                                                             |  |                        |             |   |      |   |            |      |  |   |           |   |  |      |            |   |            |   |           |       |  |   |             |  
|Fixed rate debt                                                                              |  | $                      | 1,158,000   |   |      | $ | 11,095,000 |      |  | $ | 2,057,000 |   |  | $    | 26,121,000 |   |            | $ | 2,769,000 |       |  | $ | 225,862,000 |   |  | $ | 269,062,000 |   |  | $ | 269,062,000 | 
|Average interest rate on maturing debt                                                       |  |                        | 5.29        | % |      |   | 5.83       | %    |  |   | 5.27      | % |  |      | 5.46       | % |            |   | 5.25      | %     |  |   | 5.23        | % |  |   | 5.28        | % |  |   |             | 
|Variable rate debt                                                                           |  | $                      | 117,810,000 |   |      | $ | 18,974,000 |      |  | $ | 142,000   |   |  | $    | 5,378,000  |   |            | $ |          |       |  | $ |            |   |  | $ | 142,304,000 |   |  | $ | 142,304,000 | 
|Average interest rate on maturing debt (based on rate in effect
    as of December 31, 2005) |  |                        | 6.16        | % |      |   | 7.18       | %    |  |   | 5.54      | % |  |      | 5.54       | % |            |   |          |       |  |   |            |   |  |   | 6.27        | % |  |   |             | 





|                                                                                             |  |                        |            |   |      |   |             |      |  |   |            |   |  |      |           |   |            |   |             |       |  |   |            |   |  |   |             |   |  |   |             | 
|-------------------------------------------------------------------------------------------- |  | ---------------------- | ---------- | - | ---- | - | ----------- | ---- |  | - | ---------- | - |  | ---- | --------- | - | ---------- | - | ----------- | ----- |  | - | ---------- | - |  | - | ----------- | - |  | - | ----------- | 
|                                                                                             |  | Expected Maturity Date |           
|                                                                                             |  |                        |           
|                                                                                             |  | 2005                   |            |   | 2006 |   |             | 2007 |  |   | 2008       |   |  | 2009 |           |   | Thereafter |   |             | Total |  |   | Fair Value |  
|                                                                                             |  |                        |            |   |      |   |             |      |  |   |            |   |  |      |           |   |            |   |             |       |  |   |            |  
|Fixed rate debt                                                                              |  | $                      | 695,000    |   |      | $ | 1,280,000   |      |  | $ | 10,843,000 |   |  | $    | 4,952,000 |   |            | $ | 1,252,000   |       |  | $ | 68,242,000 |   |  | $ | 87,264,000  |   |  | $ | 93,228,000  | 
|Average interest rate on maturing debt                                                       |  |                        | 5.46       | % |      |   | 5.37        | %    |  |   | 5.85       | % |  |      | 6.48      | % |            |   | 5.20        | %     |  |   | 5.20       | % |  |   | 5.36        | % |  |   |             | 
|Variable rate debt                                                                           |  | $                      | 62,910,000 |   |      | $ | 165,043,000 |      |  | $ | 26,272,000 |   |  | $    | 2,278,000 |   |            | $ | 156,877,000 |       |  | $ |           |   |  | $ | 413,380,000 |   |  | $ | 424,077,000 | 
|Average interest rate on maturing debt (based on rate in effect
    as of December 31, 2005) |  |                        | 3.88       | % |      |   | 4.36        | %    |  |   | 4.56       | % |  |      | 3.66      | % |            |   | 4.02        | %     |  |   |           |   |  |   | 4.17        | % |  |   |             | 








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of disclosure controls and
procedures.


59



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15d-14(a) 10-K


15d-15(e)




Changes in internal control over financial
reporting.





Item 9B.     Other
Information




60



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PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



|                       |  |     |    |  |          |                                    |                |  |            | 
|---------------------- |  | --- | -- |  | -------- | ---------------------------------- | -------------- |  | ---------- | 
|Name                   |  | Age |    |  | Position |                                    | Term of Office | 
|                       |  |     |    |  |          |                                    |                | 
|Anthony W. Thompson(1) |  |     | 59 |  |          | Chairman of the Board of Directors |                |  | Since 2001 | 
|Gary T. Wescombe       |  |     | 63 |  |          | Director                           |                |  | Since 2001 | 
|Edward A. Johnson      |  |     | 54 |  |          | Director                           |                |  | Since 2001 | 
|D. Fleet Wallace       |  |     | 38 |  |          | Director                           |                |  | Since 2002 | 
|W. Brand Inlow         |  |     | 52 |  |          | Director                           |                |  | Since 2002 | 
|Glenn L. Carpenter     |  |     | 63 |  |          | Director                           |                |  | Since 2005 | 
|Gary Hunt              |  |     | 57 |  |          | Director                           |                |  | Since 2005 | 
|Scott D. Peters(2)     |  |     | 48 |  |          | Chief Executive Officer, President |                |  | Since 2005 | 
|Talle A. Voorhies      |  |     | 58 |  |          | Vice President                     |                |  | Since 2001 | 
|Jack R. Maurer         |  |     | 61 |  |          | Executive Vice President           |                |  | Since 2001 | 
|Andrea R. Biller       |  |     | 55 |  |          | Secretary                          |                |  | Since 2004 | 
|                       |  |     |    |  |          | Executive Vice President           |                |  | Since 2005 | 
|Courtney Gulledge      |  |     | 27 |  |          | Chief Accounting Officer           |                |  | Since 2006 | 






|    |                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Thompson previously served as our Chief Executive
    Officer and President from December 2001 until December 2005.                  
|   
|(2) | Mr. Peters previously served as our Executive Vice
    President and Chief Financial Officer from September 2004 until
    December 2005.



Anthony W. (Tony) Thompson


Gary T. Wescombe


61



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Edward A. Johnson


D. Fleet Wallace co-founder


W. Brand Inlow co-founder


Glenn L. Carpenter


62



---



##### Table of Contents





Gary Hunt 110-year


Scott D. Peters


Talle A. Voorhies


Jack R. Maurer


Andrea R. Biller


63



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##### Table of Contents





Courtney Gulledge


Our Advisors Managers and Executive Officers






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Anthony W. (Tony) Thompsonalso serves as our
    chairman of the board of directors. See disclosure under G REIT
    Executive Officers above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | Scott D. Petersalso serves as one of our executive
    officers. See disclosure under G REIT Executive Officers above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | Jack R. Maureralso serves as one of our executive
    officers. See disclosure under G REIT Executive Officers above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | Talle A. Voorhiesalso serves as one of our executive
    officers. See disclosure under G REIT Executive Officers above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | Andrea R. Billeralso serves as one of our executive
    officers. See disclosure under G REIT Executive Officers above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | Louis J. Rogershas served as president and a member of
    the board of managers of our Advisor since August 2004 and
    September 2004, respectively. Mr. Rogers has been a member
    of Hirschler Fleischer since 1988, was a shareholder from 1994
    to December 31, 2004, and, since January 2005, has served
    as their senior counsel. At Hirschler Fleischer he specialized
    in structuring like-kind (Section 1031) exchanges, private
    placements and syndications, formation and operation of real
    estate investment trusts and acquisitions and financings for
    real estate transactions. Mr. Rogers earned a B.S. degree
    from Northeastern University in 1979 (with highest honors), a BA
    degree (with honors) in 1981, an MA degree in 1985 in
    jurisprudence from Oxford University and a JD degree in 1984
    from the University of Virginia School of Law. Mr. Rogers
    is a member of the Virginia State Bar. Mr. Rogers is a
    member of the Virginia State Bar and is a registered securities
    principal and broker with the NASD.
|
| | Daniel R. Dan Bakerhas served as a member of
    the board of managers of our Advisor since April 1998.
    Mr. Baker founded SugarOak Corporation in 1984 and served
    as its president until 2004. SugarOak Corporation provides asset
    management, construction management, property management and
    real estate development services. Since 2004, Mr. Baker has
    served as chairman of the board of SugarOak Holdings, a
    successor to SugarOak Corporation. SugarOak Holdings has three
    subsidiaries whose activities include construction, asset
    management and syndication. Mr. Baker is also president and
    chairman of the board of Union Land and Management Company
    and director and president of Coastal American Corporation. In
    these positions, Mr. Baker has managed commercial real
    estate assets in excess of $200 million in market value. In
    addition, Mr. Baker is a founding and former director of
    the Bank of the Potomac, a former board member of F&M Bank
    and currently an advisory                           

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | board member of BB&T Bank. A cum laudegraduate
    of Harvard College with a BA degree in government,
    Mr. Baker participates in numerous community organizations
    and is a former Citizens of the Year in Herndon, Virginia and a
    Paul Harris Fellow in Rotary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | Richard T. Hutton Jr. has served as a member of the board
    of managers of our Advisor since September 2005 and as the chief
    investment officer of our Advisor since August 2003.
    Mr. Hutton has also served as our interim chief financial
    officer from October 2003 through December 2003 and April 2004
    through September 2004 and also serves as the chief executive
    officer of NNN 2003 Value Fund, LLC. From April 1999 to August
    2003, Mr. Hutton served as senior vice
    president  real estate acquisitions and vice
    president  property management of our Advisor. In
    that position, Mr. Hutton was responsible for the oversight
    of the management of the real estate portfolios and property
    management staff of our Advisor and its affiliates.
    Mr. Huttons previous experience includes serving as
    controller for the TMP Group from November 1997 to April 1999.
    Mr. Hutton has also served as the interim chief financial
    officer of T REIT and our Advisor from October 2003 through
    December 2003 and April 2004 through September 2004.
    Mr. Hutton has a BA degree in psychology from Claremont
    McKenna College and has been licensed as a Certified Public
    Accountant in California since 1984.
|
| | Shannon Alterhas served as executive vice
    president  public real estate for our Advisor since
    October 2005. Prior to that, Ms. Alter served as senior
    vice president-director of operations for our Advisor since June
    2002. Ms. Alter oversees our Advisors portfolio,
    manages the property management staff and is responsible for
    managing third party property managers. Ms. Alter owned and
    managed Retail Management Services, a commercial real estate
    consulting firm, from 1996 to June 2002. Ms. Alters
    experience includes prior positions as manager of property
    management for The Vons Companies, Inc. and director of property
    management for Diversified Shopping Centers. She was the 2004
    President of the Orange County IREM chapter and teaches IREM
    courses on a national and local basis. Ms. Alter was
    awarded the Journal of Property Management Article of the Year
    award for 1998 and 1999. Ms. Alter holds a BA degree from
    the University of Southern California.                                                                                                                                                                                                                                  

Fiduciary Relationship of our Advisor to Us








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Committees of the Board of Directors




| |                
| | ---------------
| | Audit Committee





| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | makes recommendations to our board of directors concerning the
    engagement of independent public accountants;                                                                                                                        
|
| |  | reviews the plans and results of the audit engagement with the
    independent public accountants;                                                                                                                                      
|
| |  | approves professional services provided by, and the independence
    of, the independent public accountants;                                                                                                                            
|
| |  | considers the range of audit and non -audit fees;                                                                                                                                                                                       
|
| |  | consults with the independent public accountants regarding the
    adequacy of the internal accounting controls; and                                                                                                                    
|
| |  | periodically meets with representatives of our disclosure
    committee on various subjects within the scope of the disclosure
    committees charter (the disclosure committee is comprised
    of representatives of our management).

expert








| |                                 
| | --------------------------------
| | Executive Compensation Committee





| |                  
| | -----------------
| | Special Committee



66



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##### Table of Contents



Compensation of Directors






| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $1,000 per regular monthly board of directors meeting,
    whether in person or by telephone;                                                               
|
| |  | $500 per committee meeting, whether in person or by
    telephone, unless the committee meeting follows a regularly
    scheduled monthly board meeting; and
|
| |  | an additional $500 per committee meeting to the committee
    chairperson for each meeting attended in person or by telephone.                              



Independent Director Stock Option Plan




Officer and Employee Stock Option Plan




2004 Incentive Award Plan




67



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Section 16(a) Beneficial Ownership Reporting
Compliance






Code of Business Conduct and Ethics









|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Compensation of Executive Officers




Option/ SAR Grants in Last Fiscal Year




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Aggregated Option/ SAR Exercises and Fiscal Year-End Option/
SAR Value Table


|                       |  |              |     |  |              |     |                      |                           |     |                      |                             |  |  |   |                | 
|---------------------- |  | ------------ | --- |  | ------------ | --- | -------------------- | ------------------------- | --- | -------------------- | --------------------------- |  |  | - | -------------- | 
|                       |  |              |     |  |              | (d) |                      |                           | (e) |                     
|                       |  | (b)          |     |  |              |     | Number of Securities |                           |     | Value of Unexercised |                            
|                       |  | Shares       |     |  | (c)          |     |                      | Underlying Unexercised    |     |                      | In-the-Money                | 
|(a)                    |  | Acquired on  |     |  | Value        |     |                      | Options/SARs at FY- End   |     |                      | Options/SARs at FY- End ($) | 
|Name                   |  | Exercise ($) |     |  | Realized ($) |     |                      | Exercisable/Unexercisable |     |                      | Exercisable/Unexercisable   | 
|                       |  |              |     |  |              |     |                      |                           |     |                      |                             | 
|Anthony W. Thompson(1) |  |              | -0- |  |              |     | -0-                  |                           |     |                      | 45,000/50,000               |  |  | $ | 43,000/$50,000 | 
|Scott D. Peters(2)     |  |              | -0- |  |              |     | -0-                  |                           |     |                      | 0                           |  |  |   | 0              | 






|    |                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Thompson previously served as our Chief Executive
    Officer and President until December 19, 2005.                                                                                         
|   
|(2) | Mr. Peters previously served as our Executive Vice
    President and Chief Financial Officer until December 19,
    2005, when he was appointed as our Chief Executive Officer and
    President.

Compensation Committee Interlocks and Insider
Participation




Board Compensation Committee Report on Executive
Compensation









|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters

PRINCIPAL STOCKHOLDERS




|                                                      |  |                       |        |     |            |  |   | 
|----------------------------------------------------- |  | --------------------- | ------ | --- | ---------- |  | - | 
|                                                      |  | Number of Shares of   |        |     |           
|                                                      |  | Common Stock          |        |     | Percent of | 
|Name of Beneficial Owner                              |  | Beneficially Owned(1) |        |     | Class      | 
|                                                      |  |                       |        |     |            | 
|Anthony W. Thompson, Chairman                         |  |                       | 29,313 | (2) |            |  | * | 
|Gary T. Wescombe, Director                            |  |                       | 10,000 |     |            |  | * | 
|Edward A. Johnson, Director                           |  |                       | 10,000 |     |            |  | * | 
|D. Fleet Wallace, Director                            |  |                       | 10,000 |     |            |  | * | 
|W. Brand Inlow, Director                              |  |                       | 10,000 |     |            |  | * | 
|Glenn L. Carpenter, Director                          |  |                       | 10,000 |     |            |  | * | 
|Gary H. Hunt, Director                                |  |                       | 5,000  |     |            |  | * | 
|                                                      |  |                       |        |     |            | 
|All Named Executive Officers and Directors as a Group |  |                       | 84,313 |     |            |  | * | 
|                                                      |  |                       |        |     |            | 






| |   |                                                         
| | - | --------------------------------------------------------
| | * | Represents less than 1% of the outstanding common stock.



|    |                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All outstanding options were forfeited on February 27, 2006
    pursuant to the adoption of our plan of liquidation by
    stockholders.                                                                                                                                
|   
|(2) | Includes 6,175 shares of our common stock owned by AWT
    Family LP, a limited partnership controlled by Mr. Thompson
    and 23,138 shares of our common stock owned by our Advisor.
    Mr. Thompson is the chief executive officer and 36% owner
    of our Advisor.

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##### Table of Contents



Equity Compensation Plan Information




|                                                           |  |                                   |         |                  |                      |                      |                     |                     |  |  |           | 
|---------------------------------------------------------- |  | --------------------------------- | ------- | ---------------- | -------------------- | -------------------- | ------------------- | ------------------- |  |  | --------- | 
|                                                           |  |                                   |         |                  |                      | Number of Securities |                    
|                                                           |  |                                   |         | Weighted-Average |                      |                      | Remaining Available |                    
|                                                           |  | Number of Securities to be Issued |         |                  | Exercise Price of    |                      |                     | for Future Issuance | 
|                                                           |  | Upon Exercise of Outstanding      |         |                  | Outstanding Options, |                      |                     | Under Equity        | 
|Plan Category                                              |  | Options, Warrants and Rights      |         |                  | Warrants and Rights  |                      |                     | Compensation Plans  | 
|                                                           |  |                                   |         |                  |                      |                      |                     |                     | 
|Equity compensation plans approved by security holders(1)  |  |                                   | 475,000 |                  |                      | $                    | 9.00-$9.05          |                     |  |  | 6,025,000 | 
|Equity compensation plans not approved by security holders |  |                                   |        |                  |                      |                      |                     |                     |  |  |          | 
|                                                           |  |                                   |         |                  |                      |                      |                     |                     | 
|Total                                                      |  |                                   | 475,000 |                  |                      |                      |                     |                     |  |  | 6,025,000 | 
|                                                           |  |                                   |         |                  |                      |                      |                     |                     | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Each of the independent director and officer/employee stock
    option grants was approved at our Annual Meeting of Stockholders
    held on June 28, 2003. Our 2004 incentive award plan was
    approved at our Annual Meeting of Stockholders held on
    June 29, 2004 . Pursuant to our plan of liquidation, as of
    February 27, 2006, all of the plans were terminated and all
    outstanding options and warrants under the plans were forfeited
    and all restricted stock awards under the 2004 Incentive Award
    Plan became fully vested.






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions





Advisory Agreement






70



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##### Table of Contents



month-to


Dealer Manager Agreement




Real Estate Commissions




Real Estate Disposition Fee




Lease Commissions




Property Management Fee




71



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##### Table of Contents



Incentive Distributions




Related Party Accounts Receivable/ Payable




Unconsolidated Debt Due to Related Parties




Cunningham Lending Group, LLC




Triple Net Properties, LLC




Business Relationships with Legal Counsel









|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services





|                      |  |      |         |  |      |   |         | 
|--------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|Services              |  | 2005 |         |  | 2004 |  
|                      |  |      |         |  |      |  
|Audit Fees(1)         |  | $    | 574,000 |  |      | $ | 658,000 | 
|Audit-Related Fees(2) |  |      |        |  |      |   | 116,000 | 
|Tax Fees(3)           |  |      | 85,000  |  |      |   | 146,000 | 
|All Other Fees(4)     |  |      |        |  |      |   |        | 
|                      |  |      |         |  |      |  
|Total                 |  | $    | 659,000 |  |      | $ | 920,000 | 
|                      |  |      |         |  |      |  

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##### Table of Contents








|    |                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees billed in 2005 and 2004 consisted of the audit of our
    annual financial statements, acquisition audits, reviews of our
    quarterly financial statements, and statutory and regulatory
    audits, consents and other services related to filings with the
    SEC.
|   
|(2) | Audit-related fees billed in 2005 and 2004 consisted of
    financial accounting and reporting consultations.                                                                                                                                                                     
|   
|(3) | Tax services billed in 2005 and 2004 consisted of tax compliance
    and tax planning and advice.                                                                                                                                                                                 
|   
|(4) | There were no fees billed for other services in 2005 and 2004.                                                                                                                                                                                                                    







| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | consultations and consents related to SEC filings and
    registration statements;
|
| |  | consultation of accounting matters; and                                           
|
| |  | tax planning and tax compliance for the U.S. income and
    other taxes.          






PART IV







|         |                                        
|-------- | ---------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules

Financial Statements:


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                |  |      |     | 
|----------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                |  | Page |    
|                                                                                                |  |      |    
|Report of Independent Registered Public
    Accounting Firm                                     |  |      | 75  | 
|Consolidated Statement of Net Assets as of
    December 31, 2005 (Liquidation Basis)            |  |      | 76  | 
|Consolidated Balance Sheet (Going Concern
    Basis)                                            |  |      | 77  | 
|Consolidated Statements of Operations and
    Comprehensive Income (Loss) (Going Concern Basis) |  |      | 78  | 
|Consolidated Statements of
    Stockholders Equity (Going Concern Basis)                       |  |      | 79  | 
|Consolidated Statements of Cash Flows
    (Going Concern Basis)                                 |  |      | 80  | 
|Notes to Consolidated Financial
    Statements                                                  |  |      | 82  | 
|Schedules                                                                                       |  |      | 113 | 

Financial Statement Schedules:




|                                                                                 |  |      |     | 
|-------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                 |  | Page |    
|                                                                                 |  |      |    
|Valuation and Qualifying Accounts (Schedule II)                                  |  |      | 113 | 
|Real Estate Operating Properties and Accumulated Depreciation
    (Schedule III) |  |      | 113 | 



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##### Table of Contents



Exhibits:




| |                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The exhibits listed on the Exhibit Index (following the
    signatures section of this report) are included, or incorporated
    by reference, in this annual report.

Exhibits:




| |                         
| | ------------------------
| | See Item 15(a)(3) above.

Financial Statement Schedules:


|                                                                                 |  |      |     | 
|-------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                 |  | Page |    
|                                                                                 |  |      |    
|Valuation and Qualifying Accounts (Schedule II)                                  |  |      | 113 | 
|Real Estate Operating Properties and Accumulated Depreciation
    (Schedule III) |  |      | 113 | 

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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















| |                               
| | ------------------------------
| | /s/ DELOITTE &
    TOUCHE, LLP





75



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G REIT, INC.





CONSOLIDATED STATEMENT OF NET ASSETS


As of December 31, 2005 (Liquidation Basis)


|                                                                                     |                                           |              |             |             | 
|------------------------------------------------------------------------------------ | ----------------------------------------- | ------------ | ----------- | ----------- | 
|                                                                                     |                                           | December 31, |            
|                                                                                     |                                           | 2005         |            
|                                                                                     |                                           |              |            
|ASSETS                                                                              
|Real estate investments:                                                             |                                           |              |             |            
|                                                                                     | Real estate held for sale                 |              | $           | 835,474,000 | 
|                                                                                     | Investments in unconsolidated real estate |              |             | 16,578,000  | 
|                                                                                     |                                           |              |            
|                                                                                     |                                           |              | 852,052,000 |            
|Cash and cash equivalents                                                            |                                           |              | 7,173,000   |            
|Restricted cash                                                                      |                                           |              | 14,288,000  |            
|Investment in marketable securities                                                  |                                           |              | 7,617,000   |            
|Accounts receivable, net                                                             |                                           |              | 5,974,000   |            
|Accounts receivable from related parties                                             |                                           |              | 395,000     |            
|                                                                                     |                                           |              |            
|Total assets                                                                         |                                           |              | 887,499,000 |            
|                                                                                    
|LIABILITIES                                                                         
|Mortgages payable secured by properties held for sale                                |                                           |              | 350,402,000 |            
|Credit facility secured by properties held for sale and other
    debt               |                                           |              | 60,964,000  |            
|Accounts payable and accrued liabilities                                             |                                           |              | 14,140,000  |            
|Accounts payable due to related parties                                              |                                           |              | 2,026,000   |            
|Security deposits and prepaid rent                                                   |                                           |              | 4,989,000   |            
|Liability for estimated costs in excess of estimated receipts
    during liquidation |                                           |              | 1,519,000   |            
|                                                                                     |                                           |              |            
|Total liabilities                                                                    |                                           |              | 434,040,000 |            
|                                                                                     |                                           |              |            
|Net assets in liquidation                                                            |                                           | $            | 453,459,000 |            
|                                                                                     |                                           |              |            



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G REIT, INC.





CONSOLIDATED BALANCE SHEET


(Going Concern Basis)


December 31, 2004


|                                                                                                                                     |                                           |              |             |             | 
|------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------- | ------------ | ----------- | ----------- | 
|                                                                                                                                     |                                           | December 31, |            
|                                                                                                                                     |                                           | 2004         |            
|                                                                                                                                     |                                           |              |            
|ASSETS                                                                                                                              
|Real estate investments:                                                                                                             |                                           |              |             |            
|                                                                                                                                     | Properties held for sale, net             |              | $           | 761,282,000 | 
|                                                                                                                                     | Investments in unconsolidated real estate |              |             | 11,880,000  | 
|                                                                                                                                     |                                           |              |            
|                                                                                                                                     |                                           |              | 773,162,000 |            
|Cash and cash equivalents                                                                                                            |                                           |              | 17,567,000  |            
|Investment in marketable securities                                                                                                  |                                           |              | 2,161,000   |            
|Accounts receivable, net                                                                                                             |                                           |              | 4,760,000   |            
|Accounts receivable from related parties                                                                                             |                                           |              | 303,000     |            
|Restricted cash                                                                                                                      |                                           |              | 17,868,000  |            
|Deferred financing costs, net                                                                                                        |                                           |              | 2,657,000   |            
|Assets of properties held for sale, net                                                                                              |                                           |              | 96,409,000  |            
|Other assets, net                                                                                                                    |                                           |              | 163,000     |            
|                                                                                                                                     |                                           |              |            
|Total assets                                                                                                                         |                                           | $            | 915,050,000 |            
|                                                                                                                                     |                                           |              |            
|                                                                                                                                    
|LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS
    EQUITY                                                                        
|Mortgage loans payable secured by properties held for sale                                                                           |                                           | $            | 442,275,000 |            
|Credit facility secured by properties held for sale                                                                                  |                                           |              | 58,369,000  |            
|Accounts payable and accrued liabilities                                                                                             |                                           |              | 18,476,000  |            
|Accounts payable to related parties                                                                                                  |                                           |              | 961,000     |            
|Liabilities of properties held for sale, net                                                                                         |                                           |              | 31,114,000  |            
|                                                                                                                                     |                                           |              |            
|                                                                                                                                     |                                           |              | 551,195,000 |            
|Minority interests  properties held for sale                                                                                        |                                           |              | 6,830,000   |            
|Commitments and contingencies (Note 16)                                                                                              |                                           |              |             |            
|Stockholders equity:                                                                                                                |                                           |              |             |            
|Common stock, $.01 par value; 50,000,000 shares
    authorized; 43,865,000 shares issued and outstanding as of
    December 31, 2004 |                                           |              | 439,000     |            
|Additional paid-in capital                                                                                                           |                                           |              | 392,836,000 |            
|Distributions in excess of earnings                                                                                                  |                                           |              | (36,305,000 | )          
|Accumulated other comprehensive income                                                                                               |                                           |              | 55,000      |            
|                                                                                                                                     |                                           |              |            
|Total stockholders equity                                                                                                           |                                           |              | 357,025,000 |            
|                                                                                                                                     |                                           |              |            
|Total liabilities, minority interests and stockholders
    equity                                                                   |                                           | $            | 915,050,000 |            
|                                                                                                                                     |                                           |              |            



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G REIT, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS)


(Going Concern Basis)


For the Years Ended December 31, 2005, 2004 and 2003


|                                                                             |                                                                                         |                         |            |            |      |   |            |            |   |   |            |           |  
|---------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------- | ---------- | ---------- | ---- | - | ---------- | ---------- | - | - | ---------- | --------- | -
|                                                                             |                                                                                         | Year Ended December 31, |           
|                                                                             |                                                                                         |                         |           
|                                                                             |                                                                                         | 2005                    |            |            | 2004 |   |            | 2003       |  
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Expenses:                                                                    |                                                                                         |                         |            |            |      |   |            |            |   |   |            |          
|                                                                             | General and administrative                                                              |                         | $          | 4,006,000  |      |   | $          | 2,419,000  |   |   | $          | 1,287,000 |  
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Operating loss                                                               |                                                                                         |                         | (4,006,000 | )          |      |   | (2,419,000 | )          |   |   | (1,287,000 | )        
|Other (expense) income:                                                      |                                                                                         |                         |            |            |      |   |            |            |   |   |            |          
|                                                                             | Interest expense (including amortization of deferred financing
    costs)               |                         |            | (2,054,000 | )    |   |            | (1,243,000 | ) |   |            | (293,000  | )
|                                                                             | Interest and dividend income                                                            |                         |            | 695,000    |      |   |            | 332,000    |   |   |            | 117,000   |  
|                                                                             | Gain on sale of marketable securities, unconsolidated real
    estate and joint venture |                         |            | 572,000    |      |   |            | 1,231,000  |   |   |            |          |  
|                                                                             | Equity in earnings (losses) of unconsolidated real estate                               |                         |            | 1,337,000  |      |   |            | (604,000   | ) |   |            | 204,000   |  
|                                                                             | Income taxes                                                                            |                         |            |           |      |   |            | (398,000   | ) |   |            |          |  
|                                                                             | Other expense, net                                                                      |                         |            | (250,000   | )    |   |            |           |   |   |            |          |  
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Loss from continuing operations before discontinued operations               |                                                                                         |                         | (3,706,000 | )          |      |   | (3,101,000 | )          |   |   | (1,259,000 | )        
|Discontinued operations:                                                     |                                                                                         |                         |            |            |      |   |            |            |   |   |            |          
|Gain on sale of real estate                                                  |                                                                                         |                         | 10,550,000 |            |      |   |           |            |   |   |           |          
|Income (loss) from discontinued operations                                   |                                                                                         |                         | (4,215,000 | )          |      |   | 1,225,000  |            |   |   | 1,337,000  |          
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|                                                                             |                                                                                         |                         | 6,335,000  |            |      |   | 1,225,000  |            |   |   | 1,337,000  |          
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Net income (loss)                                                            |                                                                                         | $                       | 2,629,000  |            |      | $ | (1,876,000 | )          |   | $ | 78,000     |          
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Comprehensive income (loss):                                                 |                                                                                         |                         |            |            |      |   |            |            |   |   |            |          
|Net income (loss)                                                            |                                                                                         | $                       | 2,629,000  |            |      | $ | (1,876,000 | )          |   | $ | 78,000     |          
|Unrealized gain on marketable securities                                     |                                                                                         |                         | 78,000     |            |      |   | 55,000     |            |   |   |           |          
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Comprehensive income (loss)                                                  |                                                                                         | $                       | 2,707,000  |            |      | $ | (1,821,000 | )          |   | $ | 78,000     |          
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Net income (loss) per common share:                                          |                                                                                         |                         |            |            |      |   |            |            |   |   |            |          
|                                                                             | Continuing operations  basic and diluted                                               |                         | $          | (0.08      | )    |   | $          | (0.08      | ) |   | $          | (0.15     | )
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|                                                                             | Discontinued operations  basic and diluted                                             |                         | $          | 0.14       |      |   | $          | 0.03       |   |   | $          | 0.16      |  
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Total net income (loss) per common share  basic and
    diluted             |                                                                                         | $                       | 0.06       |            |      | $ | (0.05      | )          |   | $ | 0.01       |          
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Weighted-average number of common shares outstanding 
    basic and diluted |                                                                                         |                         | 43,867,000 |            |      |   | 37,336,000 |            |   |   | 8,243,000  |          
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Distributions declared per share                                             |                                                                                         | $                       | 0.75       |            |      | $ | 0.75       |            |   | $ | 0.74       |          
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  
|Distributions declared                                                       |                                                                                         | $                       | 32,888,000 |            |      | $ | 28,042,000 |            |   | $ | 6,211,000  |          
|                                                                             |                                                                                         |                         |            |            |      |   |            |            |  



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G REIT, INC.





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


(Going Concern Basis)


For the Years Ended December 31, 2005, 2004 and 2003


|                                                                 |  |              |            |        |           |   |         |                 |                  |   |             |             |  |               |             |   |       |   |         |  |  |   |             |  
|---------------------------------------------------------------- |  | ------------ | ---------- | ------ | --------- | - | ------- | --------------- | ---------------- | - | ----------- | ----------- |  | ------------- | ----------- | - | ----- | - | ------- |  |  | - | ----------- | -
|                                                                 |  | Common Stock |            |        |           |   |         |                 |                 
|                                                                 |  |              |            |        |           |   |         |                 |                 
|                                                                 |  |              |            | Common |           |   |         |                 | Distributions in |   |             | Accumulated |  |               |            
|                                                                 |  | Number of    |            |        | Stock Par |   |         | Additional      |                  |   | Excess of   |             |  | Comprehensive |             |   |      
|                                                                 |  | Shares       |            |        | Value     |   |         | Paid-In Capital |                  |   | Earnings    |             |  | Income        |             |   | Total |  
|                                                                 |  |              |            |        |           |   |         |                 |                  |   |             |             |  |               |             |   |       |  
|BALANCE  December 31, 2002                                      |  |              | 2,158,000  |        |           | $ | 22,000  |                 |                  | $ | 18,583,000  |             |  | $             | (254,000    | ) |       | $ |        |  |  | $ | 18,351,000  |  
|Net income                                                       |  |              |           |        |           |   |        |                 |                  |   |            |             |  |               | 78,000      |   |       |   |        |  |  |   | 78,000      |  
|Issuance of common stock, net of offering costs of $15,311,000   |  |              | 15,404,000 |        |           |   | 154,000 |                 |                  |   | 138,150,000 |             |  |               |            |   |       |   |        |  |  |   | 138,304,000 |  
|Distributions                                                    |  |              |           |        |           |   |        |                 |                  |   |            |             |  |               | (6,211,000  | ) |       |   |        |  |  |   | (6,211,000  | )
|                                                                 |  |              |            |        |           |   |         |                 |                  |   |             |             |  |               |             |   |       |  
|BALANCE  December 31, 2003                                      |  |              | 17,562,000 |        |           |   | 176,000 |                 |                  |   | 156,733,000 |             |  |               | (6,387,000  | ) |       |   |        |  |  |   | 150,522,000 |  
|Net loss                                                         |  |              |           |        |           |   |        |                 |                  |   |            |             |  |               | (1,876,000  | ) |       |   |        |  |  |   | (1,876,000  | )
|Unrealized gain on marketable securities                         |  |              |           |        |           |   |        |                 |                  |   |            |             |  |               |            |   |       |   | 55,000  |  |  |   | 55,000      |  
|Stock based compensation expense                                 |  |              |            |        |           |   |         |                 |                  |   | 257,000     |             |  |               |             |   |       |   |         |  |  |   | 257,000     |  
|Issuance of common stock, net of offering costs of $26,050,000   |  |              | 26,303,000 |        |           |   | 263,000 |                 |                  |   | 235,846,000 |             |  |               |            |   |       |   |        |  |  |   | 236,109,000 |  
|Distributions                                                    |  |              |           |        |           |   |        |                 |                  |   |            |             |  |               | (28,042,000 | ) |       |   |        |  |  |   | (28,042,000 | )
|                                                                 |  |              |            |        |           |   |         |                 |                  |   |             |             |  |               |             |   |       |  
|BALANCE  December 31, 2004                                      |  |              | 43,865,000 |        |           |   | 439,000 |                 |                  |   | 392,836,000 |             |  |               | (36,305,000 | ) |       |   | 55,000  |  |  |   | 357,025,000 |  
|Net income                                                       |  |              |            |        |           |   |         |                 |                  |   |             |             |  |               | 2,629,000   |   |       |   |         |  |  |   | 2,629,000   |  
|Unrealized gain on marketable securities                         |  |              |            |        |           |   |         |                 |                  |   |             |             |  |               |             |   |       |   | 78,000  |  |  |   | 78,000      |  
|Vesting of restricted stock and stock based compensation expense |  |              | 4,000      |        |           |   |         |                 |                  |   | 234,000     |             |  |               |             |   |       |   |         |  |  |   | 234,000     |  
|Distributions                                                    |  |              |           |        |           |   |        |                 |                  |   |            |             |  |               | (32,888,000 | ) |       |   |        |  |  |   | (32,888,000 | )
|                                                                 |  |              |            |        |           |   |         |                 |                  |   |             |             |  |               |             |   |       |  
|BALANCE  December 31, 2005                                      |  |              | 43,869,000 |        |           | $ | 439,000 |                 |                  | $ | 393,070,000 |             |  | $             | (66,564,000 | ) |       | $ | 133,000 |  |  | $ | 327,078,000 |  
|                                                                 |  |              |            |        |           |   |         |                 |                  |   |             |             |  |               |             |   |       |  



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G REIT, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


(Going Concern Basis)


For the Years Ended December 31, 2005, 2004 and 2003


|                                                                                                                       |                                                                             |                                                     |             |             |            |   |            |              |              |   |           |              |              |  
|---------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------------- | ----------- | ----------- | ---------- | - | ---------- | ------------ | ------------ | - | --------- | ------------ | ------------ | -
|                                                                                                                       |                                                                             | Year Ended December 31,                             |            
|                                                                                                                       |                                                                             |                                                     |            
|                                                                                                                       |                                                                             | 2005                                                |             |             | 2004       |   |            | 2003         |             
|                                                                                                                       |                                                                             |                                                     |             |             |            |   |            |              |             
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                   |                                                                             |                                                     |             |             |            |   |            |              |              |   |           |             
|Net income (loss)                                                                                                      |                                                                             | $                                                   | 2,629,000   |             |            | $ | (1,876,000 | )            |              | $ | 78,000    |             
|Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:                           |                                                                             |                                                     |             |             |            |   |            |              |              |   |           |             
|Gain on sale of real estate                                                                                            |                                                                             |                                                     | (10,550,000 | )           |            |   |           |              |              |   |          |             
|Gain on sale of marketable securities, unconsolidated real
    estate and joint venture                                |                                                                             |                                                     | (572,000    | )           |            |   | (1,231,000 | )            |              |   |          |             
|Depreciation and amortization (including deferred financing
    costs and above/below market leases and deferred rent) |                                                                             |                                                     | 34,536,000  |             |            |   | 29,529,000 |              |              |   | 3,756,000 |             
|Swap collar interest                                                                                                   |                                                                             |                                                     | 226,000     |             |            |   | (347,000   | )            |              |   | 36,000    |             
|Stock compensation expense                                                                                             |                                                                             |                                                     | 234,000     |             |            |   | 257,000    |              |              |   |          |             
|Distributions received in excess of equity in earnings from
    investments in unconsolidated real estate              |                                                                             |                                                     | 56,000      |             |            |   | 2,256,000  |              |              |   | 610,000   |             
|Minority interests                                                                                                     |                                                                             |                                                     | (183,000    | )           |            |   | (9,000     | )            |              |   | 3,000     |             
|Change in operating assets and liabilities:                                                                            |                                                                             |                                                     |             |             |            |   |            |              |              |   |           |             
|                                                                                                                       | Accounts receivable                                                         |                                                     |             | (1,374,000  | )          |   |            | 1,543,000    |              |   |           | (1,804,000   | )           
|                                                                                                                       | Other assets                                                                |                                                     |             | (2,475,000  | )          |   |            | (468,000     | )            |   |           | 1,186,000    |             
|                                                                                                                       | Accounts payable and accrued liabilities                                    |                                                     |             | (2,773,000  | )          |   |            | 9,072,000    |              |   |           | 3,039,000    |             
|                                                                                                                       | Security deposits and prepaid rent                                          |                                                     |             | (57,000     | )          |   |            | 1,179,000    |              |   |           | 974,000      |             
|                                                                                                                       |                                                                             |                                                     |             |             |            |   |            |              |             
|                                                                                                                       |                                                                             | Net cash provided by operating activities           |             |             | 19,697,000 |   |            |              | 39,905,000   |   |           |              | 7,878,000    |  
|                                                                                                                       |                                                                             |                                                     |             |             |            |   |            |              |             
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                   |                                                                             |                                                     |             |             |            |   |            |              |              |   |           |             
|                                                                                                                       | Purchase of real estate operating properties                                |                                                     |             | (18,419,000 | )          |   |            | (550,530,000 | )            |   |           | (272,299,000 | )           
|                                                                                                                       | Purchase of investments in unconsolidated real estate and joint
    venture |                                                     |             |            |            |   |            | (20,000,000  | )            |   |           | (14,767,000  | )           
|                                                                                                                       | Capital expenditures                                                        |                                                     |             | (12,158,000 | )          |   |            | (7,583,000   | )            |   |           | (217,000     | )           
|                                                                                                                       | Proceeds from sale of real estate operating property                        |                                                     |             | 113,014,000 |            |   |            |             |              |   |           |             |             
|                                                                                                                       | Proceeds from sale of unconsolidated real estate                            |                                                     |             | 273,000     |            |   |            |             |              |   |           |              |             
|                                                                                                                       | Purchases of marketable securities                                          |                                                     |             | (23,849,000 | )          |   |            | (12,065,000  | )            |   |           |             |             
|                                                                                                                       | Proceeds from sales of marketable securities                                |                                                     |             | 18,910,000  |            |   |            | 10,210,000   |              |   |           |             |             
|                                                                                                                       | Proceeds from sale of joint venture                                         |                                                     |             |            |            |   |            | 21,000,000   |              |   |           |             |             
|                                                                                                                       | Restricted cash                                                             |                                                     |             | 2,661,000   |            |   |            | (4,250,000   | )            |   |           | (1,535,000   | )           
|                                                                                                                       | Real estate and escrow deposits                                             |                                                     |             |            |            |   |            |             |              |   |           | (2,600,000   | )           
|                                                                                                                       |                                                                             |                                                     |             |             |            |   |            |              |             
|                                                                                                                       |                                                                             | Net cash provided by (used in) investing activities |             |             | 80,432,000 |   |            |              | (563,218,000 | ) |           |              | (291,418,000 | )
|                                                                                                                       |                                                                             |                                                     |             |             |            |   |            |              |             

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G REIT, INC.


CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)


|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |             |   |            |             |             | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | --------------------------------------------------- | ----------- | ------------ | ------------ | - | ---------- | ----------- | ----------- | - | ---------- | ----------- | ----------- | 
|                                                                                                                                                            |                                                                                  | Year Ended December 31,                             |            
|                                                                                                                                                            |                                                                                  |                                                     |            
|                                                                                                                                                            |                                                                                  | 2005                                                |             |              | 2004         |   |            | 2003        |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                        |                                                                                  |                                                     |             |              |              |   |            |             |             |   |            |            
|                                                                                                                                                            | Proceeds from issuance of common stock, net                                      |                                                     |             |             |              |   |            | 236,109,000 |             |   |            | 138,305,000 |            
|                                                                                                                                                            | Borrowings under credit facility, mortgages payable and other
    debt           |                                                     |             | 185,806,000  |              |   |            | 394,537,000 |             |   |            | 188,784,000 |            
|                                                                                                                                                            | Principal repayments under credit facility, mortgages payable
    and other debt |                                                     |             | (262,905,000 | )            |   |            | (72,684,000 | )           |   |            | (26,823,000 | )          
|                                                                                                                                                            | Refund (payment) of deferred financing costs                                     |                                                     |             | 310,000      |              |   |            | (5,927,000  | )           |   |            | (4,213,000  | )          
|                                                                                                                                                            | Minority interests contributions                                                 |                                                     |             |             |              |   |            | 23,000      |             |   |            |            |            
|                                                                                                                                                            | Minority interests distributions                                                 |                                                     |             | (674,000     | )            |   |            | (376,000    | )           |   |            | (74,000     | )          
|                                                                                                                                                            | Distributions                                                                    |                                                     |             | (32,888,000  | )            |   |            | (26,335,000 | )           |   |            | (5,285,000  | )          
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|                                                                                                                                                            |                                                                                  | Net cash (used in) provided by financing activities |             |              | (110,351,000 | ) |            |             | 525,347,000 |   |            |             | 290,694,000 | 
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                                                                        |                                                                                  |                                                     | (10,222,000 | )            |              |   | 2,034,000  |             |             |   | 7,154,000  |            
|CASH AND CASH EQUIVALENTS  beginning of year                                                                                                               |                                                                                  |                                                     | 17,567,000  |              |              |   | 15,533,000 |             |             |   | 8,379,000  |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|CASH AND CASH EQUIVALENTS  end of year                                                                                                                     |                                                                                  | $                                                   | 7,345,000   |              |              | $ | 17,567,000 |             |             | $ | 15,533,000 |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                                                           |                                                                                  |                                                     |             |              |              |   |            |             |             |   |            |            
|Cash paid during the year for:                                                                                                                              |                                                                                  |                                                     |             |              |              |   |            |             |             |   |            |            
|                                                                                                                                                            | Interest                                                                         |                                                     | $           | 26,616,000   |              |   | $          | 14,212,000  |             |   | $          | 1,739,000   |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|                                                                                                                                                            | Income taxes                                                                     |                                                     | $           |             |              |   | $          | 428,000     |             |   | $          |            |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|NONCASH INVESTING AND FINANCING ACTIVITIES:                                                                                                                 |                                                                                  |                                                     |             |              |              |   |            |             |             |   |            |            
|Investing Activities:                                                                                                                                       |                                                                                  |                                                     |             |              |              |   |            |             |             |   |            |            
|                                                                                                                                                            | Accrual for tenant improvements and capital expenditures                         |                                                     | $           | 242,000      |              |   | $          |            |             |   | $          |            |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|The following represents the change in certain assets and
    liabilities in connection with our acquisitions and dispositions
    of operating properties: |                                                                                  |                                                     |             |              |              |   |            |             |             |   |            |            
|                                                                                                                                                            | Real estate deposits applied                                                     |                                                     | $           |             |              |   | $          | 2,600,000   |             |   | $          | 2,271,000   |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|                                                                                                                                                            | Mortgage loan assumed upon acquisition of property                               |                                                     | $           |             |              |   | $          |            |             |   | $          | 4,024,000   |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|Financing Activities:                                                                                                                                       |                                                                                  |                                                     |             |              |              |   |            |             |             |   |            |            
|                                                                                                                                                            | Refinancing of property                                                          |                                                     | $           |             |              |   | $          | 11,605,000  |             |   | $          | 6,695,000   |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            
|                                                                                                                                                            | Issuance of common stock for dividends reinvested                                |                                                     | $           |             |              |   | $          | 3,129,000   |             |   | $          | 2,377,000   |            
|                                                                                                                                                            |                                                                                  |                                                     |             |              |              |   |            |             |            



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G REIT, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31, 2005, 2004 and 2003




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







day-to month-to




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





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G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





| |                            
| | ---------------------------
| | Principles of Consolidation

Consolidation of Variable
Interest Entities




| |                 
| | ----------------
| | Use of Estimates





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





| |                                
| | -------------------------------
| | Liquidation Basis of Accounting



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G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


tenants-in




| |                        
| | -----------------------
| | Real Estate Investments



| |                     
| | --------------------
| | Operating Properties









| |                       
| | ----------------------
| | Property Held for Sale

Accounting for Impairment or Disposal of
Long-Lived Assets


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G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | management, having the authority to approve the action,
    committed to a plan to sell the asset;                                                              
|
| |  | the asset was available for immediate sale in its present
    condition subject only to terms that are usual and customary for
    sales of such assets;        
|
| |  | an active program to locate a buyer and other actions required
    to complete the plan to sell the asset had been initiated;                                   
|
| |  | the sale of the asset was probable and the transfer of the asset
    was expected to qualify for recognition as a completed sale
    within one year;           
|
| |  | the asset was being actively marketed for sale at a price that
    was reasonable in relation to its current fair value; and                                    
|
| |  | given the actions required to complete the plan, it was unlikely
    that significant changes to the plan would be made or that the
    plan would be withdrawn.





| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                
| | ---------------
| | Restricted Cash





| |                                     
| | ------------------------------------
| | Investments in Marketable Securities



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G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                   
| | ------------------
| | Minority Interests





| |                          
| | -------------------------
| | Purchase Price Allocation

Business Combinations lease-up










| |                                                                
| | ---------------------------------------------------------------
| | Tenant Receivables and Allowance for Uncollectible
    Accounts



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G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                     
| | --------------------
| | Real Estate Deposits





| |             
| | ------------
| | Other Assets





| |                         
| | ------------------------
| | Deferred Financing Costs





| |                                 
| | --------------------------------
| | Derivative Financial Instruments



Derivative Instruments and Hedging
Activities.




| |                    
| | -------------------
| | Revenue Recognition

Accounting for
Leases,


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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                             
| | ----------------------------
| | Concentration of Credit Risk







| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments

Disclosures About Fair Value of
Financial Instruments




88



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |             
| | ------------
| | Income Taxes







| |                     
| | --------------------
| | Comprehensive Income

Reporting Comprehensive Income.




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

Earnings Per Share.


89



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                      |                         |                         |            |       |      |   |            |       |   |   |            |       |  
|--------------------------------------------------------------------- | ----------------------- | ----------------------- | ---------- | ----- | ---- | - | ---------- | ----- | - | - | ---------- | ----- | -
|                                                                      |                         | Year Ended December 31, |           
|                                                                      |                         |                         |           
|                                                                      |                         | 2005                    |            |       | 2004 |   |            | 2003  |  
|                                                                      |                         |                         |            |       |      |   |            |       |  
|Loss from continuing operations                                       |                         | $                       | (3,706,000 | )     |      | $ | (3,101,000 | )     |   | $ | (1,259,000 | )    
|Gain on sale of real estate                                           |                         |                         | 10,550,000 |       |      |   |           |       |   |   |           |      
|Income (loss) from discontinued operations                            |                         |                         | (4,215,000 | )     |      |   | 1,225,000  |       |   |   | 1,337,000  |      
|                                                                      |                         |                         |            |       |      |   |            |       |  
|Net income (loss)                                                     |                         | $                       | 2,629,000  |       |      | $ | (1,876,000 | )     |   | $ | 78,000     |      
|                                                                      |                         |                         |            |       |      |   |            |       |  
|Net income (loss) per share  basic and diluted:                      |                         |                         |            |       |      |   |            |       |   |   |            |      
|                                                                      | Continuing operations   |                         | $          | (0.08 | )    |   | $          | (0.08 | ) |   | $          | (0.15 | )
|                                                                      | Discontinued operations |                         |            | 0.14  |      |   |            | 0.03  |   |   |            | 0.16  |  
|                                                                      |                         |                         |            |       |      |   |            |       |  
|Total net income (loss) per share  basic and diluted                 |                         | $                       | 0.06       |       |      | $ | (0.05      | )     |   | $ | 0.01       |      
|                                                                      |                         |                         |            |       |      |   |            |       |  
|Weighted-average number of shares outstanding  basic
    and diluted |                         |                         | 43,867,000 |       |      |   | 37,336,000 |       |   |   | 8,243,000  |      



| |                         
| | ------------------------
| | Stock Based Compensation

Accounting for
Stock-Based Compensation Accounting for Stock-Based Compensation Transition and
Disclosure Accounting for Stock
Issued to Employees


|                                                                                                                  |  |                         |           |   |      |   |            |      |  |   |         |  
|----------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | ---------- | ---- |  | - | ------- | -
|                                                                                                                  |  | Year Ended December 31, |          
|                                                                                                                  |  |                         |          
|                                                                                                                  |  | 2005                    |           |   | 2004 |   |            | 2003 | 
|                                                                                                                  |  |                         |           |   |      |   |            |      | 
|Reported net income (loss)                                                                                        |  | $                       | 2,629,000 |   |      | $ | (1,876,000 | )    |  | $ | 78,000  |  
|Add: Stock based employee compensation expense included in
    reported net income                                |  |                         | 162,000   |   |      |   | 257,000    |      |  |   |        |  
|Less: Total stock based employee compensation expense determined
    under fair value based method for all awards |  |                         | (183,000  | ) |      |   | (196,000   | )    |  |   | (57,000 | )
|                                                                                                                  |  |                         |           |   |      |   |            |      | 
|Pro forma net income (loss)                                                                                       |  | $                       | 2,608,000 |   |      | $ | (1,815,000 | )    |  | $ | 21,000  |  
|                                                                                                                  |  |                         |           |   |      |   |            |      | 
|Reported net income (loss) per share  basic and
    diluted                                                      |  | $                       | 0.06      |   |      | $ | (0.05      | )    |  | $ | 0.01    |  
|                                                                                                                  |  |                         |           |   |      |   |            |      | 
|Pro forma net income (loss) per share  basic and
    diluted                                                     |  | $                       | 0.06      |   |      | $ | (0.05      | )    |  | $ | 0.00    |  
|                                                                                                                  |  |                         |           |   |      |   |            |      | 

10-year


90



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





| |                             
| | ----------------------------
| | Asset Retirement Obligations





| |                                          
| | -----------------------------------------
| | Recently Issued Accounting Pronouncements

Accounting Changes and Error Corrections  A
Replacement of APB Opinion No. 20 and
SFAS No. 3.


04-05, Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights 04-05). 04-05 04-05


Accounting for Certain
Investments in Debt and Equity Securities.


91



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


4.     Liability for Estimated Costs
in Excess of Estimated Receipts During Liquidation






|                                                                                           |                                                                                     |   |             |             |  
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------- | - | ----------- | ----------- | -
|Assets:                                                                                    |                                                                                     |   |             |            
|                                                                                           | Estimated net inflows from consolidated and unconsolidated
    operating activities |   | $           | 24,390,000  |  
|Liabilities:                                                                               |                                                                                     |   |             |            
|                                                                                           | Liquidation costs                                                                   |   |             | (4,418,000  | )
|                                                                                           | Distributions                                                                       |   |             | (8,226,000  | )
|                                                                                           | Capital expenditures                                                                |   |             | (13,265,000 | )
|                                                                                           |                                                                                     |   |            
|                                                                                           |                                                                                     |   | (25,909,000 | )          
|                                                                                           |                                                                                     |   |            
|Total liability for estimated costs in excess of estimated
    receipts during liquidation |                                                                                     | $ | (1,519,000  | )          
|                                                                                           |                                                                                     |   |            



|   |                          
|-- | -------------------------
|5. | Net Assets in Liquidation



|                                                                                     |  |   |             |  
|------------------------------------------------------------------------------------ |  | - | ----------- | -
|Stockholders equity as of December 31,
    2005  going concern basis               |  | $ | 327,078,000 |  
|Increase due to estimated net realizable value of operating
    properties           |  |   | 180,852,000 |  
|Increase due to estimated net realizable value of unconsolidated
    investment      |  |   | 4,895,000   |  
|Decrease due to the write-off of intangible assets and
    liabilities               |  |   | (57,847,000 | )
|Liability for estimated costs in excess of estimated receipts
    during liquidation |  |   | (1,519,000  | )
|                                                                                     |  |   |            
|Adjustment to reflect the change to the liquidation basis of
    accounting          |  |   | 126,381,000 |  
|                                                                                     |  |   |            
|Estimated value of net assets in liquidation as of
    December 31, 2005             |  | $ | 453,459,000 |  
|                                                                                     |  |   |            



|   |                        
|-- | -----------------------
|6. | Real Estate Investments





| |                                          
| | -----------------------------------------
| | Investments in Unconsolidated Real Estate



92



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                            |  |            |       |   |                   |   |            | 
|----------------------------------------------------------- |  | ---------- | ----- | - | ----------------- | - | ---------- | 
|                                                            |  | Percentage |       |   |                  
|Property                                                    |  | Owned      |       |   | December 31, 2004 |  
|                                                            |  |            |       |   |                   |  
|Congress Center, Chicago, IL  Acquired
    January 9, 2003 |  |            | 30.00 | % |                   | $ | 11,727,000 | 
|Park Sahara, Las Vegas, NV  Acquired March 18,
    2003    |  |            | 4.75  | % |                   |   | 153,000    | 
|                                                            |  |            |       |   |                   |  
|                                                            |  |            |       |   |                   | $ | 11,880,000 | 
|                                                            |  |            |       |   |                   |  



|                               |  |              |             | 
|------------------------------ |  | ------------ | ----------- | 
|                               |  | As of        |            
|                               |  | December 31, |            
|                               |  | 2004         |            
|                               |  |              |            
|Assets (primarily real estate) |  | $            | 152,410,000 | 
|                               |  |              |            
|Mortgages notes payable        |  |              | 105,606,000 | 
|Other liabilities              |  |              | 5,295,000   | 
|Equity                         |  |              | 41,509,000  | 
|                               |  |              |            
|Total liabilities and equity   |  | $            | 152,410,000 | 
|                               |  |              |            
|Our share of equity            |  | $            | 11,880,000  | 
|                               |  |              |            

|                              |  |                         |            |  |      |   |            |      |  |   |            | 
|----------------------------- |  | ----------------------- | ---------- |  | ---- | - | ---------- | ---- |  | - | ---------- | 
|                              |  | Year Ended December 31, |           
|                              |  |                         |           
|                              |  | 2005                    |            |  | 2004 |   |            | 2003 | 
|                              |  |                         |            |  |      |   |            |      | 
|Revenues                      |  | $                       | 20,512,000 |  |      | $ | 19,104,000 |      |  | $ | 15,892,000 | 
|Rental and other expenses     |  |                         | 16,195,000 |  |      |   | 21,888,000 |      |  |   | 15,218,000 | 
|                              |  |                         |            |  |      |   |            |      | 
|Net income (loss)             |  | $                       | 4,317,000  |  |      | $ | (2,784,000 | )    |  | $ | 674,000    | 
|                              |  |                         |            |  |      |   |            |      | 
|Our equity in earnings (loss) |  | $                       | 1,337,000  |  |      | $ | (604,000   | )    |  | $ | 204,000    | 
|                              |  |                         |            |  |      |   |            |      | 



| |                                                  
| | -------------------------------------------------
| | Dispositions of Unconsolidated Properties in 2005







| |                                                
| | -----------------------------------------------
| | Acquisitions of Consolidated Properties in 2005



| |                                              
| | ---------------------------------------------
| | Opus Plaza at Ken Caryl  Littleton, Colorado



93



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                 
| | --------------------------------
| | Eaton Freeway  Phoenix, Arizona





| |                                                
| | -----------------------------------------------
| | Dispositions of Consolidated Properties in 2005



| |                                     
| | ------------------------------------
| | 525 B Street  San Diego, California



94



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                                
| | -----------------------------------------------
| | Acquisitions of Consolidated Properties in 2004



|                            |  |                    |  |                   |  |            |        |      |          |           |             |                |  |   |             |  |  |              |           |  |  |   |            | 
|--------------------------- |  | ------------------ |  | ----------------- |  | ---------- | ------ | ---- | -------- | --------- | ----------- | -------------- |  | - | ----------- |  |  | ------------ | --------- |  |  | - | ---------- | 
|                            |  |                    |  |                   |  |            |        |      |          | Borrowing |             |                |  |   |            
|                            |  |                    |  |                   |  | Ownership  |        |      | Purchase |           |             | Incurred at    |  |   | Square      |  |  | Commission   |          
|Property Description        |  | Location           |  | Purchase Date     |  | Percentage |        |      | Price    |           |             | Acquisition(1) |  |   | Feet        |  |  | to Realty(2) |          
|                            |  |                    |  |                   |  |            |        |      |          |           |             |                |  |   |             |  |  |              |          
|AmberOaks Corporate Center  |  | Austin, TX         |  | January 20, 2004  |  |            | 100.00 | %    |          | $         | 35,525,000  |                |  | $ | 14,250,000  |  |  |              | 282,000   |  |  | $ | 909,000    | 
|Public Ledger Building      |  | Philadelphia, PA   |  | February 13, 2004 |  |            | 100.00 | %    |          |           | 33,950,000  |                |  |   | 25,000,000  |  |  |              | 472,000   |  |  |   | 965,000    | 
|Madrona Buildings           |  | Torrance, CA       |  | March 31, 2004    |  |            | 100.00 | %    |          |           | 45,900,000  |                |  |   | 28,458,000  |  |  |              | 211,000   |  |  |   | 1,350,000  | 
|Brunswig Square             |  | Los Angeles, CA    |  | April 5, 2004     |  |            | 100.00 | %    |          |           | 23,805,000  |                |  |   | 15,830,000  |  |  |              | 136,000   |  |  |   | 716,000    | 
|North Belt Corporate Center |  | Houston, TX        |  | April 8, 2004     |  |            | 100.00 | %    |          |           | 12,675,000  |                |  |   |            |  |  |              | 156,000   |  |  |   | 400,000    | 
|Hawthorne Plaza             |  | San Francisco, CA  |  | April 20, 2004    |  |            | 100.00 | %    |          |           | 97,000,000  |                |  |   | 62,750,000  |  |  |              | 419,000   |  |  |   | 2,900,000  | 
|Pacific Place               |  | Dallas, TX         |  | May 26, 2004      |  |            | 100.00 | %    |          |           | 29,900,000  |                |  |   |            |  |  |              | 324,000   |  |  |   | 897,000    | 
|525 B Street  Golden Eagle |  | San Diego, CA      |  | June 14, 2004     |  |            | 100.00 | %    |          |           | 96,310,000  |                |  |   | 69,943,000  |  |  |              | 424,000   |  |  |   | 1,445,000  | 
|600 B Street  Comerica     |  | San Diego, CA      |  | June 14, 2004     |  |            | 100.00 | %    |          |           | 77,190,000  |                |  |   | 56,057,000  |  |  |              | 339,000   |  |  |   | 1,158,000  | 
|Western Place I & II        |  | Fort Worth, TX     |  | July 23, 2004     |  |            | 78.50  | %(3) |          |           | 33,500,000  |                |  |   | 24,000,000  |  |  |              | 429,000   |  |  |   | 1,000,000  | 
|Pax River Office Park       |  | Lexington Park, MD |  | August 6, 2004    |  |            | 100.00 | %    |          |           | 14,000,000  |                |  |   |            |  |  |              | 172,000   |  |  |   | 420,000    | 
|One Financial Plaza         |  | St. Louis, MO      |  | August 6, 2004    |  |            | 77.63  | %(3) |          |           | 37,000,000  |                |  |   | 30,750,000  |  |  |              | 434,000   |  |  |   | 1,155,000  | 
|                            |  |                    |  |                   |  |            |        |      |          |           |             |                |  |   |             |  |  |              |          
|Totals                      |  |                    |  |                   |  |            |        |      |          | $         | 536,755,000 |                |  | $ | 327,038,000 |  |  |              | 3,798,000 |  |  | $ | 13,315,000 | 
|                            |  |                    |  |                   |  |            |        |      |          |           |             |                |  |   |             |  |  |              |          






|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the amount of the mortgage loan assumed by us upon
    the closing of the acquisition by us or newly placed on the
    property at closing.                         
|   
|(2) | Realty, an affiliate of our Advisor, which was solely owned by
    Anthony W. Thompson, through December 31, 2004 (At
    December 31, 2005, Mr. Thompson owned 84% of Realty).
|   
|(3) | Our TIC ownership interest.                                                                                                                                                    



95



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                                
| | -----------------------------------------------
| | Acquisitions of Consolidated Properties in 2003



|                                  |        |                |  |                   |  |            |        |      |          |           |             |                |  |   |            |             |  |           |         |           |  |   |           |           | 
|--------------------------------- | ------ | -------------- |  | ----------------- |  | ---------- | ------ | ---- | -------- | --------- | ----------- | -------------- |  | - | ---------- | ----------- |  | --------- | ------- | --------- |  | - | --------- | --------- | 
|                                  |        |                |  |                   |  |            |        |      |          | Borrowing |             |                |  |   | Commission |            
|                                  |        |                |  |                   |  | Ownership  |        |      | Purchase |           |             | Incurred at    |  |   | Square     |             |  | to        |        
|Property Description              |        | Location       |  | Purchase Date     |  | Percentage |        |      | Price    |           |             | Acquisition(1) |  |   | Feet       |             |  | Realty(2) |        
|                                  |        |                |  |                   |  |            |        |      |          |           |             |                |  |   |            |             |  |           |        
|Atrium Building                   |        | Lincoln, NB    |  | January 31, 2003  |  |            | 100.00 | %    |          | $         | 4,532,000   |                |  | $ | 2,200,000  |             |  |           | 167,000 |           |  | $ | 132,000   |          
|Department of Children and Family |        | Plantation, FL |  | April 25, 2003    |  |            | 100.00 | %    |          |           | 11,580,000  |                |  |   | 7,605,000  |             |  |           | 124,000 |           |  |   | 300,000   |          
|Gemini Plaza                      |        | Houston, TX    |  | May 2, 2003       |  |            | 100.00 | %    |          |           | 15,000,000  |                |  |   | 9,815,000  |             |  |           | 159,000 |           |  |   | 325,000   |          
|Bay View Plaza                    |        | Alameda, CA    |  | July 31, 2003     |  |            | 97.68  | %(3) |          |           | 11,655,000  |                |  |   |           |             |  |           | 61,000  |           |  |   | 380,000   |          
|North Pointe Corporate Center     |        | Sacramento, CA |  | August 11, 2003   |  |            | 100.00 | %    |          |           | 24,205,000  |                |  |   |           |             |  |           | 133,000 |           |  |   | 705,000   |          
|824 Market St.                    |        | Wilmington, DE |  | October 10, 2003  |  |            | 100.00 | %    |          |           | 31,900,000  |                |  |   |           |             |  |           | 202,000 |           |  |   | 970,000   |          
|Sutter Square Galleria            |        | Sacramento, CA |  | October 28, 2003  |  |            | 100.00 | %    |          |           | 8,240,000   |                |  |   | 4,024,000  |             |  |           | 61,000  |           |  |   | 240,000   |          
|One World Trade Center            |        | Long Beach, CA |  | December 5, 2003  |  |            | 100.00 | %    |          |           | 113,648,000 |                |  |   | 77,000,000 |             |  |           | 573,000 |           |  |   | 2,400,000 |          
|Centerpoint Corporate Park        |        | Kent, WA       |  | December 30, 2003 |  |            | 100.00 | %    |          |           | 54,220,000  |                |  |   | 25,029,000 |             |  |           | 436,000 |           |  |   | 1,627,000 |          
|                                  |        |                |  |                   |  |            |        |      |          |           |             |                |  |   |            |             |  |           |        
|                                  | Totals |                |  |                   |  |            |        |      |          |           | $           | 274,980,000    |  |   | $          | 125,673,000 |  |           |         | 1,916,000 |  |   | $         | 7,079,000 | 
|                                  |        |                |  |                   |  |            |        |      |          |           |             |                |  |   |            |             |  |           |        






|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the amount of the mortgage loan assumed by us upon
    the closing of the acquisition by us or newly placed on the
    property at closing.                         
|   
|(2) | Realty, an affiliate of our Advisor, which was solely owned by
    Anthony W. Thompson, through December 31, 2004 (At
    December 31, 2005, Mr. Thompson owned 84% of Realty).
|   
|(3) | Our TIC ownership interest.                                                                                                                                                    



96



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                
|-- | ---------------
|7. | Restricted Cash





|   |                                           
|-- | ------------------------------------------
|8. | Investment in Marketable Equity Securities



|                  |                   |            |   |                  |       |  |   |           |  |  |            |   |  |  |   |           | 
|----------------- | ----------------- | ---------- | - | ---------------- | ----- |  | - | --------- |  |  | ---------- | - |  |  | - | --------- | 
|                  |                   |            |   | Gross Unrealized |       |  |  
|                  |                   | Historical |   |                  |       |  |   | Estimated | 
|                  |                   | Cost       |   |                  | Gains |  |   | Losses    |  |  | Fair Value |  
|                  |                   |            |   |                  |       |  |   |           |  |  |            |  
|December 31, 2004 |                   |            |   |                  |       |  |   |           |  |  |            |   |  |  |   |          
|                  | Equity securities |            | $ | 2,106,000        |       |  | $ | 55,000    |  |  |            |  |  |  | $ | 2,161,000 | 
|                  |                   |            |   |                  |       |  |   |           |  |  |            |  





|   |             
|-- | ------------
|9. | Other Assets



|                              |                    |              |         |         | 
|----------------------------- | ------------------ | ------------ | ------- | ------- | 
|                              |                    | December 31, |        
|                              |                    | 2004         |        
|                              |                    |              |        
|Prepaid expenses and deposits |                    | $            | 133,000 |        
|Deferred tax asset            |                    |              | 30,000  |        
|                              |                    |              |        
|                              | Total other assets |              | $       | 163,000 | 
|                              |                    |              |        



|    |                       
|--- | ----------------------
|10. | Mortgage Loans Payable







97



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|           |  |        |             | 
|---------- |  | ------ | ----------- | 
|Year       |  | Amount |            
|           |  |        |            
|2006       |  | $      | 58,004,000  | 
|2007       |  |        | 30,069,000  | 
|2008       |  |        | 2,199,000   | 
|2009       |  |        | 31,499,000  | 
|2010       |  |        | 2,769,000   | 
|Thereafter |  |        | 225,862,000 | 
|           |  |        |            
|           |  | $      | 350,402,000 | 

Derivative
Instruments and Hedging Activities.




|                |  |                |   |            |  |      |  |  |          |   |  |  |           | 
|--------------- |  | -------------- | - | ---------- |  | ---- |  |  | -------- | - |  |  | --------- | 
|Notional Amount |  | Carrying Value |   | Instrument |  | Rate |  |  | Maturity |  
|                |  |                |   |            |  |      |  |  |          |  
|$75,000,000     |  | $              |  |            |  | Cap  |  |  | 5.75     | % |  |  | 1/31/2006 | 
|14,000,000      |  |                |  |            |  | Cap  |  |  | 5.00     | % |  |  | 3/1/2006  | 
|                |  |                |   |            |  |      |  |  |          |   | 
|$89,000,000     |  | $              |  |            |  |      |  |  |          |   |  |  |           | 
|                |  |                |   |            |  |      |  |  |          |   | 





|    |                               
|--- | ------------------------------
|11. | Credit Facility and Other Debt



| |                
| | ---------------
| | Credit Facility





98



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










| |           
| | ----------
| | Other Debt





|    |                   
|--- | ------------------
|12. | Minority Interests



|                     |  |               |          |              |                |  |       |  
|-------------------- |  | ------------- | -------- | ------------ | -------------- |  | ----- | -
|                     |  |               |          | TIC Minority |               
|                     |  |               |          | Interest(s)  |               
|Property             |  | Date Acquired |          |              | (Unaffiliated) | 
|                     |  |               |          |              |                | 
|Bay View Plaza       |  |               | 07/31/03 |              |                |  | 2.32  | %
|Western Place I & II |  |               | 07/23/04 |              |                |  | 21.50 | %
|One Financial Plaza  |  |               | 08/06/04 |              |                |  | 22.38 | %



99



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                     
|--- | --------------------
|13. | Stockholders Equity



| |             
| | ------------
| | Common Stock











| |                              
| | -----------------------------
| | Dividend Reinvestment Program







| |                      
| | ---------------------
| | Share Repurchase Plan





100



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



| |                                       
| | --------------------------------------
| | Independent Director Stock Option Plan





| |                                       
| | --------------------------------------
| | Officer and Employee Stock Option Plan





| |                          
| | -------------------------
| | 2004 Incentive Award Plan



101



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G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                |  |           |         |          |          |   |            |                |  |   |       |  
|----------------------------------------------- |  | --------- | ------- | -------- | -------- | - | ---------- | -------------- |  | - | ----- | -
|                                                |  |           |         | Range of |          |   | Weighted   |               
|                                                |  | Number    |         |          | Exercise |   |            | Average        | 
|Options Outstanding at                          |  | of Shares |         |          | Prices   |   |            | Exercise Price | 
|                                                |  |           |         |          |          |   |            |                | 
|December 31, 2002 (no options exercisable)      |  |           | 110,000 |          |          | $ | 9.05       |                |  | $ | 9.05  |  
|Granted (weighted average fair value of $1.09)  |  |           | 20,000  |          |          |   | 9.05       |                |  |   | 9.05  |  
|Cancelled                                       |  |           | (25,000 | )        |          |   | 9.05       |                |  |   | 9.05  |  
|December 31, 2003 (no options exercisable)      |  |           | 105,000 |          |          |   | 9.05       |                |  |   | 9.05  |  
|Granted (weighted-average fair value of $1.13)  |  |           | 365,000 |          |          |   | 9.00       |                |  |   | 9.00  |  
|Cancelled                                       |  |           | (50,000 | )        |          |   | (9.00      | )              |  |   | (9.00 | )
|                                                |  |           |         |          |          |   |            |                | 
|December 31, 2004 (85,000 options exercisable)  |  |           | 420,000 |          |          | $ | 9.00-$9.05 |                |  | $ | 9.00  |  
|Granted                                         |  |           |        |          |          |   |           |                |  |   |      |  
|Cancelled                                       |  |           |        |          |          |   |           |                |  |   |      |  
|December 31, 2005 (105,000 options exercisable) |  |           | 420,000 |          |          | $ | 9.00-$9.05 |                |  | $ | 9.00  |  
|                                                |  |           |         |          |          |   |            |                | 



|                  |  |                    |  |                       |  |                |  |                    |  |               
|----------------- |  | ------------------ |  | --------------------- |  | -------------- |  | ------------------ |  | --------------
|                  |  |                    |  | Weighted Average      |  |                |  |                    |  |               
|Range of Exercise |  |                    |  | Remaining Contractual |  | Exercise Price |  |                    |  | Exercise Price
|Prices            |  | Number Outstanding |  | Life (Years)          |  |  Options      |  | Number Exercisable |  |  Options     
|                  |  |                    |  |                       |  |                |  |                    |  |               
|$9.00-$9.05       |  | 420,000            |  | 7.66                  |  | $9.00-$9.05    |  | 105,000            |  | $9.00-$9.05   





|    |                    
|--- | -------------------
|14. | Future Minimum Rent



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



102



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|            |       |        |            |             | 
|----------- | ----- | ------ | ---------- | ----------- | 
|Year Ending |       | Amount |           
|            |       |        |           
|2006        |       | $      | 87,474,000 |            
|2007        |       |        | 80,602,000 |            
|2008        |       |        | 65,866,000 |            
|2009        |       |        | 56,037,000 |            
|2010        |       |        | 42,846,000 |            
|Thereafter  |       |        | 74,354,000 |            
|            |       |        |           
|            | Total |        | $          | 407,179,000 | 
|            |       |        |           





|    |                           
|--- | --------------------------
|15. | Related Party Transactions



| |                   
| | ------------------
| | Advisory Agreement



| |              
| | -------------
| | Advisory Fees

month-to day-to




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





| |                            
| | ---------------------------
| | Real Estate Disposition Fee



103



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                  
| | -----------------
| | Lease Commissions





| |                         
| | ------------------------
| | Property Management Fees





| |                        
| | -----------------------
| | Incentive Distributions





| |                                           
| | ------------------------------------------
| | Related Party Accounts Receivable/ Payable





| |                                           
| | ------------------------------------------
| | Unconsolidated Debt Due to Related Parties





| |                              
| | -----------------------------
| | Cunningham Lending Group, LLC





| |                           
| | --------------------------
| | Triple Net Properties, LLC



104



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                  
| | -----------------
| | Offering Expenses



| |                    
| | -------------------
| | Selling Commissions





| |                                                       
| | ------------------------------------------------------
| | Marketing and Due Diligence Expense Reimbursement Fees





| |                                   
| | ----------------------------------
| | Organization and Offering Expenses





| |              
| | -------------
| | Joint Venture





|    |                              
|--- | -----------------------------
|16. | Commitments and Contingencies



| |                 
| | ----------------
| | Operating Leases





40-year


105



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


40-year






|            |       |   |         |           | 
|----------- | ----- | - | ------- | --------- | 
|Year Ending |       |  
|            |       |  
|2006        |       | $ | 371,000 |          
|2007        |       |   | 371,000 |          
|2008        |       |   | 371,000 |          
|2009        |       |   | 371,000 |          
|2010        |       |   | 371,000 |          
|Thereafter  |       |   | 665,000 |          
|            |       |   |        
|            | Total |   | $       | 2,520,000 | 
|            |       |   |        



| |                  
| | -----------------
| | SEC Investigation

In the matter of Triple Net Properties, LLC.


Accounting for Contingencies.




| |                         
| | ------------------------
| | Prior Performance Tables



106



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


8-K




| |           
| | ----------
| | Litigation





| |                      
| | ---------------------
| | Environmental Matters





| |                    
| | -------------------
| | Unconsolidated Debt







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





|    |                                                       
|--- | ------------------------------------------------------
|17. | Discontinued Operations  Properties Held for
    Sale

Accounting for the Impairment or
Disposal of Long-Lived Assets


107



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                  |  |                |                    |  |           |  |                 | 
|--------------------------------- |  | -------------- | ------------------ |  | --------- |  | --------------- | 
|Property                          |  | Date Purchased |                    |  | Date Sold | 
|                                  |  |                |                    |  |           | 
|5508 West Highway 290 Building    |  |                | September 13, 2002 |  |           |  |                | 
|Two Corporate Plaza               |  |                | November 27, 2002  |  |           |  |                | 
|Atrium Building                   |  |                | January 31, 2003   |  |           |  |                | 
|Department of Children and Family |  |                | April 25, 2003     |  |           |  |                | 
|Gemini Plaza                      |  |                | May 2, 2003        |  |           |  |                | 
|Bay View Plaza                    |  |                | July 31, 2003      |  |           |  |                | 
|North Pointe Corporate Center     |  |                | August 11, 2003    |  |           |  |                | 
|824 Market St.                    |  |                | October 10, 2003   |  |           |  |                | 
|Sutter Square Galleria            |  |                | October 28, 2003   |  |           |  |                | 
|One World Trade Center            |  |                | December 5, 2003   |  |           |  |                | 
|Centerpoint Corporate Park        |  |                | December 30, 2003  |  |           |  |                | 
|AmberOaks Corporate Center        |  |                | January 20, 2004   |  |           |  |                | 
|Public Ledger Building            |  |                | February 13, 2004  |  |           |  |                | 
|Madrona Buildings                 |  |                | March 31, 2004     |  |           |  |                | 
|Brunswig Square                   |  |                | April 5, 2004      |  |           |  |                | 
|North Belt Corporate Center       |  |                | April 8, 2004      |  |           |  |                | 
|Hawthorne Plaza                   |  |                | April 20, 2004     |  |           |  |                | 
|Pacific Place                     |  |                | May 26, 2004       |  |           |  |                | 
|525 B Street  Golden Eagle       |  |                | June 14, 2004      |  |           |  | August 10, 2005 | 
|600 B Street  Comerica           |  |                | June 14, 2004      |  |           |  |                | 
|Western Place I & II              |  |                | July 23, 2004      |  |           |  |                | 
|Pax River Office Park             |  |                | August 6, 2004     |  |           |  |                | 
|One Financial Plaza               |  |                | August 6, 2004     |  |           |  |                | 
|Opus Plaza at Ken Caryl           |  |                | September 12, 2005 |  |           |  |                | 
|Eaton Freeway Industrial Park     |  |                | October 21, 2005   |  |           |  |                | 

108



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                               |                                                                           |              |             |             |              |   |            |              |  |   |            |            | 
|------------------------------------------------------------------------------ | ------------------------------------------------------------------------- | ------------ | ----------- | ----------- | ------------ | - | ---------- | ------------ |  | - | ---------- | ---------- | 
|                                                                               |                                                                           | Years Ended  |            
|                                                                               |                                                                           |              |            
|                                                                               |                                                                           | December 31, |             |             | December 31, |   |            | December 31, | 
|                                                                               |                                                                           | 2005         |             |             | 2004         |   |            | 2003         | 
|                                                                               |                                                                           |              |             |             |              |   |            |              | 
|Revenues                                                                       |                                                                           |              |             |             |              |   |            |              |  |   |            |           
|                                                                               | Rental income                                                             |              | $           | 118,912,000 |              |   | $          | 94,911,000   |  |   | $          | 12,428,000 | 
|                                                                               | Interest income                                                           |              |             | 216,000     |              |   |            | 91,000       |  |   |            | 6,000      | 
|                                                                               |                                                                           |              |             |             |              |   |            |              | 
|                                                                               |                                                                           |              | 119,128,000 |             |              |   | 95,002,000 |              |  |   | 12,434,000 |           
|Expenses                                                                       |                                                                           |              |             |             |              |   |            |              |  |   |            |           
|                                                                               | Rental expenses                                                           |              |             | 56,310,000  |              |   |            | 41,245,000   |  |   |            | 4,983,000  | 
|                                                                               | Depreciation and amortization                                             |              |             | 39,027,000  |              |   |            | 34,832,000   |  |   |            | 3,756,000  | 
|                                                                               | Interest expense (including amortization of deferred financing
    costs) |              |             | 28,189,000  |              |   |            | 17,709,000   |  |   |            | 2,355,000  | 
|Minority interest                                                              |                                                                           |              | (183,000    | )           |              |   | (9,000     | )            |  |   | 3,000      |           
|                                                                               |                                                                           |              |             |             |              |   |            |              | 
|Income (loss) from discontinued operations 
    properties held for sale, net |                                                                           |              | (4,215,000  | )           |              |   | 1,225,000  |              |  |   | 1,337,000  |           
|Gain on sale of real estate                                                    |                                                                           |              | 10,550,000  |             |              |   |           |              |  |   |           |           
|                                                                               |                                                                           |              |             |             |              |   |            |              | 
|                                                                               |                                                                           | $            | 6,335,000   |             |              | $ | 1,225,000  |              |  | $ | 1,337,000  |           
|                                                                               |                                                                           |              |             |             |              |   |            |              | 



|                                                                                     |  |              |             | 
|------------------------------------------------------------------------------------ |  | ------------ | ----------- | 
|                                                                                     |  | December 31, |            
|                                                                                     |  | 2004         |            
|                                                                                     |  |              |            
|Operating properties, net of accumulated depreciation of
    $24,872,000             |  | $            | 761,282,000 | 
|Identified intangible assets, net of accumulated amortization of
    $13,475,000     |  |              | 84,984,000  | 
|Lease commissions, net of accumulated amortization of $113,000                       |  |              | 1,780,000   | 
|Loan fees, net of accumulated amortization of $2,433,000                             |  |              | 4,576,000   | 
|Other assets                                                                         |  |              | 5,069,000   | 
|Total assets                                                                         |  |              | 893,315,000 | 
|Mortgage loans payable secured by properties held for sale                           |  |              | 442,275,000 | 
|Credit facility secured by properties held for sale                                  |  |              | 58,369,000  | 
|Identified intangible liabilities, net of accumulated
    amortization of $5,839,000 |  |              | 25,563,000  | 
|Security deposits and prepaid rent                                                   |  |              | 5,551,000   | 
|Minority liability  properties held for sale                                        |  |              | 6,830,000   | 
|Total liabilities                                                                    |  |              | 554,502,000 | 
|Total equity                                                                         |  |              | 338,813,000 | 



| |                  
| | -----------------
| | Intangible Assets





109



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                       
| | ----------------------
| | Intangible Liabilities







|    |                               
|--- | ------------------------------
|18. | Tax Treatment of Distributions



|                  |  |                          |            |  |      |  |        |      |  |   |            |  |  |  |        |   |  |   |           |  |  |  |        |  
|----------------- |  | ------------------------ | ---------- |  | ---- |  | ------ | ---- |  | - | ---------- |  |  |  | ------ | - |  | - | --------- |  |  |  | ------ | -
|                  |  | Years Ended December 31, |           
|                  |  |                          |           
|                  |  | 2005                     |            |  | 2004 |  |        | 2003 | 
|                  |  |                          |            |  |      |  |        |      | 
|Ordinary income   |  | $                        | 3,333,000  |  |      |  | 10.12  | %    |  | $ | 12,774,000 |  |  |  | 48.36  | % |  | $ | 2,432,000 |  |  |  | 46.39  | %
|Capital gain      |  |                          | 11,963,000 |  |      |  | 36.34  | %    |  |   |           |  |  |  |       |   |  |   |          |  |  |  |       |  
|Return of capital |  |                          | 17,628,000 |  |      |  | 53.54  | %    |  |   | 13,642,000 |  |  |  | 51.64  | % |  |   | 2,810,000 |  |  |  | 53.61  | %
|                  |  |                          |            |  |      |  |        |      |  |   |            |  |  |  |        |   |  |  
|                  |  | $                        | 32,924,000 |  |      |  | 100.00 | %    |  | $ | 26,416,000 |  |  |  | 100.00 | % |  | $ | 5,242,000 |  |  |  | 100.00 | %
|                  |  |                          |            |  |      |  |        |      |  |   |            |  |  |  |        |   |  |  



|    |                                              
|--- | ---------------------------------------------
|19. | Selected Quarterly Financial Data (Unaudited)



|                                                                             |  |                |            |   |               |   |            |          |  |   |            |   |  |   |            |  
|---------------------------------------------------------------------------- |  | -------------- | ---------- | - | ------------- | - | ---------- | -------- |  | - | ---------- | - |  | - | ---------- | -
|                                                                             |  | Quarters Ended |           
|                                                                             |  |                |           
|                                                                             |  | December 31,   |            |   | September 30, |   |            | June 30, |  |   | March 31,  |  
|                                                                             |  | 2005           |            |   | 2005          |   |            | 2005     |  |   | 2005       |  
|                                                                             |  |                |            |   |               |   |            |          |  |   |            |  
|General and administrative expenses                                          |  | $              | 1,874,000  |   |               | $ | 609,000    |          |  | $ | 975,000    |   |  | $ | 548,000    |  
|                                                                             |  |                |            |   |               |   |            |          |  |   |            |  
|Loss before other (expense) and discontinued operations                      |  |                | (1,874,000 | ) |               |   | (609,000   | )        |  |   | (975,000   | ) |  |   | (548,000   | )
|Other (expense)                                                              |  |                | (256,000   | ) |               |   | (194,000   | )        |  |   | (411,000   | ) |  |   | (176,000   | )
|Equity in earnings of unconsolidated real estate                             |  |                | 340,000    |   |               |   | 311,000    |          |  |   | 533,000    |   |  |   | 153,000    |  
|                                                                             |  |                |            |   |               |   |            |          |  |   |            |  
|Loss from continuing operations                                              |  |                | (1,790,000 | ) |               |   | (492,000   | )        |  |   | (853,000   | ) |  |   | (571,000   | )
|Income (loss) from discontinued operations                                   |  |                | (1,377,000 | ) |               |   | 8,852,000  |          |  |   | (1,793,000 | ) |  |   | 653,000    |  
|                                                                             |  |                |            |   |               |   |            |          |  |   |            |  
|Net income (loss)                                                            |  | $              | (3,167,000 | ) |               | $ | 8,360,000  |          |  | $ | (2,646,000 | ) |  | $ | 82,000     |  
|                                                                             |  |                |            |   |               |   |            |          |  |   |            |  
|Earnings (loss) per share  basic and diluted                                |  | $              | (0.07      | ) |               | $ | 0.19       |          |  | $ | (0.06      | ) |  | $ | 0.00       |  
|                                                                             |  |                |            |   |               |   |            |          |  |   |            |  
|Weighted-average number of common shares outstanding 
    basic and diluted |  |                | 43,869,000 |   |               |   | 43,869,000 |          |  |   | 43,865,000 |   |  |   | 43,865,000 |  

110



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                              |  |                |            |   |               |   |            |          |  |   |            |   |  |   |            |  
|----------------------------------------------------------------------------- |  | -------------- | ---------- | - | ------------- | - | ---------- | -------- |  | - | ---------- | - |  | - | ---------- | -
|                                                                              |  | Quarters Ended |           
|                                                                              |  |                |           
|                                                                              |  | December 31,   |            |   | September 30, |   |            | June 30, |  |   | March 31,  |  
|                                                                              |  | 2004           |            |   | 2004          |   |            | 2004     |  |   | 2004       |  
|                                                                              |  |                |            |   |               |   |            |          |  |   |            |  
|General and administrative expenses                                           |  | $              | 1,182,000  |   |               | $ | 225,000    |          |  | $ | 642,000    |   |  | $ | 370,000    |  
|                                                                              |  |                |            |   |               |   |            |          |  |   |            |  
|Loss before other (expense) income and discontinued operations                |  |                | (1,182,000 | ) |               |   | (225,000   | )        |  |   | (642,000   | ) |  |   | (370,000   | )
|Other (expense) income                                                        |  |                | (92,000    | ) |               |   | 607,000    |          |  |   | 513,000    |   |  |   | (1,106,000 | )
|Equity in earnings (losses) of unconsolidated real estate                     |  |                | (349,000   | ) |               |   | (356,000   | )        |  |   | 97,000     |   |  |   | 4,000      |  
|                                                                              |  |                |            |   |               |   |            |          |  |   |            |  
|Income (loss) from continuing operations                                      |  |                | (1,623,000 | ) |               |   | 26,000     |          |  |   | (32,000    | ) |  |   | (1,472,000 | )
|Income (loss) from discontinued operations                                    |  |                | 586,000    |   |               |   | (1,344,000 | )        |  |   | 478,000    |   |  |   | 1,505,000  |  
|                                                                              |  |                |            |   |               |   |            |          |  |   |            |  
|Net income (loss)                                                             |  | $              | (1,037,000 | ) |               | $ | (1,318,000 | )        |  | $ | 446,000    |   |  | $ | 33,000     |  
|                                                                              |  |                |            |   |               |   |            |          |  |   |            |  
|Earnings (loss) per share  basic and diluted                                 |  | $              | (0.02      | ) |               | $ | (0.03      | )        |  | $ | 0.01       |   |  | $ | 0.00       |  
|                                                                              |  |                |            |   |               |   |            |          |  |   |            |  
|Weighted-average number of common shares
    outstanding   basic and diluted |  |                | 43,865,000 |   |               |   | 43,855,000 |          |  |   | 40,135,000 |   |  |   | 21,336,000 |  



|    |                      
|--- | ---------------------
|20. | Business Combinations







111



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                  
|--- | -----------------
|21. | Subsequent Events





112



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##### Table of Contents



G REIT, INC.





SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


|                                                                    |  |              |         |  |            |            |         |               |  |   |            |   |  |   |         | 
|------------------------------------------------------------------- |  | ------------ | ------- |  | ---------- | ---------- | ------- | ------------- |  | - | ---------- | - |  | - | ------- | 
|                                                                    |  |              |         |  |            | Deductions |         |               | 
|                                                                    |  | Balance at   |         |  | Charged to |            |         | (Write-off of |  |   | Balance at |  
|                                                                    |  | Beginning of |         |  | Costs and  |            |         | Uncollectible |  |   | End of     |  
|                                                                    |  | Period       |         |  | Expenses   |            |         | Account)      |  |   | Period     |  
|                                                                    |  |              |         |  |            |            |         |               |  |   |            |  
|Allowance for Doubtful Accounts                                     |  |              |         |  |            |            |         |               |  |   |            |   |  |   |         | 
|Year Ended December 31, 2005   Allowance for
    doubtful accounts |  | $            | 321,000 |  |            | $          |        |               |  | $ | (321,000   | ) |  | $ |        | 
|Year Ended December 31, 2004   Allowance for
    doubtful accounts |  | $            | 150,000 |  |            | $          | 212,000 |               |  | $ | (41,000    | ) |  | $ | 321,000 | 
|Year Ended December 31, 2003   Allowance for
    doubtful accounts |  | $            |        |  |            | $          | 150,000 |               |  | $ |           |   |  | $ | 150,000 | 

G REIT, INC.


SCHEDULE III  REAL ESTATE OPERATING
PROPERTIES AND ACCUMULATED DEPRECIATION


|                              |  |                          |             |               |      |                               |                    |              |               |   |             |                 |  |              |             |  |               |   |             |       |  |  |                 |  |  |             |             |  |  |  |             |   |  |  |                | 
|----------------------------- |  | ------------------------ | ----------- | ------------- | ---- | ----------------------------- | ------------------ | ------------ | ------------- | - | ----------- | --------------- |  | ------------ | ----------- |  | ------------- | - | ----------- | ----- |  |  | --------------- |  |  | ----------- | ----------- |  |  |  | ----------- | - |  |  | -------------- | 
|                              |  |                          |             |               |      | Gross Amount at Which Carried |                    |              |               |   |            
|                              |  | Initial Costs to Company |             |               |      |                               | at Close of Period |              |               |   |             |                
|                              |  |                          |             |               |      |                               |                    |              |               |   |             |                
|                              |  |                          |             | Buildings and |      |                               |                    |              | Buildings and |   |             | Net Liquidation |  |              |             |  | Accumulated   |   |             | Date  | 
|                              |  | Encumbrance              |             |               | Land |                               |                    | Improvements |               |   | Land        |                 |  | Improvements |             |  | Adjustment(1) |   |             | Total |  |  | Depreciation(2) |  |  | Constructed |            
|                              |  |                          |             |               |      |                               |                    |              |               |   |             |                 |  |              |             |  |               |   |             |       |  |  |                 |  |  |             |            
|5508 Highway 290              |  | $                        | 6,695,000   |               |      | $                             | 1,153,000          |              |               | $ | 8,790,000   |                 |  | $            | 1,153,000   |  |               | $ | 8,943,000   |       |  |  |                |  |  | $           | 10,096,000  |  |  |  | (1,309,000  | ) |  |  | 2001           | 
|Two Corporate Plaza           |  |                          | 10,160,000  |               |      |                               | 1,748,000          |              |               |   | 12,388,000  |                 |  |              | 1,748,000   |  |               |   | 12,739,000  |       |  |  |                |  |  |             | 14,487,000  |  |  |  | (2,180,000  | ) |  |  | 1989           | 
|Atrium Building               |  |                          | 2,990,000   |               |      |                               | 419,000            |              |               |   | 3,907,000   |                 |  |              | 419,000     |  |               |   | 4,368,000   |       |  |  |                |  |  |             | 4,787,000   |  |  |  | (650,000    | ) |  |  | 1917           | 
|Dept. of Children             |  |                          | 7,605,000   |               |      |                               | 2,655,000          |              |               |   | 8,357,000   |                 |  |              | 2,655,000   |  |               |   | 8,386,000   |       |  |  |                |  |  |             | 11,041,000  |  |  |  | (1,076,000  | ) |  |  | 1973           | 
|Gemini                        |  |                          | 9,815,000   |               |      |                               | 1,220,000          |              |               |   | 13,314,000  |                 |  |              | 1,220,000   |  |               |   | 13,315,000  |       |  |  |                |  |  |             | 14,535,000  |  |  |  | (1,804,000  | ) |  |  | 1983           | 
|Bay View Plaza                |  |                          | 6,200,000   |               |      |                               | 1,879,000          |              |               |   | 9,044,000   |                 |  |              | 1,879,000   |  |               |   | 9,053,000   |       |  |  |                |  |  |             | 10,932,000  |  |  |  | (869,000    | ) |  |  | 2001           | 
|North Pointe                  |  |                          | 15,600,000  |               |      |                               | 1,979,000          |              |               |   | 22,224,000  |                 |  |              | 1,979,000   |  |               |   | 22,240,000  |       |  |  |                |  |  |             | 24,219,000  |  |  |  | (1,511,000  | ) |  |  | 1988           | 
|824 Market                    |  |                          | 13,800,000  |               |      |                               | 6,406,000          |              |               |   | 26,832,000  |                 |  |              | 6,406,000   |  |               |   | 29,647,000  |       |  |  |                |  |  |             | 36,053,000  |  |  |  | (2,840,000  | ) |  |  | 1984           | 
|Sutter Square                 |  |                          | 4,024,000   |               |      |                               |                   |              |               |   | 8,414,000   |                 |  |              |            |  |               |   | 8,483,000   |       |  |  |                |  |  |             | 8,483,000   |  |  |  | (581,000    | ) |  |  | 1987           | 
|One World Trade Center        |  |                          | 77,000,000  |               |      |                               | 22,851,000         |              |               |   | 92,211,000  |                 |  |              | 22,851,000  |  |               |   | 93,144,000  |       |  |  |                |  |  |             | 115,995,000 |  |  |  | (9,983,000  | ) |  |  | 1989           | 
|Centerpointe                  |  |                          | 25,029,000  |               |      |                               | 8,537,000          |              |               |   | 47,551,000  |                 |  |              | 8,537,000   |  |               |   | 48,695,000  |       |  |  |                |  |  |             | 57,232,000  |  |  |  | (4,207,000  | ) |  |  | 1986           | 
|AmberOaks                     |  |                          | 14,250,000  |               |      |                               | 7,138,000          |              |               |   | 21,302,000  |                 |  |              | 7,138,000   |  |               |   | 22,526,000  |       |  |  |                |  |  |             | 29,664,000  |  |  |  | (1,967,000  | ) |  |  | 1985           | 
|Public Ledger                 |  |                          | 25,000,000  |               |      |                               | 10,271,000         |              |               |   | 19,854,000  |                 |  |              | 10,271,000  |  |               |   | 20,867,000  |       |  |  |                |  |  |             | 31,138,000  |  |  |  | (1,851,000  | ) |  |  | 1927           | 
|Madrona Buildings             |  |                          | 28,458,000  |               |      |                               | 12,581,000         |              |               |   | 28,047,000  |                 |  |              | 12,581,000  |  |               |   | 29,507,000  |       |  |  |                |  |  |             | 42,088,000  |  |  |  | (1,822,000  | ) |  |  | 1990           | 
|Brunswig Square               |  |                          | 15,830,000  |               |      |                               | 8,803,000          |              |               |   | 12,362,000  |                 |  |              | 8,803,000   |  |               |   | 12,642,000  |       |  |  |                |  |  |             | 21,445,000  |  |  |  | (714,000    | ) |  |  | 1931           | 
|North Belt Corporate          |  |                          |            |               |      |                               | 692,000            |              |               |   | 9,167,000   |                 |  |              | 692,000     |  |               |   | 10,234,000  |       |  |  |                |  |  |             | 10,926,000  |  |  |  | (780,000    | ) |  |  | 1982           | 
|Hawthorne Plaza               |  |                          | 62,750,000  |               |      |                               | 15,828,000         |              |               |   | 66,392,000  |                 |  |              | 15,828,000  |  |               |   | 66,834,000  |       |  |  |                |  |  |             | 82,662,000  |  |  |  | (3,348,000  | ) |  |  | 1910           | 
|Pacific Place                 |  |                          |            |               |      |                               | 1,230,000          |              |               |   | 24,646,000  |                 |  |              | 1,230,000   |  |               |   | 26,283,000  |       |  |  |                |  |  |             | 27,513,000  |  |  |  | (1,372,000  | ) |  |  | 1982           | 
|600 B St                      |  |                          | 56,060,000  |               |      |                               | 4,216,000          |              |               |   | 60,550,000  |                 |  |              | 4,216,000   |  |               |   | 61,041,000  |       |  |  |                |  |  |             | 65,257,000  |  |  |  | (2,889,000  | ) |  |  | 1974           | 
|Pax River                     |  |                          |            |               |      |                               | 1,661,000          |              |               |   | 12,163,000  |                 |  |              | 1,661,000   |  |               |   | 12,203,000  |       |  |  |                |  |  |             | 13,864,000  |  |  |  | (482,000    | ) |  |  | 1983           | 
|Western Place I & II          |  |                          | 24,000,000  |               |      |                               | 2,397,000          |              |               |   | 27,652,000  |                 |  |              | 2,397,000   |  |               |   | 29,114,000  |       |  |  |                |  |  |             | 31,511,000  |  |  |  | (1,517,000  | ) |  |  | 1980           | 
|One Financial Plaza           |  |                          | 30,750,000  |               |      |                               | 2,973,000          |              |               |   | 29,504,000  |                 |  |              | 2,973,000   |  |               |   | 32,970,000  |       |  |  |                |  |  |             | 35,943,000  |  |  |  | (1,432,000  | ) |  |  | 1985           | 
|Opus Plaza at Ken Caryl       |  |                          | 6,700,000   |               |      |                               | 1,178,000          |              |               |   | 7,289,000   |                 |  |              | 1,178,000   |  |               |   | 7,289,000   |       |  |  |                |  |  |             | 8,467,000   |  |  |  | (64,000     | ) |  |  | 2002           | 
|Eaton Freeway                 |  |                          | 5,000,000   |               |      |                               | 1,299,000          |              |               |   | 5,663,000   |                 |  |              | 1,299,000   |  |               |   | 5,663,000   |       |  |  |                |  |  |             | 6,962,000   |  |  |  | (30,000     | ) |  |  | 1982,1985,1988 | 
|Net Liquidation Adjustment(1) |  |                          |            |               |      |                               |                   |              |               |   |            |                 |  |              |            |  |               |   |            |       |  |  | 165,452,000     |  |  |             | 165,452,000 |  |  |  |            |   |  |  |                | 
|                              |  |                          |             |               |      |                               |                    |              |               |   |             |                 |  |              |             |  |               |   |             |       |  |  |                 |  |  |             |            
|Total                         |  | $                        | 447,716,000 |               |      | $                             | 119,114,000        |              |               | $ | 577,623,000 |                 |  | $            | 119,114,000 |  |               | $ | 596,186,000 |       |  |  | 165,452,000     |  |  | $           | 880,752,000 |  |  |  | (45,278,000 | ) |  |  |                | 
|                              |  |                          |             |               |      |                               |                    |              |               |   |             |                 |  |              |             |  |               |   |             |       |  |  |                 |  |  |             |            

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|                               |  |          |      |                        |                     |  |          | 
|------------------------------ |  | -------- | ---- | ---------------------- | ------------------- |  | -------- | 
|                               |  |          |      | Maximum Life on Which  |                    
|                               |  |          |      | Depreciation in Latest |                    
|                               |  | Date     |      |                        | Income Statement is | 
|Description                    |  | Acquired |      |                        | Computed            | 
|                               |  |          |      |                        |                     | 
|5508 Highway 290 West Building |  |          | 2002 |                        |                     |  | 39 years | 
|Two Corporate Plaza            |  |          | 2002 |                        |                     |  | 39 years | 
|Atrium Building                |  |          | 2003 |                        |                     |  | 39 years | 
|Dept. of Children              |  |          | 2003 |                        |                     |  | 39 years | 
|Gemini                         |  |          | 2003 |                        |                     |  | 39 years | 
|Bay View Plaza                 |  |          | 2003 |                        |                     |  | 39 years | 
|North Pointe                   |  |          | 2003 |                        |                     |  | 39 years | 
|824 Market                     |  |          | 2003 |                        |                     |  | 39 years | 
|Sutter Square                  |  |          | 2003 |                        |                     |  | 39 years | 
|One World Trade Center         |  |          | 2003 |                        |                     |  | 39 years | 
|Centerpointe                   |  |          | 2003 |                        |                     |  | 39 years | 
|AmberOaks                      |  |          | 2004 |                        |                     |  | 39 years | 
|Public Ledger                  |  |          | 2004 |                        |                     |  | 39 years | 
|Madrona Buildings              |  |          | 2004 |                        |                     |  | 39 years | 
|Brunswig Square                |  |          | 2004 |                        |                     |  | 39 years | 
|North Belt Corporate           |  |          | 2004 |                        |                     |  | 39 years | 
|Hawthorne Plaza                |  |          | 2004 |                        |                     |  | 39 years | 
|Pacific Place                  |  |          | 2004 |                        |                     |  | 39 years | 
|600 B St.                      |  |          | 2004 |                        |                     |  | 39 years | 
|Pax River                      |  |          | 2004 |                        |                     |  | 39 years | 
|Western Place I & II           |  |          | 2004 |                        |                     |  | 39 years | 
|One Financial Plaza            |  |          | 2004 |                        |                     |  | 39 years | 
|Opus Plaza at Ken Caryl        |  |          | 2005 |                        |                     |  | 39 years | 
|Eaton Freeway                  |  |          | 2005 |                        |                     |  | 39 years | 






|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|(a) | The changes in total real estate for the year ended
    December 31, 2005 are as follows:

|                                                    |  |      |             |  
|--------------------------------------------------- |  | ---- | ----------- | -
|                                                    |  | 2005 |            
|                                                    |  |      |            
|Balance as of December 31, 2004                     |  | $    | 786,154,000 |  
|Acquisitions                                        |  |      | 15,429,000  |  
|Capital expenditures                                |  |      | 11,036,000  |  
|Liquidation adjustment, net                         |  |      | 165,452,000 |  
|Disposals                                           |  |      | (97,319,000 | )
|                                                    |  |      |            
|Balance as of December 31, 2005 (liquidation basis) |  | $    | 880,752,000 |  
|                                                    |  |      |            



|    |                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------
|(b) | The changes in accumulated depreciation for the year ended
    December 31, 2005 (liquidation basis) are as follows:

|                                |  |      |            |  
|------------------------------- |  | ---- | ---------- | -
|                                |  | 2005 |           
|                                |  |      |           
|Balance as of December 31, 2004 |  | $    | 24,872,000 |  
|Additions                       |  |      | 23,498,000 |  
|Disposals                       |  |      | (3,092,000 | )
|                                |  |      |           
|Balance as of December 31, 2005 |  | $    | 45,278,000 |  
|                                |  |      |           






|    |                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Under the liquidation basis of accounting, our real estate
    holding are now carried at their estimated fair value, as a
    result the net liquidation adjustment is the net adjustment that
    we have made to the carrying value of the property in order to
    reflect its fair value.
|   
|(2) | Depreciation expense will not be recorded subsequent to
    December 31, 2005 as a result of the adoption of our plan
    of liquidation, because all assets are considered held for sale.                                                                                                    

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SIGNATURES






| |             
| | ------------
| | G Reit, Inc.



| |     |                    
| | --- | -------------------
| | By: | /s/ Scott D. Peters

| | 
| | 
| | 



| |                                       
| | --------------------------------------
| | Scott D. Peters                       
| | Chief Executive Officer, and President







|                                           |  |                                       |  |                |  | 
|------------------------------------------ |  | ------------------------------------- |  | -------------- |  | 
|Name                                       |  | Title                                 |  | Date          
|                                           |  |                                       |  |               
|                                          
|/s/ Scott D. PetersScott D. Peters         |  | Chief Executive Officer and President |  | March 17, 2006
|                                          
|/s/ Courtney GulledgeCourtney Gulledge     |  | Chief Accounting Officer              |  | March 17, 2006
|                                          
|/s/ Anthony W. ThompsonAnthony W. Thompson |  | Chairman of the Board of Directors    |  | March 17, 2006
|                                          
|/s/ Gary T. WescombeGary T. Wescombe       |  | Director                              |  | March 17, 2006
|                                          
|/s/ Glenn L. CarpenterGlenn L. Carpenter   |  | Director                              |  | March 17, 2006
|                                          
|/s/ Edward A. JohnsonEdward A. Johnson     |  | Director                              |  | March 17, 2006
|                                          
|/s/ D. Fleet WallaceD. Fleet Wallace       |  | Director                              |  | March 17, 2006
|                                          
|/s/ W. Brand InlowW. Brand Inlow           |  | Director                              |  | March 17, 2006
|                                          
|/s/ Gary R. HuntGary R. Hunt               |  | Director                              |  | March 17, 2006

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##### Table of Contents



EXHIBIT INDEX


S-K,


10-K S-K).


|        |    |         |  |                                                                                                                                                                                                                                                                                                        
|------- | -- | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|Number  |    | Exhibit
|        |    |        
|        | 1  | .1      |  | Form of Dealer Manager Agreement between G REIT, Inc. and NNN
    Capital Corp. (included as Exhibit 1.1 to Amendment
    No. 2 to our Registration Statement on Form S-11 filed
    on January 23, 2004 (File No. 333-109640) and
    incorporated herein by reference).                              
|       
|        | 1  | .2      |  | Form of Participating Broker-Dealer Agreement (included as
    Exhibit 1.2 to Amendment No. 2 to our Registration
    Statement on Form S-11 filed on January 23, 2004 (File
    No. 333-109640) and incorporated herein by reference).                                                                
|       
|        | 2  | .1      |  | G REIT, Inc. Plan of Liquidation and Dissolution, as approved by
    stockholders on February 27, 2006 and as currently in
    effect (included as Exhibit A to our Definitive Proxy
    Statement filed on January 13, 2006 and incorporated herein
    by reference)                                 
|       
|        | 3  | .1      |  | Articles of Incorporation of G REIT, Inc. (as approved by
    stockholders on June 29, 2004 and as currently in effect
    (included as Appendix B to our Definitive Proxy Statement filed
    on May 27, 2004 and incorporated herein by reference).                                                  
|       
|        | 3  | .2      |  | Bylaws of G REIT, Inc. (as approved by stockholders on
    June 29, 2004 and as currently in effect (included as
    Appendix C to our Definitive Proxy Statement filed on
    May 27, 2004 and incorporated herein by reference).                                                                     
|       
|        | 4  | .1      |  | Form of our Common Stock Certificate (included as
    Exhibit 4.1 to our Registration Statement on Form S-11
    filed on January 9, 2002 (File No. 333-76498) and
    incorporated herein by reference).                                                                                              
|       
|        | 10 | .1      |  | Form of Agreement of Limited Partnership of G REIT, L.P.
    (included as Exhibit 10.1 to our Registration Statement on
    Form S-11 filed on January 9, 2002 (File
    No. 333-76498) and incorporated herein by reference).                                                                         
|       
|        | 10 | .2      |  | Amended and Restated Dividend Reinvestment Plan (included as
    Exhibit C to our Prospectus, a part of Amendment No. 2
    to our Registration Statement on Form S-11 filed on
    January 23, 2004 (File No. 333-109640) and
    incorporated herein by reference).                                  
|       
|        | 10 | .3      |  | Amended and Restated Stock Repurchase Plan (included as
    Exhibit D to our Prospectus, a part of Amendment No. 2
    to our Registration Statement on Form S-11 filed on
    January 23, 2004 (File No. 333-109640) and
    incorporated herein by reference).                                       
|       
|        | 10 | .4      |  | Independent Director Stock Option Plan (included as
    Exhibit 10.4 to Amendment No. 1 to our Registration
    Statement on Form S-11 filed on April 29, 2002 (File
    No. 333-76498) and incorporated herein by reference).                                                                         
|       
|        | 10 | .5      |  | Officer and Employee Stock Option Plan (included as
    Exhibit 10.5 to Amendment No. 1 to our Registration
    Statement on Form S-11 filed on April 29, 2002 (File
    No. 333-76498) and incorporated herein by reference).                                                                         
|       
|        | 10 | .6      |  | Advisory Agreement between G REIT, Inc. and Triple Net
    Properties, LLC (included as Exhibit 10.6 to our
    Registration Statement on Form S-11 filed on
    January 9, 2002 (File No. 333-76498) and incorporated
    herein by reference).                                                       
|       
|        | 10 | .7      |  | First Amendment to Advisory Agreement between G REIT, Inc. and
    Triple Net Properties, LLC (included as Exhibit 10.8 to
    Post Effective Amendment No. 1 to our Registration
    Statement on Form S-11 filed on December 18, 2002
    (File No. 333-76498) and incorporated herein by reference).
|       
|        | 10 | .8      |  | 2004 Incentive Award Plan (included as Appendix A to the
    Definitive Proxy filed on May 27, 2004 and incorporated
    herein by reference).                                                                                                                                                         
|       
|        | 10 | .9      |  | Credit Agreement among G REIT, L.P., the Lenders and LaSalle
    Bank National Association dated as of January 31, 2003.
    (included as Exhibit 10.48 to Form 10-K for the fiscal
    year ended December 31, 2004 filed on March 31, 2005
    and incorporated herein by reference).                

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|        |    |         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|Number  |    | Exhibit
|        |    |        
|       
|        | 10 | .10     |  | First Amendment to Credit Agreement among G REIT, L.P., the
    Lenders and LaSalle Bank National Association dated as of
    April   , 2003. (included as Exhibit 10.49
    to Form 10-K for the fiscal year ended December 31,
    2004 filed on March 31, 2005 and incorporated herein by
    reference).                                                                                                                                                                                        
|       
|        | 10 | .11     |  | Amended and Restated Credit Agreement among G REIT, L.P., the
    Lenders and LaSalle Bank National Association dated as of
    July 17, 2003. (included as Exhibit 10.50 to
    Form 10-K for the fiscal year ended December 31, 2004
    filed on March 31, 2005 and incorporated herein by
    reference).                                                                                                                                                                                       
|       
|        | 10 | .12     |  | First, Second, Third, Fourth, Fifth and Sixth Amendment to the
    Amended and Restated Credit Agreement among G REIT, L.P., the
    Lenders and LaSalle Bank National Association dated as of
    August 11, 2003, September 19, 2003, November 7,
    2003, December 19, 2003, March  , 2004 and
    August 27, 2004, respectively. (included as
    Exhibit 10.51 to Form 10-K for the fiscal year ended
    December 31, 2004 filed on March 31, 2005 and
    incorporated herein by reference).
|       
|        | 10 | .13     |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions by and between GREIT  525 and 600 B
    Street, LP and Hines-Sumisei US Core Office Properties, LP dated
    June 27, 2005 (included as Exhibit 99 to the
    Form 8-K filed on June 29, 2005 and incorporated
    herein by reference).                                                                                                                                                                              
|       
|        | 10 | .14     |  | Fourth Amendment to Agreement for Purchase and Sale of Real
    Property and Escrow Instructions by and between
    GREIT  525 and 600 B Street, LP and Hines-Sumisei US
    Core Office Properties, LP dated July 13, 2005. (included
    as Exhibit 10.2 to Form 10-Q filed on
    November 14, 2005 and incorporated herein by reference).                                                                                                                                                      
|       
|        | 10 | .15     |  | Second Amended and Restated Credit Agreement dated
    January 25, 2006, by and among G REIT, L.P, certain
    lenders named therein, and LaSalle Bank National Association
    (included as Exhibit 10.1 to Current Report on
    Form 8-K filed on January 31, 2006 and incorporated
    herein by reference).                                                                                                                                                                                    
|       
|        | 14 | .1      |  | GREIT Code of Business Conduct and Ethics dated May 14,
    2004 (included as Exhibit 14.1 to Form 10-K for the
    fiscal year ended December 31, 2004 filed by us on
    March 31, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                    
|       
|        | 31 | .1*     |  | Certification of Chief Executive Officer, as required by
    Rule 13a-14(a) of the Securities Exchange Act of 1934, as
    amended, as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                       
|       
|        | 31 | .2*     |  | Certification of Chief Accounting Officer, as required by
    Rule 13a-14(a) of the Securities Exchange Act of 1934, as
    amended, as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                      
|       
|        | 32 | .1*     |  | Certification of Chief Executive Officer, pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                         
|       
|        | 32 | .2*     |  | Certification of Chief Accounting Officer, pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                        






|  |                
|- | ---------------
|* | Filed herewith.

117