##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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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,
    2003                                                 
|          
|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



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G REIT, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                                                                 |  |                                         
|---------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Virginia                                                                                                         |  | 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)




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

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

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

Title of Class:

Common Stock


Indicate
by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days.     Yes þ          No o

Indicate
by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.     þ

As
of April 9, 2004, the aggregate market value of the shares
of common stock held by non-affiliates of the registrant was
approximately $277,571,250 (based on the price for which each
share was sold).

Indicate
by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the
Act)     Yes o          No þ

As
of June 30, 2003, there were approximately
7,251,894 shares of common stock of G REIT, Inc.
outstanding.



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G REIT, INC.

(A Virginia Corporation)


TABLE OF CONTENTS

|             |  |                                                                                           |    |      |    | 
|------------ |  | ----------------------------------------------------------------------------------------- | -- | ---- | -- | 
|             |  |                                                                                           |    | Page
|             |  |                                                                                           |    |     
|PART I      
|Item 1.      |  | Business                                                                                  |    |      | 1  | 
|Item 2.      |  | Properties                                                                                |    |      | 7  | 
|Item 3.      |  | Legal Proceedings                                                                         |    |      | 10 | 
|Item 4.      |  | Submission of Matters to a
    Vote of Security Holders                                   |    |      | 10 | 
|            
|PART II     
|Item 5.      |  | Market for Registrants
    Common Equity and Related Shareholder Matters                 |    |      | 10 | 
|Item 6.      |  | Selected Financial Data                                                                   |    |      | 12 | 
|Item 7.      |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |    |      | 13 | 
|Item 7A.     |  | Quantitative and Qualitative
    Disclosures About Market Risk                            |    |      | 24 | 
|Item 8.      |  | Financial Statements and
    Supplementary Data                                           |    |      | 26 | 
|Item 9.      |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure  |    |      | 52 | 
|Item 9A.     |  | Controls and Procedures                                                                   |    |      | 53 | 
|            
|PART III    
|Item 10.     |  | Directors and Executive
    Officers of the Registrant                                    |    |      | 53 | 
|Item 11.     |  | Executive Compensation                                                                    |    |      | 57 | 
|Item 12.     |  | Security Ownership of
    Certain Beneficial Owners and Management                        |    |      | 58 | 
|Item 13.     |  | Certain Relationships and
    Related Transactions                                        |    |      | 58 | 
|Item 14.     |  | Principal Accountant Fees
    and Services                                                |    |      | 59 | 
|            
|PART IV     
|Item 15.     |  | Exhibits, Financial
    Statement Schedules, and Reports on Form 8-K                      |    |      | 60 | 
|SIGNATURES   |  |                                                                                           | 64 |     
|EXHIBIT 23.1
|EXHIBIT 23.2
|EXHIBIT 31.1
|EXHIBIT 31.2
|EXHIBIT 32.1
|EXHIBIT 32.2



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PART I






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

Our Company

G REIT, Inc. was formed as a Virginia
corporation in December of 2001 and has qualified and elected to
be taxed as a real estate investment trust, or REIT, for federal
income tax purposes. Our company was organized to acquire and
manage a diversified real estate portfolio composed of office,
industrial and service properties located throughout the United
States with a primary focus on properties that have a government
orientation as a result of substantial space being leased to
government tenants. For this purpose, government tenants include
the United States federal government and governmental
authorities, state, local and other governments and governmental
authorities, quasi-governmental authorities, government
contractors and service providers, parties who provide service
to the public or others in connection with government programs,
government licensees and certain tax-exempt organizations.

As of December 31, 2003, we owned interests
in 13 properties aggregating to a total gross leasable area, or
GLA, of approximately 2.8 million square feet. Tenants with
a government orientation occupied approximately 39% of the total
GLA of these properties. As of December 31, 2003,
approximately 88% of the total GLA in these properties was
leased. We may lease our properties to tenants under gross or
net leases.

We conduct business and own properties through
our operating partnership, G REIT, L.P., which was formed
as a Virginia limited partnership in December of 2001. We are
the sole general partner of our operating partnership and have
control over the affairs of our operating partnership.

Our day to day operations are managed by our
advisor, Triple Net Properties, LLC, under an advisory
agreement. Our advisor engages affiliated entities, including
Triple Net Properties Realty, Inc., or Realty, a real
estate brokerage and management company, to provide various
services for the properties. Our advisor and Realty were formed
in 1998 to serve as an asset and property manager for real
estate investment trusts, syndicated real estate limited
partnerships, limited liability companies and similar real
estate entities.

Our principal executive offices are located at
1551 N. Tustin Avenue, Suite 200, Santa Ana,
California 92705 and our telephone number is
(877) 888-7348. We make our periodic and current reports
available on our website at www.1031nnn.com after these
materials are filed with the Securities and Exchange Commission.
They are also available in print to any shareholder upon request.

Our Public Offerings

On July 22, 2002, our registration statement
for our initial public offering of shares of our common stock
was declared effective by the Securities and Exchange
Commission. In our initial offering, we offered for the sale to
the public on a best efforts basis a maximum of
20,000,000 shares of our common stock at a purchase price
of $10.00 per share and up to an additional 1,000,000
additional shares through our dividend reinvestment plan. As of
December 31, 2003, we sold 17,339,249 shares of our
common stock under our initial offering, issued an additional
251,540 shares to shareholders participating in our
dividend reinvestment plan and repurchased 28,342 shares
under our repurchase plan. As a result, 17,562,457 shares
were outstanding at December 31, 2003, which generated
gross proceeds of approximately $175,000,000. Effective
February 9, 2004, we terminated our initial offering. Of
the 21,000,000 shares registered in the initial offering,
19,987,934 were sold and 357,381 were issued in accordance with
our dividend reinvestment plan. On February 17, 2004, we
filed a post-effective amendment to deregister
654,685 shares of our common stock.

On January 23, 2004, our registration
statement for our second offering of shares of our common stock
was declared effective by the Securities and Exchange
Commission. In our second offering, we are offering for sale to
the public on a best efforts basis a maximum of
27,000,000 shares of our common





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stock at a purchase price of $10.00 per
share and up to 1,500,000 additional shares through our dividend
reinvestment plan. We commenced the sale of shares pursuant to
our second offering on February 9, 2004. We intend to
terminate the current offering on April 30, 2004.


Management anticipates that approximately 87.5%
of the gross offering proceeds of both our initial and second
offerings will be used to acquire real estate and the balance
will be used to pay various fees and expenses.

2003 Year Highlights



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The gross offering proceeds from our initial
    offering at December 31, 2003 were approximately
    $175,000,000 as compared to approximately $21,500,000 at
    December 31, 2002.                                                                                                                                                                                                                                                                                                                            
|
| |  | We increased our property portfolio from two
    consolidated office properties totaling approximately
    235,000 sq. ft. at December 31, 2002 to 11
    consolidated office properties totaling approximately
    2,100,000 square feet and investments in two unconsolidated
    office properties totaling approximately 648,000 square
    feet at December 31, 2003.                                                                                                                                       
|
| |  | As of December 31, 2003, the total purchase
    price of our acquisitions of consolidated properties was
    approximately $300,000,000, total debt was approximately
    $179,000,000 and acquisition loan-to-value was approximately
    60%. In comparison, as of December 31, 2002, the total
    purchase price of our acquisitions of consolidated properties
    was approximately $24,000,000, total debt was approximately
    $17,000,000 and acquisition loan-to-value was approximately 71%.         
|
| |  | We diversified our portfolio and at
    December 31, 2003 owned properties in Southern and Northern
    California, Texas, Illinois, Florida, Delaware, Nevada,
    Nebraska and Washington.                                                                                                                                                                                                                                                                                                                     
|
| |  | The percentage of government tenants in our
    properties at year end was approximately 39%. Our government
    tenants, among others, include the General Services
    Administration, Internal Revenue Service, Federal Bureau of
    Investigation, Federal Aviation Agency, U.S. Bankruptcy
    Court, U.S. Customs Trade Office, U.S. Department of
    Treasury, Department of Defense, Florida, Nebraska, Nevada and
    Texas state agencies, and government contractors Lockheed Martin
    and Boeing.
|
| |  | We currently pay monthly distributions to our
    shareholders at an annual rate of 7.50%. We have increased our
    distribution rate twice since we began paying distributions in
    September 2002: from 7.00% to 7.25% effective January 2003 and
    from 7.25% to 7.50% effective June 2003.                                                                                                                                                                                                              
|
| |  | We obtained a new credit facility through LaSalle
    Bank National Association in the amount of $25,000,000 in
    January 2003. The amount we may borrow under the credit line was
    increased to $115,000,000 at December 31, 2003.                                                                                                                                                                                                                                                                         

Investment Objectives and Policies

General

Our companys primary investment objective
is to obtain current income from investments in real estate,
including real estate that has a government orientation.

Additionally, we intend to:



| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | invest in income producing real property
    generally through equity investments in a manner which permits
    us to continue to qualify as a REIT for federal income tax
    purposes;
|
| |  | generate cash available for distribution to our
    shareholders;                                                                                                                       
|
| |  | preserve and protect shareholder capital; and                                                                                                                                           
|
| |  | realize capital appreciation upon the ultimate
    sale of our properties.                                                                                                              

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To the extent feasible, we will strive to invest
in a diversified portfolio of properties, in terms of geography,
type of property and types of tenants, that will satisfy our
investment objectives. However, we cannot assure you that we
will attain these objectives or that our shareholder capital
will not decrease.

Acquisition Strategies

Our primary acquisition strategy is to acquire
and manage, through entities owned or controlled directly or
indirectly by us, office, industrial and service properties that
have a government orientation as a result of substantial space
being leased to government tenants. In general, we define
government tenants to include:



| |   |                                                                          
| | - | -------------------------------------------------------------------------
| |  | U.S. federal government departments and
    agencies;                    
|
| |  | state, local and other government departments and
    agencies;          
|
| |  | quasi-governmental agencies;                                             
|
| |  | government contractors and service providers;                            
|
| |  | governmental licensees; and                                              
|
| |  | health care, medical insurance, grant research
    and similar companies.

We primarily acquire property through
wholly-owned subsidiaries of our operating partnership. We also
may acquire undivided tenant in common interests in real
properties and real properties subject to long-term ground
leases. As of December 31, 2003, we have acquired 11
consolidated properties and interests in two unconsolidated
properties as undivided tenants in common. We may purchase
tenant in common interests in properties where the other tenants
in common are participating in tax-free exchanges arranged by
our advisor. Other methods of acquiring a property may be used
when advantageous. For example, we may acquire properties
through a joint venture or the acquisition of substantially all
of the interests of an entity that in turn owns a real property.

We typically acquire properties with cash and
mortgage or other debt but may acquire properties free and clear
of permanent mortgage indebtedness by paying the entire purchase
price for such property in cash or in units of limited
partnership interest in our operating partnership. With
properties purchased on an all-cash basis, we may later incur
mortgage indebtedness by obtaining loans secured by selected
properties, if favorable financing terms are available. The
proceeds from such loans will primarily be used to acquire
additional properties in support of our investment objectives.
Management does not intend to incur indebtedness in excess of
60% of the aggregate fair market value of all our properties and
a maximum of 80% of the fair market value of any one property,
as determined at the end of each calendar year.

We intend to utilize one or more sources of
capital for future growth, which may include borrowings under
our secured credit facility with LaSalle, the issuance of equity
or debt securities and other bank or institutional borrowings.
There is no assurance, however, that we will be able to obtain
capital on favorable terms or at all.

Although our geographic area of operations is not
limited, management intends that a significant portion of our
properties will be in the District of Columbia and the following
states: California, Colorado, Florida, Illinois, Maryland,
Nevada, Texas, Virginia and Washington. Properties may be
located in or near the U.S. capital and state capitals,
near military bases and other federal, state or local
government, agency or authority installations or centers of
government. As of December 31, 2003, four of our properties
were located in California, three in Texas and one each in
Florida, Delaware, Illinois, Nebraska, Nevada and
Washington.

As of December 31, 2003, our consolidated
properties were approximately 88% leased. Most of our leases are
gross leases with terms of 5 years or more,
usually providing for a base minimum annual rent with periodic
increases. Our gross leases typically require that we pay all or
a majority of the operating expenses, including real estate
taxes, special assessments, utilities, insurance and building
repairs related to

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the property. In addition, most of our
governmental leases may permit tenants to terminate under
certain circumstances, including, for example, failure to obtain
appropriations or termination or non-renewal of a material
contract.


To assist us, our advisor and its affiliates may
purchase properties in their own name, assume loans in
connection with the purchase of properties and temporarily hold
title to such properties for the purpose of facilitating the
acquisition of such property, borrowing money or obtaining
financing, completing construction of the property or for any
other purpose related to our business. We may also acquire
properties from our advisor, affiliates of our advisor and
entities advised or managed by our advisor. Such acquisitions
must be approved by a majority of our directors, including a
majority of our independent directors, and supported by an
independent appraisal prepared by an appraiser who is a member
in good standing of the American Institute of Real Estate
Appraisers or similar national organization selected by the
independent directors.

Acquisition Standards

We believe, based on our advisors prior
real estate experience, that we have the ability to identify
properties capable of meeting our investment objectives. In
evaluating potential acquisitions, the primary factor we
consider is the propertys current and projected cash flow.
We also consider a number of other factors, including a
propertys:



| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | geographic location and type;                                                                                                 
|
| |  | construction quality and condition;                                                                                           
|
| |  | potential for capital appreciation;                                                                                           
|
| |  | ability of tenants to pay scheduled rent;                                                                                     
|
| |  | lease terms and rent roll, including the
    potential for rent increases;                                                    
|
| |  | potential for economic growth in the tax and
    regulatory environment of the community in which the property is
    located;
|
| |  | potential for expanding the physical layout of
    the property;                                                              
|
| |  | occupancy and demand by tenants for properties of
    a similar type in the same geographic vicinity;                         
|
| |  | prospects for liquidity through sale, financing
    or refinancing of the property;                                           
|
| |  | competition from existing properties and the
    potential for the construction of new properties in the
    area; and        
|
| |  | treatment under applicable federal, state and
    local tax and other laws and regulations.                                   

Our advisor has substantial discretion with
respect to the selection of specific properties.

We will not close the purchase of any property
unless and until we obtain an environmental assessment, a
minimum of Phase I review, for each property purchased and
are generally satisfied with the environmental status of the
property.

In purchasing properties, we will be subject to
risks generally incident to the ownership of real estate,
including:



| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in general economic or local conditions;                                                                                                 
|
| |  | changes in supply of or demand for similar
    competing properties in an area;                                                                  
|
| |  | changes in interest rates and availability of
    permanent mortgage funds which may render the sale of a property
    difficult or unattractive;
|
| |  | changes in tax, real estate, environmental and
    zoning laws;                                                                                  

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| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | periods of high interest rates and tight money
    supply which may make the sale of properties more difficult;
|
| |  | tenant turnover; and                                                                                           
|
| |  | general overbuilding or excess supply in the
    market area.                                                  

Operating Strategies

Our primary operating strategy is to acquire
properties with a government orientation that meet our
acquisition standards and then to enhance the performance and
value of those properties through strategies designed to address
the needs of current and prospective tenants. Our management
strategies include:



| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | aggressively leasing available space through
    targeted marketing augmented, where possible, by our
    advisors local asset and property management offices;                
|
| |  | re-positioning properties, for example, shifting
    from single to multi-tenant use in order to maximize
    desirability and utility for prospective tenants;                 
|
| |  | controlling operating expenses by centralization
    of asset and property management, leasing, marketing, financing,
    accounting, renovation and data processing activities;
|
| |  | emphasizing regular maintenance and periodic
    renovation to meet the needs of tenants and to maximize
    long-term returns; and                                             
|
| |  | financing acquisitions and refinancing properties
    when favorable terms are available to increase cash flow.                                                                 

Tax Status

We qualified and elected to be taxed as a REIT
for federal income tax purposes under Sections 856 through
860 of the Internal Revenue Code, or Code. So long as we qualify
for taxation as a REIT, we generally will not be subject to
federal income tax to the extent we distribute at least 90% of
our REIT taxable income to our shareholders. If we fail to
qualify as a REIT in any taxable year, we will be subject to
federal income tax (including any applicable alternative minimum
tax) on our taxable income at regular corporate rates. Unless
entitled to relief under specific statutory provisions, we will
also be disqualified for taxation as a REIT for the four taxable
years following the year in which we lose our qualification.
Even if we qualify for taxation as a REIT, we may be subject to
certain state and local taxes on our income and property and to
federal income and excise taxes on our undistributed income.

Competition

In seeking new investment opportunities, we
compete with other real estate investors, including pension
funds, insurance companies, foreign investors, real estate
partnerships, other public and private real estate investment
trusts, private individuals and other domestic real estate
companies, many of which have greater financial and other
resources than our company. With respect to properties presently
owned or to be owned by us, we compete with other owners of like
properties for tenants.

Government Regulations

Many laws and government regulations are
applicable to our properties and changes in these laws and
regulations, or their interpretation by agencies and the courts,
occur frequently.

Costs of Compliance with the Americans with
Disabilities Act.Under the Americans
with Disabilities Act of 1990, or ADA, all public accommodations
must meet federal requirements for access and use by disabled
persons. Although we believe that we are in substantial
compliance with present requirements of the ADA, none of our
properties have been audited, nor have investigations of its
properties been conducted to determine compliance. We may incur
additional costs in connection with the ADA. Additional federal,
state and local laws also may require modifications to our
properties or restrict

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our ability to renovate our properties.
Management cannot predict the cost of compliance with the ADA or
other legislation. If we incur substantial costs to comply with
the ADA or any other legislation, our financial condition,
results of operations, cash flow and ability to satisfy our debt
service obligations and pay distributions could be adversely
affected.


Costs of Government Environmental Regulation
and Private Litigation.Environmental
laws and regulations hold us liable for the costs of removal or
remediation of certain hazardous or toxic substances on our
properties. These laws could impose liability without regard to
whether we are responsible for the presence or release of the
hazardous materials. Government investigations and remediation
actions may have substantial costs and the presence of hazardous
substances on a property could result in personal injury or
similar claims by private plaintiffs. Various laws also impose
liability on persons who arrange for the disposal or treatment
of hazardous or toxic substances for the cost of removal or
remediation of hazardous substances at the disposal or treatment
facility. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the
disposal facility. As the owner and operator of our properties,
we may be deemed to have arranged for the disposal or treatment
of hazardous or toxic substances.

Use of Hazardous Substances by Some of Our
Tenants.Some of our tenants routinely
handle hazardous substances and wastes on our properties as part
of their routine operations. Environmental laws and regulations
subject these tenants, and potentially our company, to liability
resulting from such activities. We require our tenants, in their
leases, to comply with these environmental laws and regulations
and to indemnify us for any related liabilities. Management is
unaware of any material noncompliance, liability or claim
relating to hazardous or toxic substances or petroleum products
in connection with any of our properties.

Other Federal, State and Local
Regulations.Our properties are
subject to various federal, state and local regulatory
requirements, such as state and local fire and life safety
requirements. If we fail to comply with these various
requirements, we may incur governmental fines or private damage
awards. While management believes that our properties are
currently in material compliance with all of these regulatory
requirements, management does not know whether existing
requirements will change or whether future requirements will
require us to make significant unanticipated expenditures that
will adversely affect its ability to make distributions to our
shareholders. Management believes, based in part on engineering
reports which are generally obtained at the time the properties
are acquired, that all of our properties comply in all material
respects with current regulations. However, if we were required
to make significant expenditures under applicable regulations,
our financial condition, results of operations, cash flow and
ability to satisfy our debt service obligations and to pay
distributions could be adversely affected.

Significant Tenants

As of December 31, 2003, none of our tenants
accounted for 10% or more of our aggregate annual rental income.
However, separate agencies of the General Services
Administration had seven leases at four of our consolidated
properties which accounted for approximately 22% of our
aggregate annual rental income at December 31, 2003.

Our ten largest tenants at our consolidated
properties, based upon our aggregate annual rental income,
accounted for approximately 39% of our aggregate annual rental
income at December 31, 2003. These tenants are:



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | General Services Administration (IRS) at North
    Pointe Corporate Center: 7.4%                         
|
| |  | General Services Administration
    (U.S. Bankruptcy Court) at 824 Market Street: 5.6%                   
|
| |  | General Services Administration
    (U.S. Customs, DOD and Exim Bank) at One World Trade
    Center: 4.6%
|
| |  | United Space Alliance at Gemini Plaza: 4.3%                                                              

6



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| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | State of Florida (Dept. of Children &
    Family Services) at Department of Children & Families
    Campus: 4.2%
|
| |  | General Services Administration (FBI) at One
    World Trade Center: 3.0%                                       
|
| |  | Patient Accounting Service Center at Centerpoint
    Corporate Park: 2.9%                                       
|
| |  | Lockheed Engineeering at Two Corporate Plaza: 2.8%                                                              
|
| |  | Good Guys at Bay View Plaza: 2.0%                                                                               
|
| |  | Nebraska Department of Environmental Quality at
    Atrium Building: 1.8%                                       

The loss of any of the above-mentioned tenants or
their inability to pay rent could have a material adverse effect
on our business and results of operations.

We also are subject to a concentration of
regional economic exposure as approximately 49.5% of our
aggregate annual rental income is generated by our consolidated
properties located in California. Regional economic downturns in
this state could adversely impact our operations.

Employees

We have no employees and our companys
executive officers are all employees of our advisor.
Substantially all work of our company is performed by employees
of our advisor and its affiliates.

Financial Information About Industry
Segments

We are in the business of owning, managing,
operating, leasing, acquiring, developing, investing in and
disposing of office, industrial and service properties. We
internally evaluate all properties as one industry segment and
accordingly do not report segment information.






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

As of December 31, 2003, we owned 11
consolidated office properties located in six states with an
aggregate GLA of approximately 2.1 million square feet. We
also owned interests in two unconsolidated office properties
with an aggregate GLA of approximately 648,073 square feet.
As of December 31, 2003, approximately 39% of our aggregate
GLA was leased to government-oriented tenants.

7



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The following table presents certain additional
information about our consolidated properties at
December 31, 2003:

|                                           |       |                   |                |         |  |       |         |           |  |                |       |         |  |              |          |              |  |   |             |             |  |   |            |            |  |  |     |   |  |   |       |  | 
|------------------------------------------ | ----- | ----------------- | -------------- | ------- |  | ----- | ------- | --------- |  | -------------- | ----- | ------- |  | ------------ | -------- | ------------ |  | - | ----------- | ----------- |  | - | ---------- | ---------- |  |  | --- | - |  | - | ----- |  | 
|                                           |       |                   |                | GLA     |  | %     |         | Date      |  | Total          |       | Annual  |  | Physical     |          | Annual Rent 
|Property                                   |       | Property Location |                | (Sq Ft) |  | Owned |         | Acquired  |  | Purchase Price |       | Rent(1) |  | Occupancy(2) |          | Per Sq Ft(3)
|                                           |       |                   |                |         |  |       |         |           |  |                |       |         |  |              |          |             
|5508 Highway 290 West Building             |       |                   | Austin, TX     |         |  |       | 74,089  |           |  |                | 100.0 | %       |  |              | 9/13/02  |              |  | $ | 10,300,000  |             |  | $ | 1,034,000  |            |  |  | 92  | % |  | $ | 15.10 | 
|Two Corporate Plaza                        |       |                   | Clear Lake, TX |         |  |       | 161,331 |           |  |                | 100.0 | %       |  |              | 11/27/02 |              |  |   | 13,580,000  |             |  |   | 2,623,000  |            |  |  | 96  | % |  |   | 17.03 | 
|Atrium Building                            |       |                   | Lincoln, NE    |         |  |       | 166,902 |           |  |                | 100.0 | %       |  |              | 1/31/03  |              |  |   | 4,532,000   |             |  |   | 1,429,000  |            |  |  | 83  | % |  |   | 10.26 | 
|Department of Children and Families Campus |       |                   | Plantation, FL |         |  |       | 124,037 |           |  |                | 100.0 | %       |  |              | 4/25/03  |              |  |   | 11,580,000  |             |  |   | 2,043,000  |            |  |  | 94  | % |  |   | 17.58 | 
|Gemini Plaza                               |       |                   | Houston, TX    |         |  |       | 158,627 |           |  |                | 100.0 | %       |  |              | 5/02/03  |              |  |   | 15,000,000  |             |  |   | 1,467,000  |            |  |  | 100 | % |  |   | 9.25  | 
|Bay View Plaza                             |       |                   | Alameda, CA    |         |  |       | 60,434  |           |  |                | 97.68 | %       |  |              | 7/31/03  |              |  |   | 11,655,000  |             |  |   | 1,216,000  |            |  |  | 93  | % |  |   | 21.66 | 
|North Pointe Corporate Center              |       |                   | Sacramento, CA |         |  |       | 130,805 |           |  |                | 100.0 | %       |  |              | 8/11/03  |              |  |   | 24,205,000  |             |  |   | 2,884,000  |            |  |  | 82  | % |  |   | 26.81 | 
|824 Market Street                          |       |                   | Wilmington, DE |         |  |       | 200,020 |           |  |                | 100.0 | %       |  |              | 10/10/03 |              |  |   | 31,900,000  |             |  |   | 3,983,000  |            |  |  | 92  | % |  |   | 21.65 | 
|Sutter Square Galleria                     |       |                   | Sacramento, CA |         |  |       | 61,036  |           |  |                | 100.0 | %       |  |              | 10/28/03 |              |  |   | 8,240,000   |             |  |   | 1,140,000  |            |  |  | 96  | % |  |   | 19.43 | 
|One World Trade Center                     |       |                   | Long Beach, CA |         |  |       | 573,300 |           |  |                | 100.0 | %       |  |              | 12/05/03 |              |  |   | 113,648,000 |             |  |   | 11,557,000 |            |  |  | 94  | % |  |   | 21.45 | 
|Centerpoint Corporate Park                 |       |                   | Kent, WA       |         |  |       | 435,784 |           |  |                | 100.0 | %       |  |              | 12/30/03 |              |  |   | 54,220,000  |             |  |   | 4,600,000  |            |  |  | 67  | % |  |   | 15.67 | 
|                                           |       |                   |                |         |  |       |         |           |  |                |       |         |  |              |          |              |  |   |             |             |  |   |            |            |  |  |     |   |  |   |       | 
|                                           | Total |                   |                |         |  |       |         | 2,146,365 |  |                |       |         |  |              |          |              |  |   | $           | 298,860,000 |  |   | $          | 33,976,000 |  |  |     |   |  |   |       |  | 
|                                           |       |                   |                |         |  |       |         |           |  |                |       |         |  |              |          |              |  |   |             |             |  |   |            |            |  |  |     |   |  |   |       | 



---



|    |                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Annualized rental income based on contractual
    base rent from leases in force at December 31, 2003.                                                 
|   
|(2) | Physical occupancy at December 31, 2003. As
    of December 31, 2003, approximately 88% of the total GLA in
    our consolidated properties was leased.
|   
|(3) | Average annual rent per square foot at
    December 31, 2003.                                                                                          

The following information generally applies to
our properties:



| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We believe all of the 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 the properties.                                                                  
|
| |  | Our properties are located in urban markets where
    we are subject to competition for attracting new and retaining
    current tenants.                          
|
| |  | Depreciation is provided on a straight-line basis
    over the estimated useful lives of the buildings and
    improvements, ranging primarily from 15 to 39 years.

8



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##### Table of Contents



Lease Expiration Table

The following schedule presents the sensitivity
of our annual base rent due to lease expirations for the next
10 years at our consolidated properties as of
December 31, 2003, by number, percentage of total aggregate
GLA and annual base rent.

|                        |       |           |    |           |  |                 |         |            |  |  |       |       |   |   |           |            | 
|----------------------- | ----- | --------- | -- | --------- |  | --------------- | ------- | ---------- |  |  | ----- | ----- | - | - | --------- | ---------- | 
|                        |       |           |    | Total Sq. |  | % of Total      |         | Annual    
|                        |       | Number    |    | Ft. of    |  | GLA             |         | Rent Under
|                        |       | of Leases |    | Expiring  |  | Represented by  |         | Expiring  
|Year Ending December 31 |       | Expiring  |    | Leases    |  | Expiring Leases |         | Leases    
|                        |       |           |    |           |  |                 |         |           
|2004                    |       |           | 51 |           |  |                 | 228,778 |            |  |  | 10.66 | %     |   | $ | 3,675,000 |           
|2005                    |       |           | 40 |           |  |                 | 210,667 |            |  |  | 9.82  |       |   |   | 4,014,000 |           
|2006                    |       |           | 48 |           |  |                 | 316,103 |            |  |  | 14.73 |       |   |   | 6,123,000 |           
|2007                    |       |           | 27 |           |  |                 | 276,761 |            |  |  | 12.89 |       |   |   | 5,312,000 |           
|2008                    |       |           | 13 |           |  |                 | 137,179 |            |  |  | 6.39  |       |   |   | 2,731,000 |           
|2009                    |       |           | 14 |           |  |                 | 116,041 |            |  |  | 5.41  |       |   |   | 2,237,000 |           
|2010                    |       |           | 9  |           |  |                 | 46,986  |            |  |  | 2.19  |       |   |   | 560,000   |           
|2011                    |       |           | 7  |           |  |                 | 252,813 |            |  |  | 11.78 |       |   |   | 3,105,000 |           
|2012                    |       |           | 13 |           |  |                 | 159,057 |            |  |  | 7.40  |       |   |   | 3,580,000 |           
|2013                    |       |           | 6  |           |  |                 | 89,032  |            |  |  | 4.15  |       |   |   | 2,236,000 |           
|Thereafter              |       |           | 5  |           |  |                 | 44,703  |            |  |  | 2.08  |       |   |   | 403,000   |           
|                        |       |           |    |           |  |                 |         |            |  |  |       |       |   |   |           |           
|                        | Total |           |    | 233       |  |                 |         | 1,878,120  |  |  |       | 87.50 | % |   | $         | 33,976,000 | 
|                        |       |           |    |           |  |                 |         |            |  |  |       |       |   |   |           |           

Concentration of Tenants

The following table sets forth information as to
the ten largest tenants at our consolidated properties as of
December 31, 2003, based upon aggregate annual rental
income.

|                                                              |  |                                     |  |             |  |        |      |             |  |            |         |         |  |  |          |  |  |           
|------------------------------------------------------------- |  | ----------------------------------- |  | ----------- |  | ------ | ---- | ----------- |  | ---------- | ------- | ------- |  |  | -------- |  |  | ----------
|                                                              |  |                                     |  |             |  | % of   |      |             |  |            |         |        
|                                                              |  |                                     |  | Current     |  | Total  |      |             |  |            |         |        
|                                                              |  |                                     |  | Annual      |  | Rental |      | Rentable    |  | Lease      |         | Renewal
|Lessee                                                        |  | Property                            |  | Base Rent   |  | Income |      | Square Feet |  | Expiration |         | Options
|                                                              |  |                                     |  |             |  |        |      |             |  |            |         |        
|GSA (IRS)(1)                                                  |  | North Pointe                        |  | $2,498,000  |  |        | 7.4  | %           |  |            | 89,179  |         |  |  | 08/17/07 |  |  | None      
|GSA (U.S. Bankruptcy Court)(1)                                |  | 824 Market Street                   |  | 1,919,600   |  |        | 5.6  |             |  |            | 69,467  |         |  |  | 08/05/13 |  |  | None      
|GSA (U.S. Customs/ DOD/ Exim Bank)(1)                         |  | One World Trade                     |  | 1,558,100   |  |        | 4.6  |             |  |            | 55,837  |         |  |  | 09/30/12 |  |  | None      
|United Space Alliance(1)                                      |  | Gemini Plaza                        |  | 1,467,300   |  |        | 4.3  |             |  |            | 158,627 |         |  |  | 05/31/11 |  |  | Two 5-year
|State of Florida (Dept. of Children &
    Family Services)(1) |  | Dept. of Children & Families Campus |  | 1,417,700   |  |        | 4.2  |             |  |            | 69,571  |         |  |  | 02/28/05 |  |  | Two 5-year
|GSA (FBI)(1)                                                  |  | One World Trade                     |  | 1,003,100   |  |        | 3.0  |             |  |            | 29,745  |         |  |  | 06/30/12 |  |  | None      
|PASC (Patient Accounting Service Center)                      |  | Centerpoint                         |  | 996,300     |  |        | 2.9  |             |  |            | 59,056  |         |  |  | 12/31/08 |  |  | None      
|Lockheed Engineering(1)                                       |  | Two Corporate Center                |  | 957,900     |  |        | 2.8  |             |  |            | 55,021  |         |  |  | 06/30/06 |  |  | Two 3-year
|Good Guys                                                     |  | Bay View Plaza                      |  | 663,300     |  |        | 2.0  |             |  |            | 31,579  |         |  |  | 03/02/11 |  |  | One 5-year
|Nebraska Dept of Environmental Quality(1)                     |  | Atrium Building                     |  | 616,100     |  |        | 1.8  |             |  |            | 62,357  |         |  |  | 07/15/04 |  |  | One 5-year
|                                                              |  |                                     |  |             |  |        |      |             |  |            |         |         |  |  |          |  |  |           
|                                                              |  |                                     |  | $13,097,400 |  |        | 38.6 | %           |  |            | 680,439 |         |  |  |          |  |  |           
|                                                              |  |                                     |  |             |  |        |      |             |  |            |         |         |  |  |          |  |  |           



---



|    |                                            
|--- | -------------------------------------------
|(1) | Government entity or government contractor.

9



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##### Table of Contents



Geographic Diversification/Concentration
Table

The following table lists the states where the
consolidated properties we owned as of December 31, 2003
are located and provides certain information regarding our
portfolios geographic diversification/concentration.

|           |       |            |   |             |  |                |         |             |  |               |      |       |   |   |            |            |  |  |      |       |  
|---------- | ----- | ---------- | - | ----------- |  | -------------- | ------- | ----------- |  | ------------- | ---- | ----- | - | - | ---------- | ---------- |  |  | ---- | ----- | -
|           |       |            |   |             |  |                |         | Current     |  | Approximate %
|           |       | No. of     |   | Aggregate   |  | Approximate %  |         | Annual Base |  | of Aggregate 
|State      |       | Properties |   | Square Feet |  | of Square Feet |         | Rent        |  | Annual Rent  
|           |       |            |   |             |  |                |         |             |  |              
|California |       |            | 4 |             |  |                | 825,575 |             |  |               | 38.4 |       |   | $ | 16,797,000 |            |  |  | 49.5 |      
|Delaware   |       |            | 1 |             |  |                | 200,020 |             |  |               | 9.3  |       |   |   | 3,983,000  |            |  |  | 11.7 |      
|Florida    |       |            | 1 |             |  |                | 124,037 |             |  |               | 5.8  |       |   |   | 2,043,000  |            |  |  | 6.0  |      
|Nebraska   |       |            | 1 |             |  |                | 166,902 |             |  |               | 7.8  |       |   |   | 1,429,000  |            |  |  | 4.2  |      
|Texas      |       |            | 3 |             |  |                | 394,047 |             |  |               | 18.4 |       |   |   | 5,124,000  |            |  |  | 15.1 |      
|Washington |       |            | 1 |             |  |                | 435,784 |             |  |               | 20.3 |       |   |   | 4,600,000  |            |  |  | 13.5 |      
|           |       |            |   |             |  |                |         |             |  |               |      |       |   |   |            |            |  |  |      |      
|           | Total |            |   | 11          |  |                |         | 2,146,365   |  |               |      | 100.0 | % |   | $          | 33,976,000 |  |  |      | 100.0 | %
|           |       |            |   |             |  |                |         |             |  |               |      |       |   |   |            |            |  |  |      |      

Indebtedness

At December 31, 2003, we had secured
mortgage loans outstanding on four of our consolidated
properties, representing aggregate indebtedness of approximately
$97,300,000. In addition, at December 31, 2003, advances
under our credit facility with LaSalle in the amount of
approximately $81,500,000 were collateralized by certain of our
consolidated properties. See Item 7:
Managements Discussion and Analysis of Financial
Condition and Results of Operations and Notes 5 and 6
to our financial statements included with this report.






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

There are no material pending legal proceedings,
other than routine litigation incidental to our business, to
which we are a party, or of which any of our properties is the
subject.






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

No matters were submitted to a vote of security
holders during the fourth quarter of 2003.




PART II






|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

Market Information

There is no established public trading market for
our shares of common stock.

Shareholders

As of April 9, 2004, we had 9,724
shareholders of record.

Distributions

We paid monthly distributions on our common stock
from September 1, 2002 through December 1, 2002 at an
annual rate of $0.70 per share (7.00% based on a $10.00 purchase
price). On November 25, 2002, our board of directors
approved an increase in the annual distribution to
$0.725 per share (7.25% based on a $10.00 purchase price)
effective January 1, 2003. On March 22, 2003, our
board of directors approved an increase in the annual
distribution to $0.75 per share (7.50% based on a $10.00
purchase price) effective June 1, 2003.

10



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##### Table of Contents



Our continued payment of distributions will
depend primarily on our ability to generate positive cash flow
from future operations. However, we cannot assure you that we
will continue to pay distributions at the current rate or at all.

Equity Compensation Plan Information

Our equity compensation plan information as of
December 31, 2003 is as follows:

|                                                               |  |                                   |         |                      |  |                      |      |  |  |  |         | 
|-------------------------------------------------------------- |  | --------------------------------- | ------- | -------------------- |  | -------------------- | ---- |  |  |  | ------- | 
|                                                               |  |                                   |         | Weighted Average     |  |                     
|                                                               |  | Number of Securities to be Issued |         | Exercise Price of    |  | Number of Securities
|                                                               |  | Upon Exercise of Outstanding      |         | Outstanding Options, |  | Remaining Available 
|Plan Category                                                  |  | Options, Warrants and Rights      |         | Warrants and Rights  |  | for Future Issuance 
|                                                               |  |                                   |         |                      |  |                     
|Equity compensation plans approved by security
    holders(1)  |  |                                   | 130,000 |                      |  | $                    | 9.05 |  |  |  | 370,000 | 
|Equity compensation plans not approved by
    security holders |  |                                   |        |                      |  |                      |      |  |  |  |        | 
|                                                               |  |                                   |         |                      |  |                      |      |  |  |  |         | 
|Total                                                          |  |                                   | 130,000 |                      |  |                      |      |  |  |  | 370,000 | 
|                                                               |  |                                   |         |                      |  |                      |      |  |  |  |         | 



---



|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Each of the independent director and
    officer/employee stock option plans was approved at our annual
    shareholders meeting held on June 28, 2003.

11



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##### Table of Contents








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

SELECTED FINANCIAL DATA

G REIT, INC.

(a Virginia corporation)


|                           |  |              |             |              |  |   |            | 
|-------------------------- |  | ------------ | ----------- | ------------ |  | - | ---------- | 
|                           |  | December 31, |             | December 31,
|Selected Financial Data(1) |  | 2003         |             | 2002        
|                           |  |              |             |             
|BALANCE SHEET DATA:        |  |              |             |              |  |   |            | 
|Total assets               |  | $            | 345,861,244 |              |  | $ | 36,461,309 | 
|Mortgage loans payable     |  |              | 97,287,026  |              |  |   | 16,860,000 | 
|Line of credit             |  |              | 81,533,603  |              |  |   |           | 
|Shareholders equity       |  |              | 150,521,841 |              |  |   | 18,350,358 | 

|                                                          |                   |              |              |              |  |   |             |         | 
|--------------------------------------------------------- | ----------------- | ------------ | ------------ | ------------ |  | - | ----------- | ------- | 
|                                                          |                   | Year Ended   |              | Year Ended  
|                                                          |                   | December 31, |              | December 31,
|                                                          |                   | 2003         |              | 2002        
|                                                          |                   |              |              |             
|OPERATING DATA:                                           |                   |              |              |              |  |   |             |        
|Rental income                                             |                   | $            | 12,427,027   |              |  | $ | 732,685     |        
|Rental expenses                                           |                   |              | 4,749,996    |              |  |   | 204,561     |        
|General and administrative expense                        |                   |              | 1,519,921    |              |  |   | 169,532     |        
|Interest expense                                          |                   |              | 2,647,937    |              |  |   | 248,609     |        
|Net income                                                |                   |              | 77,937       |              |  |   | 25,650      |        
|Net income per common share, basic and diluted(2)         |                   |              | 0.01         |              |  |   | 0.06        |        
|Distributions declared                                    |                   |              | 6,210,925    |              |  |   | 279,462     |        
|Distributions per common share(2)                         |                   |              | .75          |              |  |   | .69         |        
|Funds from operations(2)(3)                               |                   |              | 4,083,351    |              |  |   | 127,799     |        
|Cash flows provided by (used in) operating
    activities |                   |              | 574,550      |              |  |   | (608,907    | )      
|Cash flows used in investing activities                   |                   |              | (284,577,098 | )            |  |   | (26,101,496 | )      
|Cash flows provided by financing activities               |                   |              | 291,157,077  |              |  |   | 35,089,194  |        
|Weighted average number of shares outstanding(2):         |                   |              |              |              |  |   |             |        
|                                                          | Basic and diluted |              |              | 8,242,697    |  |   |             | 405,481 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The above selected financial data should be read
    in conjunction with the consolidated financial statements and
    related notes appearing elsewhere in this report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(2) | Net income and distributions per share are based
    upon the weighted average number of common shares outstanding.
    Distributions by the company of our current and accumulated
    earnings and profits for federal income tax purposes are taxable
    to shareholders as ordinary income. Distributions in excess of
    these earnings and profits generally are treated as a
    non-taxable reduction of the shareholders basis in the
    shares 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
    shareholders shares. For the years ended December 31,
    2003 and December 31, 2002, approximately 41% and 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 shareholders 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 the board
    of directors to reinvest funds rather than to distribute the
    funds, our capital expenditures, the annual distribution

12



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##### Table of Contents



| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | required to maintain REIT status under the Code
    and other factors the board of directors may deem relevant.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | One of our objectives is to provide cash
    distributions to our shareholders from cash generated by our
    operations. Cash generated from operations is not equivalent to
    our net operating income or loss as determined under accounting
    principles generally accepted in the United States, or GAAP. Due
    to certain unique operating characteristics of real estate
    companies, the National Association of Real Estate Investment
    Trusts, or NAREIT, an industry trade group, has promulgated a
    standard known as Funds from Operations or
    FFO, which it believes more accurately reflects the
    operating performance of a REIT such as our company.

We define FFO, a non-GAAP measure, consistent
with the NAREITs definition, as net income available to
common shareholders, plus depreciation and amortization of
assets uniquely significant to the real estate industry, reduced
by gains and increased by losses on (i) sales of investment
property and (ii) extraordinary items.

We consider 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. The historical
accounting convention used for real estate assets requires
straight-line depreciation of buildings and improvements, which
implies that the value of real estate assets diminishes
predictably over time. Since real estate values historically
rise and fall with market conditions, presentations of operating
results for a REIT, using historical accounting for
depreciation, could be less informative. The use of FFO is
recommended by the REIT industry as a supplemental performance
measure.

Presentation of this information is intended to
assist the reader in comparing the operating performance of
different REITs, although it should be noted that not all
REITs calculate FFO the same way, so comparisons with other
REITs may not be meaningful. Furthermore, FFO is not necessarily
indicative of cash flow available to fund cash needs and should
not be considered as an alternative to net income as an
indication of our performance.

FFO is calculated as follows:

|                      |                                          |                   |           |                   |  |   |         |         | 
|--------------------- | ---------------------------------------- | ----------------- | --------- | ----------------- |  | - | ------- | ------- | 
|                      |                                          | Year Ended        |           | Year Ended       
|                      |                                          | December 31, 2003 |           | December 31, 2002
|                      |                                          |                   |           |                  
|Net income            |                                          | $                 | 77,937    |                   |  | $ | 25,650  |        
|Add:                  |                                          |                   |           |                   |  |   |         |        
|                      | Depreciation  Consolidated properties   |                   |           | 2,837,428         |  |   |         | 102,149 | 
|                      | Depreciation  Unconsolidated properties |                   |           | 1,167,986         |  |   |         |        | 
|                      |                                          |                   |           |                   |  |   |         |        
|Funds from operations |                                          | $                 | 4,083,351 |                   |  | $ | 127,799 |        
|                      |                                          |                   |           |                   |  |   |         |        






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

The following discussion should be read in
conjunction with Item 6: Selected Financial
Data and the Companys financial statements and notes
appearing elsewhere in this Form 10-K.

Forward-Looking Statements

Historical results and trends should not be taken
as indicative of future operations. Managements statements
contained in this report that are not historical facts are
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results may differ materially from those
included in the forward-looking statements. We intend those
forward-looking statements to be covered by the safe-harbor
provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and are
including this statement for purposes of complying with those
safe-harbor provisions. Forward-looking statements, which are
based on certain assumptions and describe future plans,
strategies

13



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and expectations of the Company, are generally
identifiable by use of the words believe,
expect, intend, anticipate,
estimate, project,
prospects, or similar expressions. Our ability to
predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a
material adverse effect on the operations and future prospects
of our company on a consolidated basis include, but are not
limited to: changes in economic conditions generally and the
real estate market specifically, legislative/regulatory changes
(including changes to laws governing the taxation of REITs),
availability of capital, interest rates, competition, supply and
demand for operating properties in our current and proposed
market areas and generally accepted accounting principles,
policies and guidelines applicable to REITs. These risks and
uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such
statements. Additional information concerning us and our
business, including additional factors that could materially
affect our financial results, is included herein and in our
other filings with the Securities and Exchange Commission.


Overview

We were incorporated on December 18, 2001
under the laws of the Commonwealth of Virginia. We operate as a
real estate investment trust for federal income tax purposes. As
a REIT, we are generally not subject to income taxes. To
maintain our REIT status, we are required to distribute annually
as dividends at least 90% of our REIT taxable income, as defined
by the Code to our shareholders, among other requirements. If we
fail to qualify as a REIT in any taxable year, we will be
subject to Federal income tax on our taxable income at regular
corporate tax rates. As of December 31, 2003, we believe we
were in compliance with all relevant REIT requirements.

We were incorporated to acquire ownership
interests in office, industrial and service real estate
properties, a number of which will have a government-tenant
orientation. We completed our first property acquisition in
September 2002. As of December 31, 2003, we have purchased
interests in 13 properties, including 11 consolidated office
properties and two unconsolidated undivided tenant in common
interests in office properties.

We are externally advised by Triple Net
Properties, LLC, our advisor, which is primarily responsible for
managing the day-to-day operations and assets of our company.
The advisory agreement between us and our advisor has a one year
term, and is subject to successive renewals with the written
consent of the parties including a majority of our independent
directors. Our advisor is affiliated with our company in that
the two entities have common officers and directors, some of
whom also own an equity interest in our advisor.

Public Offering of Equity Securities/ Use of
Proceeds

Pursuant to a registration statement on
Form S-11/A under the Securities Act of 1933, as amended,
we offered for sale to the public on a best efforts
basis a minimum of 100,000 and a maximum of
20,000,000 shares of our common stock at a price of $10 per
share and up to 1,000,000 additional shares pursuant to a
dividend reinvestment plan under which our shareholders may
elect to have dividends reinvested in additional shares at
$9.05 per share. The registration statement was declared
effective by the SEC on July 22, 2002. As discussed in the
registration statement, we plan to principally use the net
offering proceeds from the sale of shares to acquire ownership
interests in real estate properties with a government-tenant
orientation. We intend to finance property acquisitions with a
combination of net offering proceeds and debt secured by the
acquired properties.

As of December 31, 2003, we sold
17,339,249 shares of our common stock under our initial
offering, issued an additional 251,540 shares to
shareholders participating in our dividend reinvestment plan and
repurchased 28,242 shares under our repurchase plan. As a
result, 17,562,457 shares were outstanding at
December 31, 2003, which generated aggregate gross proceeds
of approximately $175,000,000.

In connection with the offering, we incurred
approximately $18,200,000 of costs related to the issuance and
distribution of shares through December 31, 2003. Such
amount includes a total of approximately $13,200,000 paid to the
dealer manager of the offering, NNN Capital Corp., which is

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wholly owned by our chief executive officer, and
is principally comprised of selling commissions and investor
marketing and due diligence costs. In addition, approximately
$1,100,000 was paid to our advisor as a reimbursement for
offering expenses.


2003 Acquisitions



| |                                       
| | --------------------------------------
| | Congress Center,
    Chicago, Illinois

On January 9, 2003, through our wholly-owned
subsidiary, GREIT  Congress Center, LLC, we purchased
a 30% undivided tenant in common interest in Congress Center, a
16-story Class A office building of approximately
524,730 square feet located in Chicago, Illinois. NNN
Congress Center, LLC and WREIT  Congress Center, LLC,
affiliates of our advisor, simultaneously purchased undivided
tenant in common interests totaling approximately 70% ownership
of the property. The property was purchased from an unaffiliated
third party for a purchase price of $136,108,000. Our cash
investment was approximately $14,341,000. Our companys
total investment consisted of our proportionate share of the
purchase price of approximately $40,832,000 (consisting of
approximately $12,047,000 in cash and $28,785,000 in debt), plus
$2,294,000 for our proportionate share of closing costs, loan
fees and reserves. Our liability for the debt is limited to the
amount of our investment in the property. The seller of the
property paid a sales commission to Realty of $2,000,000, or
approximately 1.5% of the purchase price.



| |                                       
| | --------------------------------------
| | Atrium Building, Lincoln,
    Nebraska

On January 31, 2003, through our
wholly-owned subsidiary, GREIT  Atrium Building, LLC,
we purchased the Atrium Building, a six-story Class B
office building with approximately 166,902 square feet
located in Lincoln, Nebraska. The property was purchased from an
unaffiliated third party for a purchase price of $4,532,000. The
property is encumbered by two ground leases under parts of the
office building which expire in 2054 and 2055, respectively,
including renewal options. We funded the purchase price with
$2,200,000 in borrowings under our credit facility with LaSalle.
We are required to make interest only payments until the due
date of January 30, 2006, at which time the loan must be
paid in full or refinanced. The seller of the property paid a
sales commission to Realty of $132,000, or approximately 2.9% of
the purchase price.



| |                                   
| | ----------------------------------
| | Park Sahara, Las Vegas,
    Nevada

On March 18, 2003, through our wholly-owned
subsidiary, GREIT  Park Sahara, LLC, we purchased a
4.75% undivided tenant in common interest in Park Sahara, a
five-building Class B office park containing a total of
approximately 123,343 square feet located in Las Vegas,
Nevada. The property was purchased from an unaffiliated third
party for a total purchase price of $12,200,000. Our
proportionate share of the total purchase price was
approximately $579,500 including $180,500 in cash and $399,000
in debt. Our liability for the debt is limited to the amount of
our investment in the property. The seller of the property paid
a sales commission to Realty of $320,000, or approximately 2.6%
of the purchase price.



| |                                                                    
| | -------------------------------------------------------------------
| | Department of Children and Families Campus,
    Plantation, Florida

On April 25 2003, through our wholly-owned
subsidiary, GREIT  Department of DCF, LLC, we
purchased the Department of Children and Families Campus, or
DCF, consisting of one one-story and two three-story
Class B buildings with a total of approximately
124,037 square feet located on a 9.4 acre site in
Plantation, Florida. The property was purchased from an
unaffiliated third party for a purchase price of $11,580,000.
The purchase was financed with $7,605,000 in borrowings under
our credit facility with LaSalle. We are required to make
interest only payments until the due date of January 30,
2006, at which time the loan must be paid in full or refinanced.
The seller of the property paid a sales commission to Realty of
$300,000, or approximately 2.6% of the purchase price.

15



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| |                             
| | ----------------------------
| | Gemini Plaza, Houston, Texas

On May 2, 2003, through our wholly-owned
subsidiary, GREIT  Gemini Plaza, LLC, we purchased
Gemini Plaza, a six-story Class A office building with
approximately 158,627 square feet on a 7.02 acre site
located in Houston, Texas. The property was purchased from an
unaffiliated third party for a purchase price of $15,000,000.
The purchase was financed with $9,815,000 in borrowings under
our credit facility with LaSalle. We are required to make
interest only payments until the due date of January 30,
2006, at which time the loan must be paid in full or refinanced.
The seller of the property paid a sales commission to Realty of
$325,000, or approximately 2.2% of the purchase price.



| |                                         
| | ----------------------------------------
| | Bay View Plaza  Alameda,
    California

On July 31, 2003, through our wholly-owned
subsidiary, GREIT  Bay View, LP, we purchased an
approximately 97.68% majority tenant in common interest in Bay
View Plaza in Alameda, California. The property consists of a
two-story Class A office building with approximately 60,434
square feet in the master-planned Harbor Bay Office Park. The
property was purchased from an unaffiliated third party for a
purchase price of $11,655,000 in cash. Our proportionate share
of the total purchase price was approximately $11,329,000. The
seller of the property paid a sales commission to Realty of
$380,000, or approximately 3.0% of the purchase price.



| |                                                           
| | ----------------------------------------------------------
| | North Pointe Corporate Center 
    Sacramento, California

On August 11, 2003, through our wholly-owned
subsidiary, GREIT  North Pointe, LP, we purchased
North Pointe Corporate Center in Sacramento, California. North
Pointe is a 130,805 square foot, four-story Class A
office building on 5.6 acres built in 1988. The property
was purchased from an unaffiliated third party for a purchase
price of $24,205,000 in cash. The seller of the property paid a
sales commission to Realty of $705,000, or approximately 2.9% of
the purchase price.



| |                                             
| | --------------------------------------------
| | 824 Market Street 
    Wilmington, Delaware

On October 10, 2003, through our
wholly-owned subsidiary, GREIT  824 Market
Street, LLC, we purchased 824 Market Street in Wilmington,
Delaware. 824 Market Street is a 200,020 square foot,
ten-story, Class B+ multi-tenant office tower which
occupies one city block in downtown Wilmington, Delaware. The
property was purchased from an unaffiliated third party for a
purchase price of $31,900,000 in cash. We paid an acquisition
fee to Realty of $970,000, or approximately 3.0% of the purchase
price



| |                                                    
| | ---------------------------------------------------
| | Sutter Square Galleria 
    Sacramento, California

On October 28, 2003, through our
wholly-owned subsidiary, GREIT  Sutter Square, LP, we
purchased Sutter Square Galleria in Sacramento, California.
Sutter Square is a two-building, mixed-use property containing
approximately 61,036 square feet located in midtown Sacramento.
The property is subject to a ground lease expiring in 2030 with
one ten-year option period thereafter. The property was
purchased from an unaffiliated third party for a purchase price
of $8,240,000. In connection with the purchase, we assumed the
existing loan from GE Capital Loan Services in the amount of
$4,024,126. The loan bears interest at a fixed rate of 6.89% per
annum. We are required to make monthly principal and interest
payments on a 30-year amortization schedule until the due date
of November 1, 2008. The seller paid a sales commission to
Realty of $240,000, or approximately 2.9% of the purchase price.



| |                                                    
| | ---------------------------------------------------
| | One World Trade Center  Long
    Beach, California

On December 5, 2003, through our
wholly-owned subsidiary, GREIT  One World Trade
Center, LP, we purchased One World Trade Center in Long Beach,
California. One World Trade Center is a 27-story, Class A
multi-tenant office building with approximately 573,300 square
feet, including a retail component of approximately 120,000
square feet. We purchased the property from an unaffiliated
third party for a purchase price of $113,648,000. We funded the
purchase price with a first mortgage loan from HSH NordBank in
the amount of $77,000,000 with an interest rate of
1.90% per annum over 3 month

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LIBOR. We may make a second draw in the amount of
$2,500,000 upon meeting certain earn out requirements. We are
required to make monthly principal and interest payments through
December 4, 2006. The loan is subject to two 12-month
extensions providing we meet certain criteria. We also entered
into an interest rate collar agreement with HSH NordBank in the
amount of $77,000,000 with a LIBOR floor and ceiling of 1.50%
and 4.05%, respectively. The seller paid a sales commission to
Realty of $2,400,000, or approximately 2.1% of the purchase
price.




| |                                                    
| | ---------------------------------------------------
| | Centerpoint Corporate Center 
    Kent, Washington

On December 30, 2003, through our
wholly-owned subsidiary, GREIT  Centerpoint Corporate
Park, LLC, we purchased Centerpoint Corporate Park in Kent,
Washington. Centerpoint consists of a four-building portfolio
totaling approximately 435,784 square feet which is part of
an eight building, 735,000 square-foot Class A
suburban master-planned corporate campus built on
40.29 acres in Kent, Washington, a suburb of Seattle. We
purchased the property from an unaffiliated third party for a
purchase price of $54,220,000. We financed the purchase with
approximately $25,028,814 in borrowings under our credit
facility with LaSalle Bank. We paid an acquisition fee to Realty
of $1,626,600, or approximately 3.0% of the purchase price.

Critical Accounting Policies

The preparation of financial statements in
accordance with accounting principles generally accepted in the
United States of America requires us to make estimates and
judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. We believe that our critical
accounting policies are those that require significant judgments
and estimates such as those related to revenue recognition,
allowance for doubtful accounts, impairment of real estate
assets, purchase price allocation, deferred assets and
qualification as a REIT. These estimates are made and evaluated
on an on-going basis using information that is currently
available as well as various other assumptions believed to be
reasonable under the circumstances. Actual results could vary
from those estimates and those estimates could be different
under different assumptions or conditions.



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

Base rental income is recognized on a
straight-line basis over the terms of the respective lease
agreements. Differences between rental income recognized and
amounts contractually due under the lease agreements are
credited or charged, as applicable, to rent receivable. We
maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of tenants to make required
payments under lease agreements. We also maintain an allowance
for deferred rent receivables arising from the straight-lining
of rents. We determine the adequacy of this allowance by
continually evaluating individual tenant receivables considering
the tenants financial condition, security deposits,
letters of credit, lease guarantees and current economic
conditions.



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

Our properties are stated at depreciated cost. We
assess the impairment of a real estate asset when events or
changes in circumstances indicate that the net book value may
not be recoverable. Indicators management considers important
which could trigger an impairment review include the following:



| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | 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

Property acquisitions have been accounted for in
accordance with Statement of Financial Accounting Standards
No. 141, Business Combinations. The fair value
of the real estate acquired is allocated to the

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acquired tangible assets, consisting of land,
building and tenant improvements, and identified intangible
assets and liabilities, consisting of the value of above-market
and below-market leases, other value of in-place leases and
value of tenant relationships, if any, based in each case on
their fair values.


The fair value of the tangible assets of an
acquired property (which includes land, building and tenant
improvements) is determined by valuing the property as if it
were vacant, and the as-if-vacant value is then
allocated to land, building and tenant improvements based on our
determination of the relative fair values of these assets.
Factors considered by us in performing these analyses include an
estimate of carrying costs during the expected lease-up periods
considering current market conditions and insurance and other
operating expenses during the expected lease-up periods based on
current market demand. We also estimate costs to execute similar
leases including leasing commissions, concessions, legal and
other related costs.

In allocating the fair value of the identified
intangible assets and liabilities of an acquired property,
above-market and below-market in-place lease values are recorded
based on the present value (using an interest rate which
reflects the risks associated with the leases acquired) of the
difference between (1) the contractual amounts to be paid
pursuant to the in-place leases and (2) our estimate of
fair market lease rates for the corresponding in-place leases,
measured over a period equal to the remaining non-cancelable
term of the lease. The capitalized above-market and below-market
lease values are amortized into rental income over the remaining
non-cancelable terms of the respective leases.



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

Costs incurred for debt financing and property
leasing are capitalized as deferred assets. Deferred financing
costs include amounts paid to lenders and others to obtain
financing. Such costs are amortized over the term of the related
loan. Amortization of deferred financing costs is included in
interest expense in our statements of operations. Deferred
leasing costs include leasing commissions that are amortized
using the straight-line method over the term of the related
lease. Unamortized financing and leasing costs are charged to
expense in the event of debt prepayment or early termination of
the lease.



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

Since our taxable year ended December 31,
2002, we have been organized and operated, and intend to
continue to operate, so as to qualify for taxation as a REIT
under the Code. Our qualification and taxation as a REIT depends
on our ability to meet, through actual annual operating results,
asset diversification, distribution levels and diversity of
stock ownership, numerous requirements established under highly
technical and complex Code provisions subject to interpretation.

If we failed to qualify as a REIT in any taxable
year, we would be subject to federal income tax, including any
applicable alternative minimum tax, on our taxable income at
regular corporate rates. Moreover, unless entitled to relief
under specific statutory provisions, we also would be
disqualified as a REIT for four taxable years following the year
during which qualification was lost.



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

There are no off-balance sheet transactions,
arrangements or obligations (including contingent obligations)
that have, or are reasonably likely to have a current or future
material effect on our financial condition, changes in the
financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.

Results of Operations

Our operating results are primarily comprised of
income derived from our portfolio of properties. Because of the
significant property acquisitions throughout the years ended
December 31, 2003 and 2002, the comparability of financial
data from period to period is limited.

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| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Comparison of the year ended
    December 31, 2003 to the year ended December 31,
    2002

Rental income increased approximately $11,700,000
or 1,596% during the year ended December 31, 2003 as
compared with the year ended December 31, 2002.
Approximately $8,000,000 of this increase was attributable to
the nine consolidated properties acquired during 2003, and
approximately $3,700,000 was attributable to a full years
ownership of the two properties acquired during 2002.

Rental expenses increased approximately
$4,500,000, or 2,222% during the year ended December 31,
2003 as compared with the year ended December 31, 2002.
Approximately $3,000,000 of this increase was attributable to
properties acquired during 2003, and approximately $1,500,000
was attributable to a full years ownership of the
properties acquired during 2002.

General and administrative expenses consist
primarily of third party professional legal and accounting fees
and the cost of computerized information services and related
office expenses required to maintain our accounting and investor
records. General and administrative expenses increased
approximately $1,400,000, or 797%, as a result of a full
years operation of our company in 2003.

Interest expense increased approximately
$2,400,000, or 965% during the year ended December 31, 2003
as compared with the year ended December 31, 2002, as a
result of an increase in borrowings for property acquisitions.

Depreciation expense and amortization of leasing
commissions increased approximately $3,700,000, or 3,577% during
the year ended December 31, 2003 as compared with the year
ended December 31, 2002. Approximately $2,300,000 of this
increase is attributable to the properties acquired during 2003,
and approximately $1,400,000 of the increase was attributable to
a full years ownership of the properties acquired during
2002.

Interest income increased approximately $105,000,
or 591% during the year ended December 31, 2003 as compared
with the year ended December 31, 2002, as a result of
earnings in 2003 on short-term investment of cash pending its
investment in acquired properties.

As a result of the above items, net income for
the year ended December 31, 2003 was $77,965 compared with
$25,650 for the year ended December 31, 2002.

Liquidity and Capital Resources



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

Cash flows provided by operating activities
increased by approximately $1,200,000 during the year ended
December 31, 2003 as compared to the year ended
December 31, 2002, as a result of the acquisition of nine
consolidated properties in 2003 and the full years
operation of the two consolidated properties acquired in 2002.

Cash flows used in investing activities were
approximately $283,000,000 in 2003, primarily for the
acquisition of nine consolidated properties and interests in two
unconsolidated properties during 2003.

Cash flows provided by financing activities were
approximately $292,000,000 in 2003. The proceeds from issuance
of approximately 15,404,000 shares of common stock resulted
in net proceeds of approximately $138,000,000, and net
borrowings under our line of credit and notes payable were
approximately $158,000,000. Distributions paid in 2003 were
approximately $5,300,000.



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

On July 22, 2002, our registration statement
for our initial public offering of shares of our common stock
was declared effective by the Securities and Exchange
Commission. In the initial offering, we offered for the sale to
the public on a best efforts basis a maximum of
20,000,000 shares of our common stock at a purchase price
of $10.00 per share and up to 1,000,000 additional shares
through our dividend reinvestment plan. As of December 31,
2003, we sold 17,339,249 shares of our common stock under
our initial offering, issued an additional 251,540 shares
to shareholders participating in our dividend

19



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##### Table of Contents



reinvestment plan and repurchased
28,242 shares under our repurchase plan. As a result,
17,562,457 shares were outstanding at December 31,
2003, which generated aggregate gross proceeds of approximately
$175,000,000. Effective February 9, 2004, we terminated our
initial offering. Of the 21,000,000 shares registered in
the initial offering, 19,987,934 were sold and 357,381 were
issued in accordance with our dividend reinvestment plan. On
February 17, 2004, we filed a post-effective amendment to
deregister 654,685 shares of our common stock.


On January 23, 2004, our registration
statement for our second offering of shares of our common stock
was declared effective by the Securities and Exchange
Commission. In the second offering, we are offering for sale to
the public on a best efforts basis a maximum of
27,000,000 shares of our common stock at a purchase price
of $10.00 per share and up to 1,500,000 additional shares
through our dividend reinvestment plan. We commenced the sale of
shares pursuant to our second offering on February 9, 2004.
We intend to terminate the current offering on April 30,
2004.

Management anticipates that 87.5% of the gross
offering proceeds of both the initial and second offerings will
be used to acquire real estate and the balance will be used to
pay various fees and expenses.

Our operating partnership has a secured line of
credit with a group of banks led by LaSalle, which matures on
January 30, 2006. At December 31, 2003, advances under
this credit facility bear interest at LIBOR plus 3.9% and we are
required to make interest only payments on a monthly basis. As
of December 31, 2003, our borrowings under this credit
facility totaled $81,533,000 and undrawn amounts under the
credit facility totaled $33,467,000. On April 1, 2004, we
amended our credit agreement to increase the line of credit to
$350,000,000.

As of December 31, 2003, we had
approximately $15,500,000 in cash and cash equivalents.

We intend to acquire additional properties and
will seek to fund these acquisitions through utilization of the
current cash balances and/or proceeds received from a
combination of subsequent equity issuances, debt financings or
asset dispositions. There may be a delay between a sale of
shares of common stock and our purchase of properties, which may
result in a delay in the benefits to shareholders of returns
generated from property operations. During such a period, we may
temporarily invest any unused proceeds from the offering in
investments that could yield lower returns than investments in
real estate.

In order to qualify as a REIT for federal income
tax purposes, we are required to make distributions to its
shareholders of at least 90% of REIT taxable income. We expect
to use our cash flow from operating activities for distributions
to shareholders.



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

The following table provides information with
respect to the maturities and scheduled principal repayments of
our secured debt and line of credit and scheduled interest
payments of our fixed rate debt at December 31, 2003. It
also provides information about the minimum commitments due in
connection with our ground lease obligations at
December 31, 2003. The table does not reflect available
extension options.

|                                     |       |                        |         |             |  |             |            |              |  |       |           |           |  |   |            |            |  |   |            |             | 
|------------------------------------ | ----- | ---------------------- | ------- | ----------- |  | ----------- | ---------- | ------------ |  | ----- | --------- | --------- |  | - | ---------- | ---------- |  | - | ---------- | ----------- | 
|                                     |       |                       
|                                     |       | Payments Due by Period
|                                     |       |                       
|                                     |       | Less than              |         |             |  | More than   |            |             
|                                     |       | 1 Year                 |         | 1-3 Years   |  | 3-5 Years   |            | 5 Years      |  |      
|                                     |       | (2004)                 |         | (2005-2006) |  | (2007-2008) |            | (After 2008) |  | Total
|                                     |       |                        |         |             |  |             |            |              |  |      
|Principal payments  secured debt    |       | $                      | 184,795 |             |  | $           | 407,072    |              |  | $     | 457,824   |           |  | $ | 13,076,949 |            |  | $ | 14,126,640 |            
|Principal payments  credit facility |       |                        |        |             |  |             | 81,533,603 |              |  |       |          |           |  |   |           |            |  |   | 81,533,603 |            
|Interest payments  fixed rate debt  |       |                        | 875,293 |             |  |             | 1,713,103  |              |  |       | 1,662,351 |           |  |   |           |            |  |   | 4,250,747  |            
|Ground lease obligations             |       |                        | 41,000  |             |  |             | 82,000     |              |  |       | 82,000    |           |  |   | 262,000    |            |  |   | 467,000    |            
|                                     |       |                        |         |             |  |             |            |              |  |       |           |           |  |   |            |            |  |   |            |            
|                                     | Total |                        | $       | 1,101,088   |  |             | $          | 83,735,778   |  |       | $         | 2,202,175 |  |   | $          | 13,338,949 |  |   | $          | 100,377,990 | 
|                                     |       |                        |         |             |  |             |            |              |  |       |           |           |  |   |            |            |  |   |            |            

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Subsequent Events

Acquisitions



| |                                                         
| | --------------------------------------------------------
| | AmberOaks Corporate Corporate
    Center  Austin, Texas

On January 20, 2004, through our
wholly-owned subsidiary, GREIT  AmberOaks GP, LLC, we
purchased AmberOaks Corporate Center in Austin, Texas from an
unaffiliated third party for a purchase price of approximately
$35,525,000. AmberOaks is a Class A five-building office
portfolio with approximately 281,885 square feet that is
part of an eight-building complex. An affiliate of the advisor
purchased the remaining three buildings. The property is
approximately 74% leased, with approximately 64% of the property
leased to URS Corporation (aka Radian International). We
financed the purchase price with approximately $14,700,000 in
borrowings under a three-year secured revolving line of credit
with LaSalle. We are required to make interest only payments
until the due date at our option of (1) LaSalles
prime rate plus 0.50% or (2) up to 3 months LIBOR plus
3.00%. The rate will be subject to a floor of 4.25%. We paid an
acquisition fee to Realty of $908,900, or approximately 2.6% of
the purchase price.



| |                                                        
| | -------------------------------------------------------
| | Public Ledger Building 
    Philadelphia, Pennsylvania

On February 13, 2004, through our wholly
owned subsidiary, GREIT  Public Ledger, LLC, we
purchased the Public Ledger Building in Philadelphia,
Pennsylvania from an unaffiliated third party for a purchase
price of approximately $33,950,000. The Public Ledger Building
is a 471,217 square foot 12-story multi-tenant
Class B+ office building located in Philadelphias
East Market Street submarket. The property is approximately 85%
leased to multiple tenants. At the date of acquisition, the
General Services Administration occupied approximately 27.5% of
the property. We financed the purchase price with approximately
$19,929,000 in borrowings under our credit facility arranged
through LaSalle. We are required to make interest only payments
until the due date of January 30, 2006, at which time the
loan must be paid in full or refinanced. We paid an acquisition
fee to Realty of $965,000, or approximately 2.8% of the purchase
price.



| |                                             
| | --------------------------------------------
| | Madrona Buildings  Torrance,
    California

On March 31, 2004, through our wholly owned
subsidiary, GREIT  Madrona, LP, we purchased the
Madrona Buildings in Torrance, California from an unaffiliated
third party for a purchase price of approximately $45,900,000 in
cash. We received a credit of approximately $2,500,000 from the
seller at closing to cover the free rental periods and tenant
improvements that two tenants have under their respective
leases. The property is a four-building Class A office
portfolio totaling approximately 211,407 square feet located in
Torrance, California, a suburb of Los Angeles. The Madrona
Buildings are approximately 84.7% leased, with approximately
41.2% leased by American Honda Motor Company, 25.3% by NavCom
Technology, Inc. and 18.2% by Kaiser Permanente. We paid an
acquisition fee to Realty of $1,350,000, or approximately 2.9%
of the purchase price.



| |                                              
| | ---------------------------------------------
| | Brunswig Square  Los Angeles,
    California

On April 5, 2004, through our wholly owned
subsidiary, GREIT  Brunswig Square, LP, we purchased
Brunswig Square in Los Angeles, California from an unaffiliated
third party for a purchase price of approximately $23,805,000 in
cash. Brunswig Square is a mixed use office/ retail building
totaling approximately 135,982 square feet, including a
retail component of approximately 24,169 square feet, located in
the Little Tokyo District of downtown Los Angeles. The property
is approximately 92.9% leased, with approximately 25.6% leased
by the City of Los Angeles  Department of
Fire & Police Pensions, 22.5% leased by the City of Los
Angeles  Employee Retirement Systems, 14.5% by the
General Services Administration  Immigration and
Naturalization Services and 9.6% by the General Services
Administration  Office of Personnel Management. We
paid Realty an acquisition fee of $716,400, or approximately
3.0% of the purchase price.

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| |                                                 
| | ------------------------------------------------
| | North Belt Corporate Center 
    Houston, Texas

On April 8, 2004, through our wholly owned
subsidiary, GREIT  North Belt Corporate, LP, we
purchased North Belt Corporate Center in Houston, Texas from an
unaffiliated third party for a purchase price of approximately
$12,675,000 in cash. North Belt is a multi-tenant office
building totaling approximately 155,764 square feet. The
property is approximately 86.5% leased, with approximately 21.1%
leased by the General Services Administration 
U.S. Customs and Border Protection, 20.2% by Southwestern
Energy Company and 10.2% to Bredero Price Company. We paid
Realty an acquisition fee of $400,000, or approximately 3.0% of
the purchase price.

Proposed Acquisitions



| |                                                
| | -----------------------------------------------
| | Hawthorne Plaza 
    San Francisco, California

Our advisor has entered into a contract on our
behalf with an unaffiliated third-party seller for the
acquisition of Hawthorne Plaza, a two-building Class A
office complex totaling approximately 418,668 square feet
located in the south financial district in San Francisco,
California. The property is approximately 99.7% leased, with
approximately 87.4% leased by the General Services
Administration on behalf of the Environmental Protection Agency,
Health Care Financing Administration (Centers for
Medicare & Medicaid Services), Bureau of Citizenship
and Immigration Services, U.S. Department of Agriculture
and the U.S. Passport Agency. The purchase price for the
property is approximately $97,000,000. We intend to finance the
property with a mortgage loan from Fleet National Bank,
Administrative Agent in the amount of approximately $62,750,000.
We intend to pay Realty an acquisition fee of $2,900,000, or
approximately 3.0% of the purchase price, for arranging the
transaction. Closing of this acquisition is anticipated in April
2004. We have a deposit of $2,000,000 related to this potential
acquisition. Under certain circumstances, the deposit may be
nonrefundable.

In addition, we are currently considering several
potential property acquisitions. Our decision to acquire one or
more of these properties will generally depend upon:



| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | our receipt of a satisfactory environmental
    survey and property appraisal for each property;                               
|
| |  | no material adverse change occurring in the
    properties, the tenants or in the local economic
    conditions; and           
|
| |  | our receipt of sufficient financing, either
    through the net proceeds from this offering or satisfactory debt
    financing.

There can be no assurance that any or all of the
conditions will be satisfied.

Other Events

For the period from January 1, 2004 through
March 31, 2004, we sold approximately
10,067,127 shares of common stock, and issued an additional
167,173 shares under the DRIP, resulting in additional
gross proceeds before offering costs and selling commissions of
approximately $102,500,000. We intend to terminate our current
offering on April 30, 2004.

On April 1, 2004, our company and LaSalle
amended the credit agreement to increase our line of credit to
$350,000,000.

Effective April 22, 2004, Diana M. Laing has
resigned her position as our chief financial officer and our
board of directors has appointed Richard Hutton as interim chief
financial officer. Mr. Hutton has served as the chief
investment officer of our advisor since August 2003, overseeing
all financial operations of our advisor, and previously served
as our interim chief financial officer. From April 1999 to
August 2003, Mr. Hutton served as senior vice
president  real estate acquisitions and vice
president  property management for our advisor. In
that position, Mr. Hutton oversaw the management of the
real estate portfolios and property management of our advisor
and its affiliates. Mr. Hutton holds a BA in psychology

22



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##### Table of Contents



from Claremont McKenna College and has been
licensed as a certified public accountant in California since
1984.


Impact of Accounting Principles

On January 1, 2003, we adopted the
provisions of SFAS 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections (SFAS 145). The most
significant provisions of this statement relate to the
rescission of Statement No. 4 Reporting Gains and
Losses from Extinguishment of Debt. SFAS 145 also
amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings or describe
their applicability under changed conditions. Under
SFAS 145, any gain or loss on extinguishment of debt that
was classified as an extraordinary item in prior periods
presented that does not meet certain defined criteria must be
reclassified. The adoption of this statement did not have a
material effect on our results of operations or financial
condition.

On January 1, 2003, we adopted the
provisions of SFAS 146, Accounting for Costs
Associated with Exit or Disposal Activities
(SFAS 146). SFAS 146 addresses financial
accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force
Issue No. 94-3 Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an
Activity. SFAS 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized
when the liability is incurred. The adoption of this statement
did not have a material effect on our results of operations or
financial condition.

On January 1, 2003, we adopted the initial
recognition and measurement provisions of Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others (FIN 45).
FIN 45 significantly changes the current practice in the
accounting for, and disclosure of, guarantees. Guarantees and
indemnification agreements meeting the characteristics described
in FIN 45 are required to be initially recorded as a
liability at fair value. FIN 45 also requires a guarantor
to make significant new disclosures for virtually all guarantees
even if the likelihood of the guarantor having to make payment
under the guarantee is remote. We adopted the disclosure
provisions of FIN 45 as of December 31, 2002. The
adoption of the provisions of this interpretation did not have a
material effect on our results of operations or financial
condition.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). FIN 46
clarifies the application of Accounting Research Bulletin
No. 51, Consolidated Financial Statements and
provides guidance on the identification of entities for which
control is achieved through means other than voting rights
(variable interest entities or VIEs) and
how to determine when and which business enterprise should
consolidate the VIE. This new model for consolidation applies to
an entity in which either: (1) the equity investors (if
any) lack one or more characteristics deemed essential to a
controlling financial interest or (2) the equity investment
at risk is insufficient to finance that entitys activities
without receiving additional subordinated financial support from
other parties. The provisions of this interpretation are
applicable to VIEs formed after January 31, 2003. For VIEs
formed prior to January 31, 2003, the provisions of this
interpretation apply to the first fiscal year or interim period
beginning after December 15, 2003. On February 1,
2003, we adopted the provisions of this interpretation, which
did not have a material effect on our results of operations or
financial condition.

In April 2003, the FASB issued
SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities
(SFAS 149). SFAS 149 amends and clarifies
financial accounting and reporting for derivative instruments,
including certain derivative instruments imbedded in other
contracts and for hedging activities under
SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities. The provisions of
SFAS 149 are generally effective for contracts entered into
or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The adoption
of this statement did not have a material effect on our results
of operations or financial condition.

23



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##### Table of Contents



In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity (SFAS 150). SFAS 150
establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both
liabilities and equity. The statement is effective for financial
instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of this
statement did not have a material effect on our results of
operations or financial condition.

Inflation

We will be exposed to inflation risk as income
from long-term leases is expected to be the primary source of
our cash flows from operations. We expect that there will be
provisions in the majority of our tenant leases that would
protect us from the impact of inflation. These provisions
include rent steps, reimbursement billings for operating expense
pass-through charges, real estate tax and insurance
reimbursements on a per square foot allowance. However, due to
the long-term nature of the leases, the leases may not re-set
frequently enough to cover inflation.






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

We are exposed to interest rate changes primarily
as a result of our long-term debt used to maintain liquidity and
fund capital expenditures and expansion of our real estate
investment portfolio and operations. Our interest rate risk
management objectives are to limit the impact of interest rate
changes on earnings and cash flows and to lower its overall
borrowing costs. To achieve our objectives we borrow primarily
at fixed rates or variable rates with the lowest margins
available and in some cases, with the ability to convert
variable rates to fixed rates. We may enter into derivative
financial instruments such as interest rate swaps, caps and
treasury locks in order to mitigate our interest rate risk on a
related financial instrument. We do not enter into derivative or
interest rate transactions for speculative purposes.

Our interest rate risk is monitored using a
variety of techniques. The table below presents, as of
December 31, 2003, the principal amounts and weighted
average interest rates by year of expected maturity to evaluate
the expected cash flows and sensitivity to interest rate changes.

|                                       |  |      |         |      |  |      |         |      |  |      |             |            |  |       |         |   |  |   |         |   |  |   |            |   |  |   |             |  
|-------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ----------- | ---------- |  | ----- | ------- | - |  | - | ------- | - |  | - | ---------- | - |  | - | ----------- | -
|                                       |  | 2004 |         | 2005 |  | 2006 |         | 2007 |  | 2008 |             | Thereafter |  | Total
|                                       |  |      |         |      |  |      |         |      |  |      |             |            |  |      
|Fixed rate debt                        |  | $    | 184,795 |      |  | $    | 197,565 |      |  | $    | 209,507     |            |  | $     | 222,184 |   |  | $ | 235,640 |   |  | $ | 13,007,335 |   |  | $ | 14,057,026  |  
|Average interest rate on maturing debt |  |      | 6.24    | %    |  |      | 6.24    | %    |  |      | 6.24        | %          |  |       | 6.24    | % |  |   | 6.25    | % |  |   | 6.19       | % |  |   | 6.20        | %
|Variable rate debt                     |  | $    | 96,448  |      |  | $    | 70,235  |      |  | $    | 158,606,967 |            |  | $     | 76,633  |   |  | $ | 80,049  |   |  | $ | 5,833,271  |   |  | $ | 164,763,603 |  
|Average interest rate on maturing debt |  |      | 4.50    | %    |  |      | 4.75    | %    |  |      | 3.51        | %          |  |       | 4.75    | % |  |   | 4.75    | % |  |   | 4.75       | % |  |   | 3.56        | %

The fair estimated value of our debt approximates
its December 31, 2003 carrying amount.

The weighted average interest rate of our
mortgage debt as of December 31, 2003 was approximately
4.82%. At December 31, 2003, our mortgage debt consisted of
approximately $14,126,600 or 8% of the total debt at a fixed
interest rate of 6.24% and approximately $164,796,217 or 92% of
the total debt at a variable interest rate of 4.5%. An increase
in the variable interest rate on certain mortgages payable
constitutes a market risk. As of December 31, 2003, for
example, a .25% increase in LIBOR would have increased our
overall annual interest expense by approximately $412,000 or
less than 6%.

24



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##### Table of Contents



The table below presents, as of December 31,
2002, the principal amounts and weighted average interest rates
by year of expected maturity to evaluate the expected cash flows
and sensitivity to interest rate changes.

|                                       |  |      |           |      |  |      |         |      |  |      |         |       |  |   |         |   |  |   |           |   |  |   |            |  
|-------------------------------------- |  | ---- | --------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | ----- |  | - | ------- | - |  | - | --------- | - |  | - | ---------- | -
|                                       |  | 2003 |           | 2004 |  | 2005 |         | 2006 |  | 2007 |         | Total
|                                       |  |      |           |      |  |      |         |      |  |      |         |      
|Fixed rate debt                        |  | $    | 127,265   |      |  | $    | 135,007 |      |  | $    | 143,220 |       |  | $ | 151,933 |   |  | $ | 9,602,575 |   |  | $ | 10,160,000 |  
|Average interest rate on maturing debt |  |      | 5.92      | %    |  |      | 5.92    | %    |  |      | 5.92    | %     |  |   | 5.92    | % |  |   | 5.92      | % |  |   | 5.92       | %
|Variable rate debt                     |  | $    | 6,700,000 |      |  | $    |        |      |  |      |        |       |  |   |        |   |  |   |          |   |  | $ | 6,700,000  |  
|Average interest rate on maturing debt |  |      | 5.50      | %    |  |      |        | %    |  |      |        | %     |  |   |        | % |  |   |          | % |  |   | 5.50       | %

The fair estimated value of the Companys
debt approximates its December 31, 2002 carrying amount.

The weighted average interest rate of the
Companys mortgage debt as of December 31, 2002 was
approximately 5.75%. At December 31, 2002, the
Companys mortgage debt consisted of approximately
$10,160,000 or 60% of the total debt at a fixed interest rate of
5.92% and approximately $6,700,000 or 40% of the total debt at a
variable interest rate of 5.50%. An increase in the variable
interest rate on certain mortgages payable constitutes a market
risk. As of December 31, 2002, for example a .25% increase
in LIBOR would have increased the Companys overall annual
interest expense by approximately $16,750 or less than 3%.

25



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##### Table of Contents








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

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                            |  |      |    | 
|----------------------------------------------------------- |  | ---- | -- | 
|                                                            |  | Page
|                                                            |  |     
|Report of Independent Certified Public Accountants          |  |      | 27 | 
|Consolidated Balance Sheets                                 |  |      | 29 | 
|Consolidated Statements of Operations                       |  |      | 30 | 
|Consolidated Statements of Shareholders
    Equity         |  |      | 31 | 
|Consolidated Statements of Cash Flows                       |  |      | 32 | 
|Notes to Consolidated Financial Statements                  |  |      | 33 | 
|Schedule III (Real Estate and Accumulated
    Depreciation) |  |      | 51 | 

26



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##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To the Board of Directors and Shareholders

G REIT, Inc.


We have audited the accompanying consolidated
balance sheet of G REIT, Inc. and subsidiaries (the
Company), as of December 31, 2003, and the
related consolidated statements of operations,
shareholders equity and cash flows for the year then
ended. Our audit also included the financial statement schedule
listed in the index at Item 15. These financial statements
and the financial statement schedule are the responsibility of
the Companys management. Our responsibility is to express
an opinion on these financial statements and the financial
statement schedule based on our audit.

We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of the Company as of
December 31, 2003, and the results of its operations and
its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all
material respects, the information set forth therein.

/s/ DELOITTE & TOUCHE, LLP

Los Angeles, California

April 13, 2004


27



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##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To the Board of Directors and Shareholders

G REIT, Inc.


We have audited the accompanying consolidated
balance sheet of G REIT, Inc. (the Company) as
of December 31, 2002, and the related consolidated
statements of operations, shareholders equity and cash
flows for the year ended December 31, 2002 and the period
from December 18, 2001 (inception) through
December 31, 2001. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of G REIT, Inc. as of
December 31, 2002, and the consolidated results of its
operations and its cash flows for the year ended
December 31, 2002 and the period from December 18,
2001 through December 31, 2001, in conformity with
accounting principles generally accepted in the United States of
America.



| |                       
| | ----------------------
| | /s/ GRANT THORNTON LLP

Irvine, California

March 18, 2003


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##### Table of Contents



G REIT, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2003 and 2002


|                                                                                                                                                                           |                                           |      |             |             |  |   |            |            | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ---- | ----------- | ----------- |  | - | ---------- | ---------- | 
|                                                                                                                                                                           |                                           | 2003 |             | 2002       
|                                                                                                                                                                           |                                           |      |             |            
|ASSETS                                                                                                                                                                    
|Real estate investments:                                                                                                                                                   |                                           |      |             |             |  |   |            |           
|                                                                                                                                                                           | Operating properties, net                 |      | $           | 298,606,101 |  |   | $          | 23,728,362 | 
|                                                                                                                                                                           | Investments in unconsolidated real estate |      |             | 14,156,658  |  |   |            |           | 
|                                                                                                                                                                           |                                           |      |             |             |  |   |            |           
|                                                                                                                                                                           |                                           |      | 312,762,759 |             |  |   | 23,728,362 |           
|Cash and cash equivalents                                                                                                                                                  |                                           |      | 15,533,420  |             |  |   | 8,378,891  |           
|Accounts receivable, net                                                                                                                                                   |                                           |      | 2,081,603   |             |  |   | 98,149     |           
|Accounts receivable from related parties                                                                                                                                   |                                           |      |            |             |  |   | 4,063      |           
|Real estate deposits                                                                                                                                                       |                                           |      | 2,600,703   |             |  |   | 2,270,985  |           
|Deferred financing costs                                                                                                                                                   |                                           |      | 3,947,040   |             |  |   | 386,429    |           
|Other assets, net                                                                                                                                                          |                                           |      | 8,935,719   |             |  |   | 1,594,430  |           
|                                                                                                                                                                           |                                           |      |             |             |  |   |            |           
|Total assets                                                                                                                                                               |                                           | $    | 345,861,244 |             |  | $ | 36,461,309 |           
|                                                                                                                                                                           |                                           |      |             |             |  |   |            |           
|LIABILITIES AND SHAREHOLDERS
    EQUITY                                                                                                                                  
|Accounts payable and accrued liabilities                                                                                                                                   |                                           | $    | 4,157,758   |             |  | $ | 770,770    |           
|Mortgage loans payable                                                                                                                                                     |                                           |      | 97,287,026  |             |  |   | 16,860,000 |           
|Line of credit                                                                                                                                                             |                                           |      | 81,533,603  |             |  |   |           |           
|Security deposits and prepaid rent                                                                                                                                         |                                           |      | 3,089,599   |             |  |   | 370,539    |           
|Lease disadvantage                                                                                                                                                         |                                           |      | 7,971,764   |             |  |   |           |           
|Distributions payable                                                                                                                                                      |                                           |      | 1,036,031   |             |  |   | 109,642    |           
|                                                                                                                                                                           |                                           |      |             |             |  |   |            |           
|                                                                                                                                                                           |                                           |      | 195,075,781 |             |  |   | 18,110,951 |           
|Commitments and contingencies                                                                                                                                              |                                           |      |            |             |  |   |           |           
|Minority interest of tenant-in-common                                                                                                                                      |                                           |      | 263,622     |             |  |   |           |           
|Shareholders equity:                                                                                                                                                      |                                           |      |             |             |  |   |            |           
|Common stock, $.01 par value;
    50,000,000 shares authorized; 17,562,457 and
    2,158,417 shares issued and outstanding at
    December 31, 2003 and 2002, respectively |                                           |      | 175,624     |             |  |   | 21,584     |           
|Additional paid-in capital                                                                                                                                                 |                                           |      | 156,733,019 |             |  |   | 18,582,586 |           
|Distributions in excess of earnings                                                                                                                                        |                                           |      | (6,386,802  | )           |  |   | (253,812   | )         
|                                                                                                                                                                           |                                           |      |             |             |  |   |            |           
|Total shareholders equity                                                                                                                                                 |                                           |      | 150,521,841 |             |  |   | 18,350,358 |           
|                                                                                                                                                                           |                                           |      |             |             |  |   |            |           
|Total liabilities and shareholders equity                                                                                                                                 |                                           | $    | 345,861,244 |             |  | $ | 36,461,309 |           
|                                                                                                                                                                           |                                           |      |             |             |  |   |            |           

The accompanying notes are an integral part of
these consolidated financial statements.

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##### Table of Contents



G REIT, INC.

CONSOLIDATED STATEMENTS OF
OPERATIONS

For the Year Ended December 31, 2003,
2002 and


the period from December 18, 2001
(inception) through December 31, 2001


|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |   |   | 
|-------------------------------------------------------- | --------------------------------- | ----------------- | ---------- | ---------- | --------- | ---- | ------- | ------- | ------- | - | - | - | - | 
|                                                         |                                   | 2003              |            | 2002       |           | 2001
|                                                         |                                   |                   |            |            |           |     
|Revenues                                                 |                                   |                   |            |            |           |      |         |         |         |   |   |  
|                                                         | Rental income                     |                   | $          | 12,427,027 |           |      | $       | 732,685 |         |   | $ |  |  
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  
|                                                         |                                   |                   | 12,427,027 |            |           |      | 732,685 |         |         |   |  |  
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  
|Expenses                                                 |                                   |                   |            |            |           |      |         |         |         |   |   |  
|                                                         | Rental expenses                   |                   |            | 4,749,996  |           |      |         | 204,561 |         |   |   |  |  
|                                                         | General and administrative        |                   |            | 1,519,921  |           |      |         | 169,532 |         |   |   |  |  
|                                                         | Depreciation                      |                   |            | 3,350,782  |           |      |         | 102,149 |         |   |   |  |  
|                                                         | Amortization of lease commissions |                   |            | 404,801    |           |      |         |        |         |   |   |  |  
|                                                         | Interest                          |                   |            | 2,647,937  |           |      |         | 248,609 |         |   |   |  |  
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  
|                                                         |                                   |                   | 12,673,437 |            |           |      | 724,851 |         |         |   |  |  
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  
|Net income before other income and minority
    interest |                                   |                   | (246,410   | )          |           |      | 7,834   |         |         |   |  |  
|Other income:                                            |                                   |                   |           |            |           |      |        |         |         |   |  |  
|Interest income                                          |                                   |                   | 123,146    |            |           |      | 17,816  |         |         |   |  |  
|Equity in earnings of unconsolidated real estate         |                                   |                   | 204,487    |            |           |      |        |         |         |   |  |  
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  
|Net income before minority interest                      |                                   |                   | 81,223     |            |           |      | 25,650  |         |         |   |  |  
|Minority interest                                        |                                   |                   | 3,286      |            |           |      |        |         |         |   |  |  
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  
|Net income                                               |                                   | $                 | 77,937     |            |           | $    | 25,650  |         |         | $ |  |  
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  
|Earnings per share  basic and diluted                   |                                   | $                 | 0.01       |            |           | $    | 0.06    |         |         | $ |  |  
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  
|Weighted average number of common shares
    outstanding |                                   |                   |            |            |           |      |         |         |         |   |   |  
|                                                         |                                   | Basic and diluted |            |            | 8,242,697 |      |         |         | 405,481 |   |   |   |  | 
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  
|Distributions declared per share                         |                                   | $                 | 0.75       |            |           | $    | 0.69    |         |         | $ |  |  
|                                                         |                                   |                   |            |            |           |      |         |         |         |   |   |  

The accompanying notes are an integral part of
these consolidated financial statements.

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G REIT, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

For the Years Ended December 31, 2003,
2002 and


the Period From December 18, 2001
(inception) Through December 31, 2001


|                                                                  |  |           |            |           |  |            |         |               |  |       |             |  |  |   |            |   |  |   |             |  
|----------------------------------------------------------------- |  | --------- | ---------- | --------- |  | ---------- | ------- | ------------- |  | ----- | ----------- |  |  | - | ---------- | - |  | - | ----------- | -
|                                                                  |  |           |            |           |  | Additional |         | Distributions |  |      
|                                                                  |  | Number of |            |           |  | Paid-In    |         | in Excess of  |  |      
|                                                                  |  | Shares    |            | Par Value |  | Capital    |         | Earnings      |  | Total
|                                                                  |  |           |            |           |  |            |         |               |  |      
|BALANCE  December 18, 2001
    (inception)                       |  |           |           |           |  | $          |        |               |  | $     |            |  |  | $ |           |   |  | $ | 0           |  
|Issuance of common stock                                          |  |           | 10         |           |  |            |        |               |  |       | 100         |  |  |   |           |   |  |   | 100         |  
|Distributions                                                     |  |           |           |           |  |            |        |               |  |       |            |  |  |   |           |   |  |   | 0           |  
|Net income                                                        |  |           |           |           |  |            |        |               |  |       |            |  |  |   |           |   |  |   | 0           |  
|                                                                  |  |           |            |           |  |            |         |               |  |       |             |  |  |   |            |   |  |   |             |  
|BALANCE  December 31, 2001                                       |  |           | 10         |           |  |            |        |               |  |       | 100         |  |  |   |           |   |  |   | 100         |  
|Issuance of common stock, net of offering costs
    of $2,936,369 |  |           | 2,158,407  |           |  |            | 21,584  |               |  |       | 18,582,486  |  |  |   |           |   |  |   | 18,604,070  |  
|Distributions                                                     |  |           |           |           |  |            |        |               |  |       |            |  |  |   | (279,462   | ) |  |   | (279,462    | )
|Net income                                                        |  |           |           |           |  |            |        |               |  |       |            |  |  |   | 25,650     |   |  |   | 25,650      |  
|                                                                  |  |           |            |           |  |            |         |               |  |       |             |  |  |   |            |   |  |   |             |  
|BALANCE  December 31, 2002                                       |  |           | 2,158,417  |           |  |            | 21,584  |               |  |       | 18,582,586  |  |  |   | (253,812   | ) |  |   | 18,350,358  |  
|Issuance of common stock net of offering costs of
    $15,310,722 |  |           | 15,404,040 |           |  |            | 154,040 |               |  |       | 138,150,433 |  |  |   |           |   |  |   | 138,304,473 |  
|Distributions                                                     |  |           |           |           |  |            |        |               |  |       |            |  |  |   | (6,210,927 | ) |  |   | (6,210,927  | )
|Net income                                                        |  |           |           |           |  |            |        |               |  |       |            |  |  |   | 77,937     |   |  |   | 77,937      |  
|                                                                  |  |           |            |           |  |            |         |               |  |       |             |  |  |   |            |   |  |   |             |  
|BALANCE  December 31, 2003                                       |  |           | 17,562,457 |           |  | $          | 175,624 |               |  | $     | 156,733,019 |  |  |   | (6,386,802 | ) |  | $ | 150,521,841 |  
|                                                                  |  |           |            |           |  |            |         |               |  |       |             |  |  |   |            |   |  |   |             |  

The accompanying notes are an integral part of
these consolidated financial statements.

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G REIT, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the Years Ended December 31, 2003,
2002 and


the Period From December 18, 2001
(inception) Through December 31, 2001


|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |     |     | 
|---------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------------- | ---------- | ------------ | ------------ | ---- | --------- | ----------- | ----------- | - | --- | --- | --- | 
|                                                                                               |                                                                 | 2003                                                    |            | 2002         |              | 2001
|                                                                                               |                                                                 |                                                         |            |              |              |     
|CASH FLOWS FROM OPERATING ACTIVITIES                                                           |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|Net income                                                                                     |                                                                 | $                                                       | 77,937     |              |              | $    | 25,650    |             |             | $ |    |    
|Adjustments to reconcile net income to net cash
    provided by (used in) operating activities |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|Depreciation                                                                                   |                                                                 |                                                         | 3,350,782  |              |              |      | 102,149   |             |             |   |    |    
|Amortization of deferred financing fees                                                        |                                                                 |                                                         | 523,212    |              |              |      | 49,424    |             |             |   |    |    
|Amortization of lease disadvantage and identified
    intangibles                              |                                                                 |                                                         | (370,522   | )            |              |      |          |             |             |   |    |    
|Equity in income from investment in
    unconsolidated real estate                             |                                                                 |                                                         | 204,487    |              |              |      |          |             |             |   |    |    
|Minority interest in earnings                                                                  |                                                                 |                                                         | 3,286      |              |              |      |          |             |             |   |    |    
|Change in operating assets and liabilities:                                                    |                                                                 |                                                         |           |              |              |      |          |             |             |   |    |    
|                                                                                               | Accounts receivable                                             |                                                         |            | (1,983,454   | )            |      |           | (102,212    | )           |   |     |    |    
|                                                                                               | Other assets                                                    |                                                         |            | (7,337,226   | )            |      |           | (1,825,227  | )           |   |     |    |    
|                                                                                               | Accounts payable and accrued liabilities                        |                                                         |            | 3,386,988    |              |      |           | 770,770     |             |   |     |    |    
|                                                                                               | Security deposits and prepaid rent                              |                                                         |            | 2,719,060    |              |      |           | 370,539     |             |   |     |    |    
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|                                                                                               |                                                                 | Net cash provided by (used in) operating
    activities |            |              | 574,550      |      |           |             | (608,907    | ) |     |     |    | 
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|CASH FLOWS FROM INVESTING ACTIVITIES                                                           |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|                                                                                               | Purchase of real estate operating properties                    |                                                         |            | (278,030,921 | )            |      |           | (23,830,511 | )           |   |     |    |    
|                                                                                               | Additions to lease disadvantage                                 |                                                         |            | 8,342,285    |              |      |           |            |             |   |     |    |    
|                                                                                               | Purchase of interest in unconsolidated real estate              |                                                         |            | (15,175,559  | )            |      |           |            |             |   |     |    |    
|                                                                                               | Distributions from investment in unconsolidated
    real estate |                                                         |            | 814,414      |              |      |           |            |             |   |     |    |    
|                                                                                               | Capital expenditures                                            |                                                         |            | (197,600     | )            |      |           |            |             |   |     |    |    
|                                                                                               | Real estate deposits                                            |                                                         |            | (329,717     | )            |      |           | (2,270,985  | )           |   |     |    |    
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|                                                                                               |                                                                 | Net cash used in investing activities                   |            |              | (284,577,098 | )    |           |             | (26,101,496 | ) |     |     |    | 
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|CASH FLOWS FROM FINANCING ACTIVITIES                                                           |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|                                                                                               | Proceeds from issuance of common stock, net                     |                                                         |            | 138,304,468  |              |      |           | 18,604,070  |             |   |     | 100 |    
|                                                                                               | Borrowings under line of credit                                 |                                                         |            | 101,533,603  |              |      |           |            |             |   |     |    |    
|                                                                                               | Repayments under line of credit                                 |                                                         |            | (20,000,000  | )            |      |           |            |             |   |     |    |    
|                                                                                               | Principal repayments on notes payable                           |                                                         |            | (6,827,100   | )            |      |           |            |             |   |     |    |    
|                                                                                               | Borrowings under notes payable                                  |                                                         |            | 87,154,129   |              |      |           | 16,860,000  |             |   |     |    |    
|                                                                                               | Payment of deferred financing costs                             |                                                         |            | (4,083,823   | )            |      |           | (205,056    | )           |   |     |    |    
|                                                                                               | Minority interest contributions                                 |                                                         |            | 333,481      |              |      |           |            |             |   |     |    |    
|                                                                                               | Minority interest distributions                                 |                                                         |            | (73,145      | )            |      |           |            |             |   |     |    |    
|                                                                                               | Distributions                                                   |                                                         |            | (5,284,536   | )            |      |           | (169,820    | )           |   |     |    |    
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|                                                                                               |                                                                 | Net cash provided by financing activities               |            |              | 291,157,077  |      |           |             | 35,089,194  |   |     |     | 100 | 
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                      |                                                                 |                                                         | 7,154,529  |              |              |      | 8,378,791 |             |             |   |    |    
|CASH AND CASH EQUIVALENTS  beginning
    of period                                            |                                                                 |                                                         | 8,378,891  |              |              |      | 100       |             |             |   |    |    
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|CASH AND CASH EQUIVALENTS  end of
    period                                                  |                                                                 | $                                                       | 15,533,420 |              |              | $    | 8,378,891 |             |             | $ | 100 |    
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                              |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|Cash paid during the period for:                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|                                                                                               | Interest                                                        |                                                         | $          | 1,800,000    |              |      | $         | 108,888     |             |   | $   |    |    
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|                                                                                               | Income taxes                                                    |                                                         | $          |             |              |      |           |            |             |   |     |    |    
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:                                                 |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|                                                                                               | Issuance of common stock for dividends reinvested               |                                                         | $          | 2,377,324    |              |      | $         | 61,893      |             |   | $   |    |    
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    
|                                                                                               | Change in fair value of interest rate swap                      |                                                         | $          | (286,811     | )            |      | $         |            |             |   | $   |    |    
|                                                                                               |                                                                 |                                                         |            |              |              |      |           |             |             |   |     |    

The accompanying notes are an integral part of
these consolidated financial statements.

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G REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

For the Years Ended December 31, 2003,
2002 and


the Period From December 18, 2001
(inception) Through December 31, 2001




|   |             
|-- | ------------
|1. | Organization

G REIT, Inc. (the Company),
was incorporated on December 18, 2001 under the laws of the
Commonwealth of Virginia. The Company has qualified and elected
to be treated as a real estate investment trust
(REIT) for federal income tax purposes. The Company
was incorporated to acquire ownership interests in, manage,
lease, develop and dispose of office, industrial and service
real estate properties, a number of which will have a
government-tenant orientation. As of December 31, 2003, the
Company owned interests in 13 real estate properties, including
11 consolidated properties and two unconsolidated tenant in
common interest properties.

The Company is externally advised by Triple Net
Properties, LLC (the Advisor), which is primarily
responsible for managing the day-to-day operations and assets of
the Company. The Company and the Advisor entered into an
advisory agreement (the Advisory Agreement) which
has a one year term, and is subject to successive renewals. The
Advisor is affiliated with the Company in that the two entities
have common officers and directors, some of whom also own an
equity interest in the Advisor. (See Note 7).

As of December 31, 2003, the Company owned
interests in 13 properties aggregating a total gross leasable
area (GLA) of approximately 2.8 million square
feet. Tenants with a government orientation occupied
approximately 39% of the total GLA of these properties. At
December 31, 2003, approximately 88% of the total GLA of
these properties was leased.

The Company owns all of its interests in
properties through its majority-owned subsidiary, G REIT,
L.P., a Virginia limited partnership (the Operating
Partnership), and conducts substantially all of its
operations through the Operating Partnership. As of
December 31, 2003, the Company was the sole general partner
of the Operating Partnership and owned 100% of the equity
interests therein, except for 100 incentive non-voting ownership
units issued to the Companys Advisor. The incentive units
entitle the Advisor to receive certain incentive distributions
of operating cash flow after a minimum 8% return on invested
capital has been paid to the Companys shareholders. In
addition, the Advisor is entitled to incentive distributions
from net proceeds from the sale of properties after the
Companys shareholders have received their invested
capital, as defined, plus an 8% return on such invested capital.



|   |                                               
|-- | ----------------------------------------------
|2. | Summary of Significant Accounting
    Policies



| |                      
| | ---------------------
| | Basis of Presentation

The accompanying consolidated financial
statements include the accounts of the Company, the Operating
Partnership and the wholly owned subsidiaries of the Operating
Partnership; all material inter-company transactions and account
balances have been eliminated in consolidation. All references
to the Company include the Operating Partnership and its
subsidiaries.



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

Cash and cash equivalents consist of all highly
liquid investments with a maturity of three months or less when
purchased.



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

Operating properties are carried at cost less
accumulated depreciation. Cost includes the cost of land and
completed buildings and related improvements. Expenditures that
increase the service life of properties are capitalized; the
cost of maintenance and repairs is charged to expense as
incurred. Depreciation is

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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

generally provided on a straight-line basis over
the estimated useful lives of the buildings and improvements,
ranging primarily from 15 to 39 years. When depreciable
property is retired or disposed of, the related costs and
accumulated depreciation are removed from the accounts and any
gain or loss reflected in operations.

Impairment losses are recorded on long-lived
assets used in operations. Impairment losses are recorded on an
operating property when indicators of impairment are present and
the carrying amount of the asset is greater than the sum of the
future undiscounted cash flows predicted to be generated by that
asset. The Company had not recorded any impairment losses for
the years ended December 31, 2003 and 2002 or the period
December 18, 2001(inception) to December 31, 2001.

Property acquisitions have been accounted for in
accordance with Statement of Financial Accounting Standards
No. 141, Business Combinations. The fair value
of the real estate acquired is allocated to the acquired
tangible assets, consisting of land, building and tenant
improvements, and identified intangible assets and liabilities,
consisting of the value of above-market and below-market leases,
other value of in-place leases and value of tenant
relationships, if any, based in each case on their fair values.

The fair value of the tangible assets of an
acquired property (which includes land, building and tenant
improvements) is determined by valuing the property as if it
were vacant, and the as-if-vacant value is then
allocated to land, building and tenant improvements based on our
determination of the relative fair values of these assets.
Factors considered by us in performing these analyses include an
estimate of carrying costs during the expected lease-up periods
considering current market conditions and insurance and other
operating expenses during the expected lease-up periods based on
current market demand. We also estimate costs to execute similar
leases including leasing commissions, concessions, legal and
other related costs.

In allocating the fair value of the identified
intangible assets and liabilities of an acquired property,
above-market and below-market in-place lease values are recorded
based on the present value (using an interest rate which
reflects the risks associated with the leases acquired) of the
difference between (1) the contractual amounts to be paid
pursuant to the in-place leases and (2) our estimate of
fair market lease rates for the corresponding in-place leases,
measured over a period equal to the remaining non-cancelable
term of the lease. The capitalized above-market and below-market
lease values are amortized into rental income over the remaining
non-cancelable terms of the respective leases.



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

Real estate deposits are paid on properties the
Company is evaluating for purchase. Real estate deposits are
capitalized when paid and may become nonrefundable under certain
circumstances. When properties are acquired, the purchase price
is reduced by the amounts of deposits paid by the Company.



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

Other assets consist primarily of identified
intangible assets, deposits and reserves required by mortgage
lenders, deferred rent receivables, and rent receipts in lockbox
accounts not yet released by lenders.



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

Financing costs consist of loan fees and other
loan costs. Loan fees and other loan costs are amortized over
the term of the respective loan. Amortization of financing costs
is included in interest expense.

34



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                                                                
| | ---------------------------------------------------------------
| | Allowance for Uncollectible Billed and
    Unbilled Receivables

Tenant receivables and unbilled deferred rent
receivables are carried net of the allowances for uncollectible
current tenant receivables and unbilled deferred rent.
Managements determination of the adequacy of these
allowances is based primarily upon evaluations of historical
loss experience, individual tenant receivables considering the
tenants financial condition, security deposits, letters of
credit, lease guarantees and current economic conditions and
other relevant factors. Management has established an allowance
for uncollectible accounts of $149,917 at December 31,
2003, to reduce receivables to its estimate of the amount
recoverable.



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

The Company is exposed to the effect of interest
rate changes in the normal course of business. The Company
mitigates these risks by following established risk management
policies and procedures which include the occasional use of
derivatives. The Companys primary strategy in entering
into derivative contracts is to minimize the volatility that
changes in interest rates could have on its future cash flows.
The Company employs derivative instruments, including interest
rate swaps and caps, to effectively convert a portion of its
variable-rate debt to fixed-rate debt. The Company does not
enter into derivative instruments for speculative purposes.

Derivatives are recognized as either assets or
liabilities in the statement of financial position and measured
at fair value in accordance with Statement of Financial
Accounting Standards No. 133. Changes in fair value are
included as a component of interest expense in the statement of
operations in the period of change.



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

Real estate property is leased to tenants under
leases with terms exceeding one year. Revenues from these
leases, which are accounted for as operating leases, are
recognized on a straight-line basis over the related term. Cost
recoveries from tenants are included in rental income in the
period the related costs are accrued.



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

Financial instruments that potentially subject
the Company to a concentration of credit risk are primarily cash
investments and accounts receivable from tenants. Cash is
generally invested in investment-grade short-term instruments
and the amount of credit exposure to any one commercial issuer
is limited. The Company has cash in financial institutions which
is insured by the Federal Deposit Insurance Corporation
(FDIC) up to $100,000 per institution. At
December 31, 2003, the Company had cash accounts in excess
of FDIC insured limits. Concentration of credit risk with
respect to accounts receivable from tenants is limited. The
Company performs credit evaluations of prospective tenants, and
security deposits are obtained.

As of December 31, 2003, the Company had
interests in three properties located in the state of Texas and
four properties located in the state of California.



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

The carrying amount of cash, accounts receivable,
real estate deposits, accounts payable and accrued liabilities
approximates fair value because of the short maturity of these
financial instruments. Notes payable are carried at amounts that
approximate fair value. The estimated fair value of notes
payable is based on borrowing rates currently available to the
Company for loans with similar terms and maturities.

35



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



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

The Company operates as a real estate investment
trust for federal income tax purposes. As a REIT, the Company is
generally not subject to income taxes. To maintain its REIT
status, the Company is required to distribute annually as
dividends at least 90% of its REIT taxable income for the year,
as defined by the Internal Revenue Code (IRC), to
its shareholders, among other requirements. If the Company fails
to qualify as a REIT in any taxable year, the Company will be
subject to Federal income tax on its taxable income at regular
corporate tax rates. Although the Company qualifies as a REIT,
the Company may be subject to certain state and local taxes on
its income and property and Federal income and excise taxes on
its undistributed income. The Company believes that it has met
all of the REIT distribution and technical requirements for the
years ended December 31, 2003, 2002 and the period
December 18, 2001 (inception) through
December 31, 2001 and was not subject to any federal income
taxes. Management intends to continue to adhere to these
requirements and maintain the Companys REIT status.



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

The Company reports earnings per share pursuant
to Statement of Financial Accounting Standards No. 128,
Earnings Per Share. Basic earnings per share
attributable for all periods presented is computed by dividing
the net income by the weighted average number of common shares
outstanding during the period. Diluted earnings per share are
computed based on the weighted average number of common shares
and all potentially dilutive securities.



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

The preparation of the Companys financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of the assets and liabilities as of December 31, 2003 and
2002, and the revenues and expenses for the year ended
December 31, 2003 and 2002 and the period from
December 18, 2001 (inception) through December 31,
2001. Actual results could differ from those estimates.



| |              
| | -------------
| | Stock Options

The Company follows the disclosure only
provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for
Stock-Based Compensation, as amended by
SFAS No. 148. For employee compensatory stock options
that will eventually vest, compensation expense is recognized
during the periods in which the related employee services are
rendered. Such expense is generally measured by determining the
excess, if any, of the grant date estimated fair market value of
the underlying stock over the amount to be paid by the employee
in conformity with Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to
Employees. Compensatory stock options and similar equity
instruments issued to non-employees in exchange for goods or
services are accounted for based on the estimated fair market
value of (1) the goods or services received or (2) the
equity instrument issued, whichever is more reliably measurable.
Pursuant to SFAS 148, the Company is required to disclose
the effects on net income

36



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G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

and per share data as if the Company had elected
to use the fair value approach to account for its stock-based
compensation plans.

|                                                       |  |                    |         |      |  |   |        | 
|------------------------------------------------------ |  | ------------------ | ------- | ---- |  | - | ------ | 
|                                                       |  |                   
|                                                       |  | For the Year Ended
|                                                       |  | December 31,      
|                                                       |  |                   
|                                                       |  | 2003               |         | 2002
|                                                       |  |                    |         |     
|Actual net income                                      |  | $                  | 77,937  |      |  | $ | 25,650 | 
|Pro forma compensation expense                         |  |                    | (65,708 | )    |  |   |       | 
|                                                       |  |                    |         |      |  |   |        | 
|Pro forma net income                                   |  |                    | 12,229  |      |  |   | 25,650 | 
|                                                       |  |                    |         |      |  |   |        | 
|Actual net income per share  basic and
    diluted    |  | $                  | .01     |      |  | $ | .06    | 
|Pro forma net income per share  basic
    and diluted |  |                    |        |      |  |   | .06    | 

This pro forma amount was determined by
estimating the fair value of each option beginning June 28,
2003, when shareholder approval of the option plans was
obtained, at $0.95 per option, using the Black-Scholes
option-pricing model, assuming a 7.50% dividend yield, a 3.53%
risk-free interest rate based on the 10-year U.S. Treasury
Bond, an expected life of 9.32 years, and a volatility rate
of 0% were applied.



| |        
| | -------
| | Segment

The Company internally evaluates all properties
as one industry segment and accordingly does not report segment
information.



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

Certain reclassifications have been made to prior
year amounts in order to conform to the current year
presentation.



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

On January 1, 2003, the Company adopted the
provisions of SFAS 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections (SFAS 145). The most
significant provisions of this statement relate to the
rescission of Statement No. 4 Reporting Gains and
Losses from Extinguishment of Debt. SFAS 145 also
amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings or describe
their applicability under changed conditions. Under
SFAS 145, any gain or loss on extinguishment of debt that
was classified as an extraordinary item in prior periods
presented that does not meet certain defined criteria must be
reclassified. The adoption of this statement did not have a
material effect on the Companys results of operations or
financial condition.

On January 1, 2003, the Company adopted the
provisions of SFAS 146, Accounting for Costs
Associated with Exit or Disposal Activities
(SFAS 146). SFAS 146 addresses financial
accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force
Issue No. 94-3 Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an
Activity. SFAS 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized
when the liability is incurred. The adoption of this statement
did not have a material effect on the Companys results of
operations or financial condition.

On January 1, 2003, the Company adopted the
initial recognition and measurement provisions of Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others (FIN 45).
FIN 45 significantly changes the current practice in the
accounting for, and disclosure of, guarantees. Guarantees and
indemnification agreements meeting the characteristics described
in FIN 45 are required to be initially recorded as a
liability at fair

37



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G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

value. FIN 45 also requires a guarantor to
make significant new disclosures for virtually all guarantees
even if the likelihood of the guarantor having to make payment
under the guarantee is remote. The Company adopted the
disclosure provisions of FIN 45 as of December 31,
2002. The adoption of the provisions of this interpretation did
not have a material effect on the Companys results of
operations or financial condition.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). FIN 46
clarifies the application of Accounting Research Bulletin
No. 51, Consolidated Financial Statements and
provides guidance on the identification of entities for which
control is achieved through means other than voting rights
(variable interest entities or VIEs) and
how to determine when and which business enterprise should
consolidate the VIE. This new model for consolidation applies to
an entity in which either: (1) the equity investors (if
any) lack one or more characteristics deemed essential to a
controlling financial interest or (2) the equity investment
at risk is insufficient to finance that entitys activities
without receiving additional subordinated financial support from
other parties. The provisions of this interpretation are
applicable to VIEs formed after January 31, 2003. For VIEs
formed prior to January 31, 2003, the provisions of this
interpretation apply to the first fiscal year or interim period
beginning after December 15, 2003. On February 1,
2003, the Company adopted the provisions of this interpretation,
which did not have a material effect on the Companys
results of operations or financial condition.

In April 2003, the FASB issued
SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities
(SFAS 149). SFAS 149 amends and clarifies
financial accounting and reporting for derivative instruments,
including certain derivative instruments imbedded in other
contracts and for hedging activities under
SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities. The provisions of
SFAS 149 are generally effective for contracts entered into
or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The adoption
of this statement did not have a material effect on the
Companys results of operations or financial condition.

In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity (SFAS 150). SFAS 150
establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both
liabilities and equity. The statement is effective for financial
instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of this
statement did not have a material effect on the Companys
results of operations or financial condition.



|   |                        
|-- | -----------------------
|3. | Real Estate Investments



| |                         
| | ------------------------
| | Consolidated Properties:

The Companys investment in consolidated
properties consisted of the following at December 31, 2003
and 2002:

|                                 |  |      |             |      |  |   |            |  
|-------------------------------- |  | ---- | ----------- | ---- |  | - | ---------- | -
|                                 |  | 2003 |             | 2002
|                                 |  |      |             |     
|Building and Tenant improvements |  | $    | 257,835,521 |      |  | $ | 20,254,059 |  
|Land                             |  |      | 44,223,510  |      |  |   | 3,576,452  |  
|                                 |  |      |             |      |  |   |            |  
|                                 |  |      | 302,059,031 |      |  |   | 23,830,511 |  
|Less: accumulated depreciation   |  |      | (3,452,930  | )    |  |   | (102,149   | )
|                                 |  |      |             |      |  |   |            |  
|                                 |  | $    | 298,606,101 |      |  | $ | 23,728,362 |  
|                                 |  |      |             |      |  |   |            |  

38



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G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |             
| | ------------
| | Acquisitions

On December 30, 2003, the Company, through
its wholly owned subsidiary, GREIT  Centerpoint
Corporate Park, LLC, a Washington limited liability company,
purchased Centerpoint Corporate Park located in Kent,
Washington. The seller was an unaffiliated third party. The
total purchase price for the property was approximately
$54,220,000. The Company paid an acquisition fee to Triple Net
Realty, Inc. (Realty), an affiliate of the
Companys advisor, of $1,626,600, or approximately 3.0% of
the purchase price.

On December 5, 2003, the Company, through
its wholly owned subsidiary, GREIT  One World Trade
Center, LP, a California limited partnership, purchased One
World Trade Center located in Long Beach, California. The seller
was an unaffiliated third party. The total purchase price for
the property was approximately $113,648,000. The seller paid a
sales commission to Realty of $2,400,000, or approximately 2.1%
of the purchase price.

On October 28, 2003, the Company, through
its wholly owned subsidiary, GREIT  Sutter Square,
LP, a California limited partnership, purchased Sutter Square
Galleria located in Sacramento, California. The property is
subject to a ground lease expiring in 2030 with one ten-year
option period thereafter. The seller was an unaffiliated third
party. The total purchase price for the property was
approximately $8,240,000. The Company paid an acquisition fee to
Realty of $240,000, or approximately 2.9% of the purchase price.

On October 10, 2003, the Company, through
its wholly owned subsidiary, GREIT  824 Market
Street, LLC, a Delaware limited liability company, purchased 824
Market Street located in Wilmington, Delaware. The seller was an
unaffiliated third party. The total purchase price for the
property was approximately $31,900,000 in cash. The Company paid
an acquisition fee to Realty of $970,000, or approximately 3.0%
of the purchase price.

On August 11, 2003, through its wholly owned
subsidiary, GREIT  North Pointe, LP, a California
limited partnership, the Company purchased North Pointe
Corporate Center located in Sacramento, California. The seller
was an unaffiliated third party. The total purchase price for
the property was approximately $24,205,000. in cash. The seller
paid a sales commission to Realty of $705,000, or approximately
2.9% of the purchase price.

On July 31, 2003, through its wholly owned
subsidiary, GREIT  Bay View, LP, a California limited
partnership, the Company purchased an approximately 97.68%
undivided tenant in common interest in Bay View Plaza located in
Alameda, California. The remaining undivided tenant in common
interest was purchased by NNN Bay View 1, LLC, an
unaffiliated third party. The seller was an unaffiliated third
party. The total purchase price for the property was
approximately $11,655,000 in cash. The Companys
proportionate share of the total purchase price was
approximately $11,329,000. The seller paid a sales commission to
Realty of $380,000, or approximately 3.0% of the purchase price.

On May 2, 2003, through its wholly owned
subsidiary, GREIT  Gemini Plaza, LLC, the Company
purchased Gemini Plaza in Houston, Texas from an unaffiliated
third party for a purchase price of approximately $15,000,000
plus closing costs. The Company funded the purchase price with
$9,815,000 in borrowings under its credit facility with LaSalle.
The Company is required to make interest only payments until the
due date of January 30, 2006, at which time the loan must
be paid in full or refinanced. The seller paid a sales
commission to Realty of $325,000, or approximately 2.2% of the
purchase price.

On April 25 2003, through its wholly owned
subsidiary, GREIT  Department of DCF, LLC, the
Company purchased the Department of Children and Families Campus
in Plantation, Florida from an unaffiliated third-party for a
purchase price of approximately $11,580,000 plus closing costs.
The Company funded the purchase with $7,605,000 in borrowings
under its credit facility with LaSalle. The Company is

39



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G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

required to make interest only payments until the
due date of January 30, 2006, at which time the loan must
be paid in full or refinanced. The seller paid a sales
commission to Realty of $300,000, or approximately 2.6% of the
purchase price.

On January 31, 2003, through its wholly
owned subsidiary, GREIT  Atrium Building, LLC, a
Delaware limited liability company, the Company purchased the
Atrium Building in Lincoln, Nebraska from an unaffiliated third
party for a purchase price of approximately $4,532,000. The
property is encumbered by two ground leases under parts of the
office building, which expire in 2054 and 2055, respectively,
including renewal options. The Company financed the purchase
price with $2,200,000 in borrowings under its credit facility
with LaSalle. The Company is required to make interest only
payments until the due date of January 30, 2006, at which
time the loan will have to be paid in full or refinanced. The
seller paid a sales commission payable to Realty of $132,000, or
approximately 2.9% of the purchase price.

On November 27, 2002, the Company, through
its wholly owned subsidiary, GREIT  Two Corporate
Plaza, LP, a Texas limited partnership, purchased Two Corporate
Plaza in Clear Lake, Texas from an unaffiliated third-party for
a purchase price of approximately $13,580,000. The seller paid a
sales commission payable to Realty of $380,000, or approximately
2.80% of the purchase price.

On September 13, 2002, the Company, through
its wholly-owned subsidiary, GREIT  5508 Highway
290 West, LP, purchased the 5508 Highway 290 West
Building in Austin, Texas from an unaffiliated third party for a
purchase price of approximately $10,300,000. The seller paid a
sales commission to Realty of $300,000, or approximately 3%
of the purchase price.



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



| |              
| | -------------
| | Acquisitions:

On January 9, 2003, through its wholly owned
subsidiary, GREIT  Congress Center, LLC, the Company
purchased an approximately 30% undivided tenant in common
interest in Congress Center, from an unaffiliated third party.
Congress Center is a 16-story Class A office building
located in Chicago, Illinois. The Companys affiliates, NNN
Congress Center, LLC and WREIT  Congress Center, LLC,
simultaneously purchased undivided tenant in common interests
totaling approximately 70% ownership of the property. The total
purchase price for Congress Center was $136,108,000. The
purchase price included a sales commission payable to Realty of
$2,000,000, approximately 1.50% of the purchase price. The
Companys total investment consisted of its proportionate
share of the purchase price (approximately $40,832,000 including
$12,047,000 in cash and $28,785,000 in debt), plus $2,294,000
for its proportionate share of closing costs, loan fees and
reserves. The Companys liability for the debt is limited
to the amount of its investment in the property.

On March 18, 2003, through its wholly owned
subsidiary, GREIT  Park Sahara, LLC, the Company
purchased an approximately 4.75% undivided tenant in common
interest in Park Sahara from an unaffiliated third party. Park
Sahara is a five-building Class B office park located in
Las Vegas, Nevada. The total purchase price for the property was
approximately $12,200,000. The purchase was financed through
(1) the assumption of a $5,040,000, 8.00% fixed rate loan
on a 25-year amortization schedule due September, 2007 from IDS
American Express, (2) a new approximately $2,260,000, 6.92%
fixed rate loan on a 25-year amortization schedule due September
2007 from IDS American Express and, (3) a $1,100,000, 7.00%
fixed rate interest-only loan also due September 2007 from the
seller. The Companys proportionate share of the total
purchase price was approximately $579,500 consisting of $180,500
in cash and $399,000 in debt, plus approximately $30,695 for its
proportionate share of loan fees, closing and carrying costs and
reserves. The Companys liability for the propertys
debt is limited to the amount of its

40



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

investment in the property. The purchase price
included a sales commission payable to Realty of $320,000,
approximately 2.60% of the purchase price.

Condensed combined historical financial
information of investments in unconsolidated real estate as of
December 31, 2003 is as follows:

|                               |  |      |             |  
|------------------------------ |  | ---- | ----------- | -
|                               |  | 2003
|                               |  |     
|Assets (primarily real estate) |  | $    | 153,527,989 |  
|                               |  |      |             |  
|Mortgage notes payable         |  | $    | 105,475,318 |  
|Other liabilities              |  |      | 2,535,565   |  
|Equity                         |  |      | 45,517,106  |  
|Total liabilities and equity   |  | $    | 153,527,989 |  
|                               |  |      |             |  
|Companys share of equity      |  | $    | 14,156,658  |  
|                               |  |      |             |  
|Revenues                       |  | $    | 15,932,227  |  
|Expenses                       |  |      | (14,954,660 | )
|Net income                     |  | $    | 977,567     |  
|                               |  |      |             |  
|Companys equity in earnings   |  | $    | 204,487     |  
|                               |  |      |             |  



|   |             
|-- | ------------
|4. | Other Assets

Other assets consist of the following at
December 31:

|                                                                                                     |                    |      |           |           |  |   |         |           | 
|---------------------------------------------------------------------------------------------------- | ------------------ | ---- | --------- | --------- |  | - | ------- | --------- | 
|                                                                                                     |                    | 2003 |           | 2002     
|                                                                                                     |                    |      |           |          
|Identified intangible assets, net of accumulated
    amortization of $609,321 and zero, respectively |                    | $    | 6,086,114 |           |  | $ | 952,526 |          
|Property impounds & reserves                                                                         |                    |      | 2,110,648 |           |  |   |        |          
|Deferred rent receivable                                                                             |                    |      | 264,067   |           |  |   | 20,853  |          
|Prepaid expenses and deposits                                                                        |                    |      | 474,890   |           |  |   | 136,611 |          
|Receivables, other                                                                                   |                    |      |          |           |  |   | 484,440 |          
|                                                                                                     |                    |      |           |           |  |   |         |          
|                                                                                                     | Total other assets |      | $         | 8,935,719 |  |   | $       | 1,594,430 | 
|                                                                                                     |                    |      |           |           |  |   |         |          



|   |                       
|-- | ----------------------
|5. | Mortgage Loans Payable

In connection with the acquisition of 5508
Highway 290 West Office Building, an office building located in
Austin, Texas, in September 2002, the Company borrowed
$6,700,000 from an unaffiliated lender under a first mortgage
loan bearing interest at a variable interest rate of
400 basis points over LIBOR (1.50% at December 31,
2002). The loan was repaid in full during the year ended
December 31, 2003.

In connection with the acquisition of Two
Corporate Plaza, an office building located in Clear Lake,
Texas, in November 2002, the Company borrowed $10,160,000 from
an unaffiliated lender under a first mortgage loan bearing
interest at a fixed interest rate of 5.92%. The Company is
required to make payments of principal and interest on a 30-year
amortization schedule until the due date of December 11,
2007, at which time the loan will have to be paid in full or
refinanced. Remaining unpaid principal at December 31, 2003
and 2002 was $10,041,872 and $10,160,000, respectively.

41



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

In connection with the acquisition of Bay View
Plaza, an office building located in Alameda, California, in
July 2003, the Company borrowed $6,200,000 from an unaffiliated
lender under a first mortgage loan bearing interest at a
variable interest rate of LIBOR plus 2% (1.27% at
December 31, 2003). The Company is required to make
payments of interest only until the due date of
December 19, 2008, at which time the loan will have to be
paid in full or refinanced.

In connection with the acquisition of Sutter
Square Galleria, an office building located in Sacramento,
California, in October 2003, the Company borrowed $4,024,126
from an unaffiliated lender under a first mortgage loan bearing
interest at a fixed interest rate of 6.89%. The Company is
required to make payments of principal and interest on a 30-year
amortization schedule until the due date of November 1,
2008, at which time the loan will have to be paid in full or
refinanced. Remaining unpaid principal at December 31, 2003
was $4,015,153.

In connection with the acquisition of One World
Trade Center, an office building located in Long Beach
California, in December 2003, the Company borrowed $77,000,000
from an unaffiliated lender under a first mortgage loan bearing
interest at a variable interest rate of 190 basis points
over LIBOR (1.157% at December 31, 2003). The Company is
required to make payments of interest only until the due date of
December 4, 2006, at which time the loan will have to be
paid in full or refinanced.

The principal payments due on notes payable for
each of the next five years ending December 31 and
thereafter are summarized as follows:

|           |  |        |            | 
|---------- |  | ------ | ---------- | 
|Year       |  | Amount
|           |  |       
|2004       |  | $      | 281,243    | 
|2005       |  |        | 267,800    | 
|2006       |  |        | 77,282,871 | 
|2007       |  |        | 298,817    | 
|2008       |  |        | 315,689    | 
|Thereafter |  |        | 18,840,606 | 
|           |  |        |            | 
|           |  | $      | 97,287,026 | 
|           |  |        |            | 



|   |               
|-- | --------------
|6. | Line of Credit

In January 2003, the Company obtained a new
credit facility with a maximum amount of $25,000,000 through
LaSalle which matures on January 30, 2006. Advances under
this credit facility (1) are made for the purchase of
properties by the Company and collateralized by the related
property; (2) bear interest at the choice of the Company at
the Prime Rate or the LIBOR plus a margin of 2.50% per
annum, declining to 2.25% when the Company meets certain
conditions, which include attaining $50,000,000 in net worth, no
default on advances, and full compliance with other covenants
under the credit facility; (3) are subject to a floor rate
of 4.15% per annum; and (4) require interest only
payments on a monthly basis. In connection with this credit
facility, the Company has granted LaSalle a right of first
refusal to finance the purchase of properties by the Company.

Properties financed by borrowings under the
LaSalle line of credit are required to meet certain minimum loan
to value, debt service coverage and other requirements on a
combined basis. As of December 31, 2003, the Company was in
compliance with all such requirements.

In November 2003, the Company and LaSalle amended
the credit agreement to increase the Companys line of
credit to $115,000,000. At December 31, 2003, borrowings
under the line totaled $81,533,603 and bore an interest at the
rate of 3.9%.

42



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|   |                     
|-- | --------------------
|7. | Shareholders Equity



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

As of December 31, 2003, the Company had
issued 17,562,457 shares of its common stock for aggregate
gross proceeds before offering costs and selling commissions
totaling approximately $175,168,000. Of these amounts,
approximately 22,100 shares or $200,005 of the
Companys common stock were sold to the Advisor, and
approximately 9,595 shares or $86,836 of the Companys
common stock were sold to other affiliated parties.

In connection with its initial public offering
(the Offering), the Company incurred approximately
$18,247,000 of costs related to the issuance and distribution of
common stock through December 31, 2003. Such amount
includes approximately $14,381,000 paid to the Dealer Manager of
the Offering (NNN Capital Corp., a company wholly owned by the
Companys CEO), principally comprised of selling
commissions, investor marketing and due diligence costs. In
addition, approximately $1,518,000 was paid to the Advisor for
reimbursement of actual offering expenses.

Beginning September 1, 2002, the Company
began monthly distributions to shareholders of record as of the
end of the preceding month at an annual rate of 7.00% to the
extent of lawfully available funds. The dividend rate increased
to 7.25% effective January 1, 2003 and to 7.50% effective
June 1, 2003. For the year ended December 31, 2003 and
2002, the Company declared distributions of $6,210,927 and
$279,462, respectively.

The Advisor has guaranteed payment of all public
offering expenses (excluding selling commissions, the marketing
contribution and the due diligence expense allowance) which
together exceed 15% of the gross offering proceeds. Effective
October 17, 2002, the Board of Directors of the Company
lowered the limitation on offering and organizational expenses
to be borne by the Company from 15% to 14% of the total proceeds
raised in the Offering. As of December 31, 2003,
organizational and offering costs did not exceed these
limitations and the Company anticipates that these costs will
not exceed these limitations upon completion of the Offering.
Any excess amounts at the completion of the Offering will be
reimbursed by the Advisor.



| |                                           
| | ------------------------------------------
| | Dividend Reinvestment Program
    (DRIP)

Effective with the Offering, the Company adopted
a DRIP that allows Company shareholders to purchase up to
1,000,000 shares of common stock, at a purchase price of
$9.05 per share, through reinvestment of dividends, subject to
certain conditions. The Company registered and reserved
1,000,000 shares for distribution pursuant to the DRIP.

As of December 31, 2003 and 2002, the
Company had issued 251,540 and 6,933 shares, respectively
under the terms of the program.



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

The Company follows the disclosure only
provisions of Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based
Compensation (SFAS 123). For employee
compensatory stock options that will eventually vest,
compensation expense is recognized during the periods in which
the related employee services are rendered. Such expense is
generally measured by determining the excess, if any, of the
grant date estimated fair market value of the underlying stock
over the amount to be paid by the employee in conformity with
Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees.
Compensatory stock options and similar equity instruments issued
to non-employees in exchange for goods or services are accounted
for based on the estimated fair market value of (1) the
goods or services received or (2) the equity instrument
issued, whichever is more reliably measurable. This accounting
policy is in conformity with SFAS 123.

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G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Concurrent with commencement of the Offering, the
Company adopted stock option plans for (1) independent and
outside directors and (2) its officers and employees (the
Plans). Shares of common stock issued upon the
exercise of such options will have certain transferability
restrictions. The unregistered public sale of restricted stock,
which is governed by Rule 144 of the Securities Act of
1933, as amended, is prohibited during the first year of
ownership and limited as set forth in such rule during the
second year of ownership.

Stock options granted pursuant to the Plans will
expire ten years from the grant date and will be exercisable in
whole or in part upon the second anniversary of the grant date;
provided, however, that if the exercise of any stock option
would cause the aggregate of all Company stock owned by the
Advisor, the Dealer Manager of the Offering (NNN Capital Corp.,
an affiliate of the Company and the Advisor), their affiliates,
and the Companys officers and directors to exceed 10.0% of
the total outstanding shares of the Companys common stock,
such exercise would be delayed until the first date on which the
exercise would not cause such limit to be exceeded. The Company
has authorized and reserved a total of 100,000 shares and
400,000 shares for issuance under the Director Plan and the
Officer/ Employee Plan, respectively. Options grants are subject
to shareholder approval of the Plans. Each of the Plans was
approved by shareholders at the Annual Meeting of Shareholders
held June 28, 2003.

|                       |           |           |         |                 |  |                  |      |      |  |   |      |      | 
|---------------------- | --------- | --------- | ------- | --------------- |  | ---------------- | ---- | ---- |  | - | ---- | ---- | 
|                       |           | Number    |         | Range of        |  | Weighted Average
|Options Outstanding at |           | of Shares |         | Exercise Prices |  | Exercise Price  
|                       |           |           |         |                 |  |                 
|January 1, 2001        |           |           |        |                 |  | $                |     |      |  | $ |     |     
|                       | Granted   |           |         |                 |  |                  |      |      |  |   |      |      | 
|                       | Exercised |           |         |                 |  |                  |      |      |  |   |      |      | 
|                       | Cancelled |           |         |                 |  |                  |      |      |  |   |      |      | 
|                       | Expired   |           |         |                 |  |                  |      |      |  |   |      |      | 
|                       |           |           |         |                 |  |                  |      |      |  |   |      |     
|December 31, 2001      |           |           |        |                 |  |                  |     |      |  |   |     |     
|                       | Granted   |           |         | 110,000         |  |                  |      | 9.05 |  |   |      | 9.05 | 
|                       | Exercised |           |         |                 |  |                  |      |      |  |   |      |      | 
|                       | Cancelled |           |         |                 |  |                  |      |      |  |   |      |      | 
|                       | Expired   |           |         |                 |  |                  |      |      |  |   |      |      | 
|                       |           |           |         |                 |  |                  |      |      |  |   |      |     
|December 31, 2002      |           |           | 110,000 |                 |  |                  | 9.05 |      |  |   | 9.05 |     
|                       | Granted   |           |         | 20,000          |  |                  |      | 9.05 |  |   |      | 9.05 | 
|                       | Exercised |           |         |                 |  |                  |      |     |  |   |      |     | 
|                       | Cancelled |           |         |                |  |                  |      |     |  |   |      |     | 
|                       | Expired   |           |         |                |  |                  |      |     |  |   |      |     | 
|                       |           |           |         |                 |  |                  |      |      |  |   |      |     
|December 31, 2003      |           |           | 130,000 |                 |  | $                | 9.05 |      |  | $ | 9.05 |     
|                       |           |           |         |                 |  |                  |      |      |  |   |      |     

A summary of outstanding options exercisable
under the Plans is presented in the schedule below.

|                |  |             |         |              |  |                 |      |             |  |                 |      |  |  |  |   |  |  |   |      | 
|--------------- |  | ----------- | ------- | ------------ |  | --------------- | ---- | ----------- |  | --------------- | ---- |  |  |  | - |  |  | - | ---- | 
|Range of        |  | Number      |         | Contractual  |  | Exercise        |      | Number      |  | Exercise       
|Exercise Prices |  | Outstanding |         | Life (Years) |  | Price  Options |      | Exercisable |  | Price  Options
|                |  |             |         |              |  |                 |      |             |  |                
|$9.05           |  |             | 130,000 |              |  |                 | 9.32 |             |  | $               | 9.05 |  |  |  |  |  |  | $ | 9.05 | 

The fair value of the options outstanding are
calculated using the Black-Scholes option-pricing model.
Assumptions used in the calculation included a 7.50% dividend
yield, a 3.53% risk-free interest rate based on the 10-year
U.S. Treasury Bond, an expected life of 9.32 years,
and a 0% volatility rate.

The weighted average remaining contractual life
of all options outstanding at December 31, 2003 was
approximately 9 years.

44



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|   |                    
|-- | -------------------
|8. | Future Minimum Rent

The Company has operating leases with tenants
that expire at various dates through 2014 and are either subject
to scheduled fixed increases or adjustments based on the
Consumer Price Index. Generally, the leases grant tenants
renewal options. Leases also provide for additional rents based
on certain operating expenses. Future minimum rent under
operating leases, excluding tenant reimbursements of certain
costs, as of December 31, 2003, are summarized as follows:

|            |       |   |            |             | 
|----------- | ----- | - | ---------- | ----------- | 
|Year Ending |       |  
|            |       |  
|2004        |       | $ | 33,330,557 |            
|2005        |       |   | 29,340,876 |            
|2006        |       |   | 25,637,294 |            
|2007        |       |   | 20,232,406 |            
|2008        |       |   | 16,378,817 |            
|Thereafter  |       |   | 38,374,576 |            
|            |       |   |            |            
|            | Total |   | $          | 163,294,526 | 
|            |       |   |            |            

A certain amount of the Companys rental
income is from tenants with leases which are subject to
contingent rent provisions. These contingent rents are subject
to the tenant achieving periodic revenues in excess of specified
levels. For the years ended December 31, 2003 and 2002, the
amount of contingent rent earned by the Company was not
significant.



|   |                                                      
|-- | -----------------------------------------------------
|9. | Advisory Agreement and Related Party
    Transactions



| |             
| | ------------
| | Advisor Fees

Under the terms of the agreement between the
Company and the Advisor (the Advisory Agreement),
the Advisor has responsibility for the day-to-day operations of
the Company; administers the Companys accounting and
bookkeeping functions; serves as a consultant in connection with
policy decisions to be made by the Companys Board of
Directors; manages the Companys property; and renders
other services deemed appropriate by the Companys Board of
Directors. The Advisor bears expenses incurred for the
performance of its services and is entitled to reimbursement
subject to certain limitations. Fees and costs reimbursed to the
Advisor cannot exceed the greater of 2% of average invested
assets, as defined, or 25% of net income for the previous four
quarters as defined. During the years ended December 31,
2003 and 2002, the Company paid the Advisor $14,381,482 and
$2,141,122, respectively, for all advisory services, including
those discussed below.



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

The Companys Advisor and affiliated
entities have incurred offering costs and certain expenses on
the Companys behalf. Pursuant to a written agreement, such
entities accepted responsibility for such costs and expenses
until the Companys Registration Statement was declared
effective by the SEC. However, the Companys obligation for
such costs and expenses will not exceed 15% of the total
proceeds raised in the Offering, as more fully disclosed in the
Companys Registration Statement.

During the years ended December 31, 2003 and
2002 and the period December 18, 2001
(inception) through December 31, 2001, the Company has
paid $15,310,722, $2,936,369, and $0, respectively, for offering
expenses. For the year ended December 31, 2003, offering
expenses paid by the Company include $14,143,492 paid to the
Dealer Manager and $1,167,230 in reimbursements to the Advisor
for legal, accounting and other expenses of the offering.

45



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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Effective October 17, 2002, the Board of
Directors of the Company lowered the limitation on offering
costs and organizational expenses to be borne by the Company
from 15% to 14% of total proceeds raised in the Offering.



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

As discussed in Note 3, Realty received real
estate sales commissions in connection with the Companys
real estate acquisitions.



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

The Company pays Realty a property management fee
equal to 5% of the gross income from the properties. For the
years ended December 31, 2003 and 2002, the Company paid
management fees to Realty of $457,698 and $24,458, respectively.



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

The Advisor owns non-voting incentive performance
units in G REIT, L.P., the Companys Operating Partnership
and is entitled to incentive distributions of operating cash
flow after the Companys shareholders have received an 8%
annual return on their invested capital. No incentive
distributions were made to the Advisor for the years ended
December 31, 2003 or 2002.



|    |                              
|--- | -----------------------------
|10. | Commitments and Contingencies



| |                 
| | ----------------
| | Operating leases

Sutter Square Galleria is subject to a ground
lease expiring in 2040 with one ten-year option period
thereafter. Future minimum rents to be paid under this
non-cancelable operating lease are computed at 12.5% of gross
rents, as defined in the ground lease agreement.

The Atrium Building is encumbered by two ground
leases under parts of the office building. One ground lease
expires in 2015, with one 40-year extension option, and requires
annual rental payments of $25,000. The other ground lease
expires in 2014, with one 40-year extension option, and requires
annual rental payments of $16,000.



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

Neither the Company nor any of the Companys
properties are presently subject to any other material
litigation nor, to the Companys knowledge, is any material
litigation threatened against any of them which if determined
unfavorably to the Company would have a material adverse effect
on the Companys cash flows, financial condition or results
of operations. The Company is party to litigation arising in the
ordinary course of business, none of which if determined
unfavorably to the Company, individually or in the aggregate, is
expected to have a material adverse effect on the Companys
cash flows, financial condition or results of operations.



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

The Company follows the policy of monitoring its
properties for the presence of hazardous or toxic substances.
While there can be no assurance that a material environmental
liability does not exist, the Company is not currently aware of
any environmental liability with respect to the properties that
would have a material effect on the Companys financial
condition, results of operations and cash flows. Further, the
Company is not aware of any environmental liability or any
unasserted claim or assessment with

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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

respect to an environmental liability that the
Company believes would require additional disclosure or the
recording of a loss contingency.



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

The Companys commitments and contingencies
include the usual obligations of real estate owners and
operators in the normal course of business. In the opinion of
management, these matters are not expected to have a material
impact on the Companys consolidated financial position and
results of operations.



|    |                                    
|--- | -----------------------------------
|11. | Selected Quarterly Data (unaudited)

Set forth below is certain unaudited quarterly
financial information. The Company believes that all necessary
adjustments, consisting only of normal recurring adjustments,
have been included in the amounts stated below to present
fairly, and in accordance with generally accepted accounting
principles, the selected quarterly information when read in
conjunction with the Financial Statements. The 2003 quarterly
amounts have been restated to reflect the effects of purchase
price allocation adjustments for properties acquired during the
year.

|                                                            |  |                              |           |             |  |             |           |             |  |   |           |   |  |   |           |  
|----------------------------------------------------------- |  | ---------------------------- | --------- | ----------- |  | ----------- | --------- | ----------- |  | - | --------- | - |  | - | --------- | -
|                                                            |  |                             
|                                                            |  | Restated                    
|                                                            |  | Year Ended December 31, 2003
|                                                            |  |                             
|                                                            |  | 4th Quarter                  |           | 3rd Quarter |  | 2nd Quarter |           | 1st Quarter
|                                                            |  |                              |           |             |  |             |           |            
|Revenues                                                    |  | $                            | 5,519,869 |             |  | $           | 3,384,653 |             |  | $ | 2,099,673 |   |  | $ | 1,545,978 |  
|Expenses                                                    |  |                              | 5,519,264 |             |  |             | 3,488,248 |             |  |   | 2,157,870 |   |  |   | 1,508,055 |  
|                                                            |  |                              |           |             |  |             |           |             |  |   |           |   |  |   |           |  
|Income (loss) before other income and minority
    interest |  |                              | 605       |             |  |             | (103,595  | )           |  |   | (58,197   | ) |  |   | 37,923    |  
|Equity in earnings of unconsolidated real estate            |  |                              | 174,441   |             |  |             | 156,121   |             |  |   | (78,982   | ) |  |   | (47,093   | )
|Minority interest                                           |  |                              | 413       |             |  |             | (3,699    | )           |  |   |          |   |  |   |          |  
|                                                            |  |                              |           |             |  |             |           |             |  |   |           |   |  |   |           |  
|Net income (loss)                                           |  | $                            | 175,459   |             |  |             | 48,827    |             |  |   | (137,179  | ) |  |   | (9,170    | )
|                                                            |  |                              |           |             |  |             |           |             |  |   |           |   |  |   |           |  
|Earnings (loss) per share  basic and
    diluted           |  | $                            | 0.01      |             |  | $           | 0.01      |             |  | $ | (0.01     | ) |  | $ | (0.00     | )
|                                                            |  |                              |           |             |  |             |           |             |  |   |           |   |  |   |           |  

|                                                            |  |                              |            |             |  |             |           |             |  |   |           |  |  |   |           | 
|----------------------------------------------------------- |  | ---------------------------- | ---------- | ----------- |  | ----------- | --------- | ----------- |  | - | --------- |  |  | - | --------- | 
|                                                            |  |                             
|                                                            |  | As Reported                 
|                                                            |  | Year Ended December 31, 2003
|                                                            |  |                             
|                                                            |  | 4th Quarter                  |            | 3rd Quarter |  | 2nd Quarter |           | 1st Quarter
|                                                            |  |                              |            |             |  |             |           |            
|Revenues                                                    |  | $                            | 5,588,197  |             |  | $           | 3,395,128 |             |  | $ | 2,080,021 |  |  | $ | 1,486,827 | 
|Expenses                                                    |  |                              | 6,433,136  |             |  |             | 3,133,401 |             |  |   | 1,853,977 |  |  |   | 1,252,923 | 
|                                                            |  |                              |            |             |  |             |           |             |  |   |           |  |  |   |           | 
|Income (loss) before other income and minority
    interest |  |                              | (844,939   | )           |  |             | 261,727   |             |  |   | 226,044   |  |  |   | 233,904   | 
|Equity in earnings of unconsolidated real estate            |  |                              | (176,589   | )           |  |             | 274,400   |             |  |   | 39,297    |  |  |   | 67,379    | 
|Minority interest                                           |  |                              | 413        |             |  |             | (3,699    | )           |  |   |          |  |  |   |          | 
|                                                            |  |                              |            |             |  |             |           |             |  |   |           |  |  |   |           | 
|Net (loss) income                                           |  | $                            | (1,021,115 | )           |  | $           | 532,428   |             |  | $ | 265,341   |  |  | $ | 301,283   | 
|                                                            |  |                              |            |             |  |             |           |             |  |   |           |  |  |   |           | 
|Earnings (loss) per share  Basic and
    diluted           |  | $                            | (.17       | )           |  | $           | .06       |             |  | $ | .05       |  |  | $ | .11       | 
|                                                            |  |                              |            |             |  |             |           |             |  |   |           |  |  |   |           | 

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G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

|                                                  |  |                              |         |             |  |             |         |             |  |   |   |  |  |   |   | 
|------------------------------------------------- |  | ---------------------------- | ------- | ----------- |  | ----------- | ------- | ----------- |  | - | - |  |  | - | - | 
|                                                  |  |                             
|                                                  |  | Year Ended December 31, 2002
|                                                  |  |                             
|                                                  |  | 4th Quarter                  |         | 3rd Quarter |  | 2nd Quarter |         | 1st Quarter
|                                                  |  |                              |         |             |  |             |         |            
|Revenues                                          |  | $                            | 663,759 |             |  | $           | 86,742  |             |  | $ |  |  |  | $ |  | 
|Expenses                                          |  |                              | 586,637 |             |  |             | 138,214 |             |  |   |  |  |  |   |  | 
|                                                  |  |                              |         |             |  |             |         |             |  |   |   |  |  |   |   | 
|Net income (loss)                                 |  | $                            | 77,122  |             |  | $           | (51,472 | )           |  | $ |  |  |  | $ |  | 
|                                                  |  |                              |         |             |  |             |         |             |  |   |   |  |  |   |   | 
|Earnings (loss) per share  Basic and
    diluted |  | $                            | 0.27    |             |  | $           | (0.21   | )           |  | $ |  |  |  | $ |  | 
|                                                  |  |                              |         |             |  |             |         |             |  |   |   |  |  |   |   | 



|    |                  
|--- | -----------------
|12. | Subsequent Events

Acquisitions

AmberOaks
Corporate Center  Austin, Texas

On January 21, 2004, through its
wholly-owned subsidiary, GREIT  AmberOaks GP, LLC,
the Company purchased AmberOaks Corporate Center in Austin,
Texas from an unaffiliated third party for a purchase price of
approximately $35,525,000. AmberOaks is a Class A
five-building office portfolio with approximately
281,885 square feet that is part of an eight-building
complex. An affiliate of the Companys advisor purchased
the remaining three buildings. The property is approximately 74%
leased, with approximately 64% of the property leased to
URS Corporation (aka Radian International). The Company
financed the purchase price with approximately $14,700,000 in
borrowings under a three-year secured revolving line of credit
with LaSalle. The Company is required to make interest only
payments until the due date at its option of
(1) LaSalles prime rate plus 0.50% or (2) up to
3 months LIBOR plus 3.00%. The rate will be subject to a
floor of 4.25%. The Company paid an acquisition fee to Realty of
$908,900, or approximately 2.6% of the purchase price.

Public Ledger
Building  Philadelphia, Pennsylvania

On February 13, 2004, through its wholly
owned subsidiary, GREIT  Public Ledger, LLC, the
Company purchased the Public Ledger Building in Philadelphia,
Pennsylvania from an unaffiliated third party for a purchase
price of approximately $33,950,000. The Public Ledger Building
is a 471,217 square foot 12-story multi-tenant
Class B+ office building located in Philadelphias
East Market Street submarket. The property is approximately 85%
leased to multiple tenants. At the date of acquisition, the
General Services Administration occupied approximately 27.5% of
the property. The Company financed the purchase price with
approximately $19,929,000 in borrowings under its credit
facility arranged through LaSalle. The Company is required to
make interest only payments until the due date of
January 30, 2006, at which time the loan must be paid in
full or refinanced. The Company paid an acquisition fee to
Realty of $965,000, or approximately 2.8% of the purchase price.

Madrona
Buildings  Torrance, California

On March 31, 2004, through its wholly owned
subsidiary, GREIT  Madrona, LP, the Company purchased
the Madrona Buildings in Torrance, California from an
unaffiliated third party for a purchase price of approximately
$45,900,000 in cash. The Company received a credit of
approximately $2,500,000 from the seller at closing to cover the
free rental periods and tenant improvements that two tenants
have under their respective leases. The property is a
four-building Class A office portfolio totaling
approximately

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##### Table of Contents



G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

211,407 square feet located in Torrance,
California, a suburb of Los Angeles. The Madrona Buildings are
approximately 84.7% leased, with approximately 41.2% leased by
American Honda Motor Company, 25.3% by NavCom
Technology, Inc. and 18.2% by Kaiser Permanente. The
Company paid an acquisition fee to Realty of $1,350,000, or
approximately 2.9% of the purchase price.

Brunswig
Square  Los Angeles, California

On April 5, 2004, through its wholly owned
subsidiary, GREIT  Brunswig Square, LP, the Company
purchased Brunswig Square in Los Angeles, California from an
unaffiliated third party for a purchase price of approximately
$23,805,000 in cash. Brunswig Square is a mixed use
office/retail building totaling approximately
135,982 square feet, including a retail component of
approximately 24,169 square feet, located in the Little
Tokyo District of downtown Los Angeles. The property is
approximately 92.9% leased, with approximately 25.6% leased by
the City of Los Angeles  Department of
Fire & Police Pensions, 22.5% leased by the City of Los
Angeles  Employee Retirement Systems, 14.5% by the
General Services Administration  Immigration and
Naturalization Services and 9.6% by the General Services
Administration  Office of Personnel Management. The
Company paid Realty an acquisition fee of $716,400, or
approximately 3.0% of the purchase price.

North Belt
Corporate Center  Houston, Texas

On April 8, 2004, through its wholly owned
subsidiary, GREIT  North Belt Corporate, LP, the
Company purchased North Belt Corporate Center in Houston, Texas
from an unaffiliated third party for a purchase price of
approximately $12,675,000 in cash. North Belt is a multi-tenant
office building totaling approximately 155,764 square feet.
The property is approximately 86.5% leased, with approximately
21.1% leased by the General Services Administration 
U.S. Customs and Border Protection, 20.2% by Southwestern
Energy Company and 10.2% to Bredero Price Company. The Company
paid Realty an acquisition fee of $400,000, or approximately
3.0% of the purchase price.

Proposed Acquisitions

Hawthorne
Plaza  San Francisco, California

The Companys advisor has entered into a
contract on our behalf with an unaffiliated third-party seller
for the acquisition of Hawthorne Plaza, a two-building
Class A office complex totaling approximately
418,668 square feet located in the south financial district
in San Francisco, California. The property is approximately
99.7% leased, with approximately 87.4% leased by the General
Services Administration on behalf of the Environmental
Protection Agency, Health Care Financing Administration (Centers
for Medicare & Medicaid Services), Bureau of
Citizenship and Immigration Services, U.S. Department of
Agriculture and the U.S. Passport Agency. The purchase
price for the property is approximately $97,000,000. The Company
intends to finance the property with a mortgage loan from Fleet
National Bank, Administrative Agent in the amount of
approximately $62,750,000. The Company intends to pay Realty an
acquisition fee of $2,900,000, or approximately 3.0% of the
purchase price, for arranging the transaction. Closing of this
acquisition is anticipated in April 2004. The Company has a
deposit of $2,000,000 related to this potential acquisition.
Under certain circumstances, the deposit may be nonrefundable.

In addition, the Company is currently considering
several potential property acquisitions. The decision to acquire
one or more of these properties will generally depend upon:



| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | the receipt of a satisfactory environmental
    survey and property appraisal for each property;                    
|
| |  | no material adverse change occurring in the
    properties, the tenants or in the local economic
    conditions; and

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G REIT, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | the receipt of sufficient financing, either
    through the net proceeds from our current offering or
    satisfactory debt financing.

There can be no assurance that any or all of the
conditions will be satisfied.

Other Events

Effective February 9, 2004, the Company
terminated its initial offering of shares of common stock. Of
the 21,000,000 shares registered in the initial offering,
19,987,934 were sold and 357,381 were issued in accordance with
the DRIP. On February 17, 2004, the Company filed a
post-effective amendment to deregister 654,685 shares of
common stock.

On January 23, 2004, the Companys
registration statement for the second offering of shares of
common stock was declared effective by the Securities and
Exchange Commission. In the second offering, the Company is
offering for sale to the public on a best efforts
basis a maximum of 27,000,000 shares of common stock at a
purchase price of $10.00 per share and up to 1,500,000
additional shares through the DRIP, under which shareholders may
elect to have dividends reinvested in additional shares at
$9.50 per share. The Company commenced the sale of shares
pursuant to the second offering on February 9, 2004. The
Company intends to terminate the second offering on
April 30, 2004.

For the period from January 1, 2004 through
March 31, 2004, the Company sold approximately
10,067,127 shares of common stock and issued an additional
167,173 shares under the DRIP, resulting in additional
gross proceeds before offering costs and selling commissions of
approximately $102,500,000.

On April 1, 2004, the Company and LaSalle
amended their credit agreement to increase the Companys
line of credit to $350,000,000.

Effective April 22, 2004, Diana M. Laing has
resigned her position as the Companys Chief Financial
Officer and the Board of Directors has appointed Richard Hutton
as interim Chief Financial Officer. Mr. Hutton has served
as the Chief Investment Officer of the Companys Advisor
since August 2003, overseeing all financial operations of the
Advisor, and previously served as the Companys interim
Chief Financial Officer. From April 1999 to August 2003,
Mr. Hutton served as Senior Vice President  Real
Estate Acquisitions and Vice President  Property
Management for the Companys Advisor. In that position,
Mr. Hutton oversaw the management of the real estate
portfolios and property management of the advisor and its
affiliates. Mr. Hutton holds a BA in psychology from
Claremont McKenna College and has been licensed as a certified
public accountant in California since 1984.

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##### Table of Contents



G REIT, INC.

SCHEDULE III  REAL ESTATE AND
ACCUMULATED DEPRECIATION


|                       |  |                          |             |                                                  |  |              |            |               |  |              |             |             |  |              |            |             |  |   |             |  |  |   |             |  |  |   |            |   |  |  |      | 
|---------------------- |  | ------------------------ | ----------- | ------------------------------------------------ |  | ------------ | ---------- | ------------- |  | ------------ | ----------- | ----------- |  | ------------ | ---------- | ----------- |  | - | ----------- |  |  | - | ----------- |  |  | - | ---------- | - |  |  | ---- | 
|                       |  |                          |             |                                                 
|                       |  | Initial Costs to Company |             | Gross Amount at Which Carried at Close of Period
|                       |  |                          |             |                                                 
|                       |  |                          |             | Buildings and                                    |  |              |            | Buildings and |  |              |             | Accumulated |  | Date        
|                       |  | Encumbrance              |             | Land                                             |  | Improvements |            | Land          |  | Improvements |             | Total       |  | Depreciation |            | Constructed
|                       |  |                          |             |                                                  |  |              |            |               |  |              |             |             |  |              |            |            
|5508 Highway 290       |  | $                        | 6,695,000   |                                                  |  | $            | 1,153,488  |               |  | $            | 8,789,918   |             |  | $            | 1,153,488  |             |  | $ | 8,807,092   |  |  | $ | 9,960,580   |  |  | $ | (541,585   | ) |  |  | 2001 | 
|Two Corporate Plaza    |  |                          | 10,160,000  |                                                  |  |              | 1,748,199  |               |  |              | 12,388,219  |             |  |              | 1,748,199  |             |  |   | 12,551,808  |  |  |   | 14,300,007  |  |  |   | (778,504   | ) |  |  | 1989 | 
|Atrium Building        |  |                          | 2,990,000   |                                                  |  |              | 418,764    |               |  |              | 3,906,954   |             |  |              | 418,764    |             |  |   | 3,906,954   |  |  |   | 4,325,718   |  |  |   | (260,670   | ) |  |  | 1917 | 
|Dept. of Children      |  |                          | 7,605,000   |                                                  |  |              | 2,660,884  |               |  |              | 8,356,914   |             |  |              | 2,660,884  |             |  |   | 8,356,914   |  |  |   | 11,017,798  |  |  |   | (273,087   | ) |  |  | 1973 | 
|Gemini                 |  |                          | 9,815,000   |                                                  |  |              | 1,220,269  |               |  |              | 13,313,647  |             |  |              | 1,220,269  |             |  |   | 13,313,647  |  |  |   | 14,533,916  |  |  |   | (424,267   | ) |  |  | 1983 | 
|Bay View Plaza         |  |                          | 6,200,000   |                                                  |  |              | 1,878,662  |               |  |              | 9,043,624   |             |  |              | 1,878,662  |             |  |   | 9,043,624   |  |  |   | 10,922,286  |  |  |   | (150,015   | ) |  |  | 2001 | 
|North Pointe           |  |                          | 15,600,000  |                                                  |  |              | 1,979,124  |               |  |              | 22,223,845  |             |  |              | 1,979,124  |             |  |   | 22,223,845  |  |  |   | 33,232,146  |  |  |   | (242,830   | ) |  |  | 1988 | 
|824 Market             |  |                          | 13,799,789  |                                                  |  |              | 6,400,275  |               |  |              | 26,831,871  |             |  |              | 6,400,275  |             |  |   | 26,831,871  |  |  |   | 24,202,969  |  |  |   | (207,291   | ) |  |  | 1984 | 
|Sutter Square          |  |                          | 4,024,126   |                                                  |  |              |            |               |  |              | 8,413,992   |             |  |              |            |             |  |   | 8,413,992   |  |  |   | 8,413,992   |  |  |   | (64,833    | ) |  |  | 1987 | 
|One World Trade Center |  |                          | 77,000,000  |                                                  |  |              | 22,851,391 |               |  |              | 92,210,652  |             |  |              | 22,851,391 |             |  |   | 92,210,652  |  |  |   | 115,062,043 |  |  |   | (506,665   | ) |  |  | 1989 | 
|Centerpointe           |  |                          | 25,028,814  |                                                  |  |              | 8,537,053  |               |  |              | 47,550,523  |             |  |              | 8,537,053  |             |  |   | 47,550,523  |  |  |   | 56,087,576  |  |  |   | (3,181     | ) |  |  | 1986 | 
|                       |  |                          |             |                                                  |  |              |            |               |  |              |             |             |  |              |            |             |  |   |             |  |  |   |             |  |  |   |            |   |  |  |      | 
|Total                  |  | $                        | 178,917,729 |                                                  |  | $            | 48,848,109 |               |  | $            | 253,030,159 |             |  | $            | 48,848,109 |             |  | $ | 253,210,922 |  |  | $ | 302,059,031 |  |  | $ | (3,452,930 | ) |  |  |      | 
|                       |  |                          |             |                                                  |  |              |            |               |  |              |             |             |  |              |            |             |  |   |             |  |  |   |             |  |  |   |            |   |  |  |      | 

|                               |  |          |      |                               |  |  |    | 
|------------------------------ |  | -------- | ---- | ----------------------------- |  |  | -- | 
|                               |  |          |      | Maximum Life on Which        
|                               |  | Date     |      | Depreciation in Latest Income
|Description                    |  | Acquired |      | Statement is Computed        
|                               |  |          |      |                              
|5508 Highway 290 West Building |  |          | 2002 |                               |  |  | 39 | 
|Two Corporate Plaza            |  |          | 2002 |                               |  |  | 39 | 
|Atrium Building                |  |          | 2003 |                               |  |  | 39 | 
|Dept. of Children              |  |          | 2003 |                               |  |  | 39 | 
|Gemini                         |  |          | 2003 |                               |  |  | 39 | 
|Bay View Plaza                 |  |          | 2003 |                               |  |  | 39 | 
|North Pointe                   |  |          | 2003 |                               |  |  | 39 | 
|824 Market                     |  |          | 2003 |                               |  |  | 39 | 
|Sutter Square                  |  |          | 2003 |                               |  |  | 39 | 
|One World Trade Center         |  |          | 2003 |                               |  |  | 39 | 
|Centerpointe                   |  |          | 2003 |                               |  |  | 39 | 

(a) The changes in total real estate for the
year ended December 31, 2003 are as follows:

|                               |  |      |             | 
|------------------------------ |  | ---- | ----------- | 
|                               |  | 2003
|                               |  |     
|Balance at beginning of period |  | $    | 23,830,511  | 
|Acquisitions                   |  |      | 278,030,921 | 
|Capital expenditures           |  |      | 197,599     | 
|                               |  |      |             | 
|Balance at end of period       |  | $    | 302,059,031 | 
|                               |  |      |             | 

(b) The changes in accumulated depreciation
for the year ended December 31, 2003 are as follows:

|                               |  |      |           | 
|------------------------------ |  | ---- | --------- | 
|                               |  | 2003
|                               |  |     
|Balance at beginning of period |  | $    | 102,149   | 
|Additions                      |  |      | 3,350,782 | 
|Deletions                      |  |      |          | 
|                               |  |      |           | 
|Balance at end of period       |  | $    | 3,452,931 | 
|                               |  |      |           | 

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

Dismissal of Squar, Milner and Engagement of
Grant Thornton

Effective August 22, 2002, our board of
directors dismissed the accounting firm of Squar, Milner,
Reehl & Williamson, LLP and approved the engagement of
Grant Thornton LLP, as our independent accountants. The decision
to engage Grant Thornton was approved by our board of directors
on the recommendation of its audit committee.

Squar Milners reports on our financial
statements for the year ended December 31, 2001 contained
no adverse opinion or a disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or
accounting principles. During the period of Squar Milners
engagement, we had no disagreements with Squar Milner on any
matter of accounting principles of practices, financial
statement disclosure or auditing scope of procedure, which
disagreement(s), if not resolved to the satisfaction of Squar
Milner, would have caused it to make reference to the subject
matter of the disagreement(s) in connection with its report. No
reportable event (as defined in Item 304(a)(1)(v) of
Regulation S-K) occurred during the period of Squar
Milners engagement.

Squar Milner provided us with a letter addressed
to the Securities and Exchange Commission stating that it had
reviewed the statements included in our Current Report on
Form 8-K, dated August 22, 2002, and filed with the
SEC on August 28, 2002, and that it agreed with our
statements regarding Squar Milner. A copy of this letter, dated
as of August 26, 2002, was filed as Exhibit 16.1 to
the Current Report on Form 8-K.

Prior to our engagement of Grant Thornton, we did
not consult with Grant Thornton regarding (1) the
application of accounting principles to a specified transaction,
either completed or proposed, (2) the type of audit opinion
that might be rendered on our financial statements or
(3) any other matter that was either the subject of a
disagreement between our company and its auditor (as defined in
paragraph 304(a)(1)(iv) of Regulation S-K and the related
instructions to this item) or a reportable event (as described
in paragraph 304(a)(1)(v) of Regulation S-K).

Dismissal of Grant Thornton and Engagement of
Deloitte & Touche, LLP

Effective February 8, 2004, our board of
directors dismissed Grant Thornton LLP as our independent
certified public accountant based on the recommendation of the
audit committee of the board of directors. Effective
February 8, 2004, our board of directors retained
Deloitte & Touche, LLP as our independent certified
public accountant based on the recommendation of the audit
committee.

The reports of Grant Thornton on our financial
statements for the two most recent fiscal years ended
December 31, 2002 and December 31, 2001 contained no
adverse opinion or disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting
principles. During our two most recent fiscal years ended
December 31, 2002 and December 31, 2001 and for the
interim period from January 1, 2003 through the date
hereof, there were no disagreements with Grant Thornton on any
matter of accounting principles or practice, financial statement
disclosure or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of Grant
Thornton, would have caused it to make reference to the subject
matter of the disagreement(s) in connection with its reports.

There were no reportable events (as
defined in Item 304 (a) (1) (v) of
Regulation S-K) that occurred with the two most recent
fiscal years ended December 31, 2002 and December 31,
2001 and the interim period January 1, 2003 through
February 8, 2004.

Grant Thornton provided us with a letter
addressed to the Securities and Exchange Commission stating that
it had reviewed the statements included in our Current Report on
Form 8-K, dated February 8, 2004, and filed with the
SEC on February 12, 2004, and that it agreed with our
statement regarding Grant Thornton. A copy of this letter was
filed as Exhibit 16.1 to the Current Report on
Form 8-K.

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Prior to our engagement of Deloitte &
Touche, LLP, we did not consult with Deloitte & Touche,
LLP regarding (1) the application of accounting principles
to a specified transaction, either completed or proposed,
(2) the type of audit opinion that might be rendered by
Deloitte & Touche, LLP on our financial statements, or
(3) any other matter that was the subject of a disagreement
between our company and its auditor (as defined in
Item 304(a)(1)(iv) of Regulation S-K and its related
instructions) or a reportable event (as described in
Item 304(a) (1)(v) of Regulation S-K).






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

(a) Evaluation of disclosure controls and
procedures. We maintain disclosure controls and procedures
that are designed to ensure that information required to be
disclosed in our Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms, and that
such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the
desired control objectives, and management is required to apply
its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.

As of December 31, 2003, the end of the
fiscal year covered by this report, we carried out an
evaluation, under the supervision and with the participation of
our companys management, including our Chief Executive
Officer and our Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and
procedures. Based on the foregoing, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure
controls and procedures were effective at the reasonable
assurance level.

(b) Changes in internal control over
financial reporting. There have been no significant changes
in our internal control over financial reporting that occurred
subsequent to the date of their evaluation that have materially
affected or are reasonably likely to materially affect our
internal control over financial reporting.




PART III






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

The following table and biographical descriptions
set forth information with respect to our officers and directors.

|                    |  |     |    |          |  |                                                                                         |  |  |            | 
|------------------- |  | --- | -- | -------- |  | --------------------------------------------------------------------------------------- |  |  | ---------- | 
|Name                |  | Age |    | Position |  | Term of Office                                                                         
|                    |  |     |    |          |  |                                                                                        
|Anthony W. Thompson |  |     | 57 |          |  | Chairman of the Board of Directors, Chief
    Executive Officer, President and Director |  |  | Since 2001 | 
|Gary T. Wescombe    |  |     | 61 |          |  | Director                                                                                |  |  | Since 2001 | 
|Edward A. Johnson   |  |     | 50 |          |  | Director                                                                                |  |  | Since 2001 | 
|D. Fleet Wallace    |  |     | 36 |          |  | Director                                                                                |  |  | Since 2002 | 
|W. Brand Inlow      |  |     | 50 |          |  | Director                                                                                |  |  | Since 2002 | 
|Diana M. Laing      |  |     | 49 |          |  | Chief Financial Officer                                                                 |  |  | Since 2004 | 
|Talle A. Voorhies   |  |     | 56 |          |  | Vice President and Secretary                                                            |  |  | Since 2001 | 
|Jack R. Maurer      |  |     | 60 |          |  | Executive Vice President                                                                |  |  | Since 2001 | 

There are no family relationships between any
directors, executive officers or between any director and
executive officer.

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Anthony W. (Tony) Thompsonhas served as Chairman of our Board of
Directors, Chief Executive Officer, President and a director of
our company since December 2001. Mr. Thompson has also been
Chief Executive Officer, President and a director of
T REIT, Inc., an affiliate, since December 1999. In
addition, he is a co-founder of our advisor, Triple Net
Properties, LLC, and has been its President since inception in
April of 1998. He is also President and 100% owner of Triple Net
Properties Realty, Inc., an affiliated real estate
brokerage and management company that will provide certain real
estate brokerage and management services to our company. Prior
to April of 1998, Mr. Thompson was co-founder, co-owner,
director and officer of a number of real estate investment
entities trading under the name The TMP Companies, including the
TMP Group, Inc., a full-service real estate investment firm
founded in 1978. Mr. Thompson has been the President and
100% owner of our dealer manager, NNN Capital Corp., since 1986
and is a registered securities principal with the NASD. He is a
1969 graduate of Sterling College with a BS in Economics. He is
a member of the Sterling College Board of Trustees and various
other charitable and civic organizations.

Gary T. Wescombehas
served as a director of our company since December 2001.
Mr. Wescombe is a partner in Wescombe & Johnson in
Newport Beach, California. From October 1999 to December 2001 he
was a partner in Warmingon Wescombe Realty Partners in Costa
Mesa, California. At both companies his focus was on real estate
investments and financing strategies. Prior to retiring in 1999,
Mr. Wescombe was a Partner with Ernst & Young, LLP
(previously Kenneth Leventhal & Company) from 1970 to
1999. Mr. Wescombe received a BS in Accounting and Finance
from San Jose State University in 1965 and is a member of
the American Institute of Certified Public Accountants and
California Society of Certified Public Accountants.

Edward A. Johnsonhas served as a director of our
company since December 2001. Dr. Johnson has served as
President of Arizona International University since September
2003. Dr. Johnson served as President of Sterling College,
a small liberal arts college affiliated with the Presbyterian
Church (USA), in Sterling, Kansas, from 1997 to August 2003
where his major accomplishments include development of strategic
and business plans, initiation of the nations first
undergraduate program in social entrepreneurship and selection
as the first leadership college by Habitat for Humanity.
Dr. Johnson received a BS in History and Political Science
from Morningside College, Sioux City, Iowa in 1973, a JD
from Creighton University School of Law, Omaha, Nebraska in
1976, and a Ph.D. in Higher Education Administration 
Law and Education Specialization from Arizona State University,
Tempe, Arizona in 1984.

D. Fleet Wallacehas served as a director of our
company since April 2002. He is a principal and co-founder of
Greystone Fund, L.P. and Greystone Capital Management, LLC,
Greystone Funds general partner. Greystone Fund, L.P. is a
professionally managed opportunity fund formed in September 2001
that invests primarily in promising venture capital
opportunities and distressed assets in the form of real estate,
notes and accounts receivable, inventory and other assets. Prior
to founding Greystone Fund and Greystone Capital Management,
from April 1998 to August 2001, Mr. Wallace served as
corporate counsel and Assistant Secretary of United Dominion
Realty Trust, Inc., a publicly-traded real estate
investment trust. At United Dominion, he managed general
corporate matters for over 150 affiliated entities, negotiated
and executed numerous real estate acquisitions and dispositions,
and provided legal support on over $1 billion in financing
transactions. From September 1994 to April 1998,
Mr. Wallace was in the private practice of law with the
firm of McGuire Woods in Richmond, Virginia. Mr. Wallace
also serves as a director of T REIT, Inc., an
affiliate.

W. Brand Inlowhas served as a director of our
company since April 2002. Mr. Inlow currently provides
professional consulting services to the multifamily industry on
matters related to acquisitions, dispositions, asset management
and property management operations. Mr. Inlow also is
President of Jessies Wish, Inc., a Virginia
non-profit corporation dedicated to awareness, education and
financial assistance for patients and families dealing with
eating disorders. Mr. Inlow served as President of Summit
Realty Group, Inc. in Richmond, Virginia, from September
2001 through October 2003. Prior to joining Summit Realty, from
November 1999 to September 2001 he was Vice President of
Acquisitions for EEA Realty, LLC in Alexandria, Virginia where
he was responsible for acquisition, disposition, and financing of

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company assets, which were primarily garden
apartment properties. Prior to joining EEA Realty, from November
1991 to November 1999, Mr. Inlow worked for United Dominion
Realty Trust, Inc. a publicly-traded real estate investment
trust, as Assistant Vice President and Senior Acquisition
Analyst, where he was responsible for the acquisition of garden
apartment communities. Mr. Inlow also serves as a director
of T REIT, Inc., an affiliate.


Diana M. Lainghas
served as our Chief Financial Officer since January 2004 and is
responsible for all areas of finance, including accounting and
financial reporting, as well as a liaison for institutional
investors, lenders and investment banks. Ms. Laing served
as a Principal and Chief Financial Officer of New Pacific Realty
Corporation, a private real estate investment company from
December 2001 to December 2003 and as Executive Vice President
and Chief Financial Officer of Firstsource Corp., a private
technology company, from July 2000 to May 2001. From August 1996
to July 2000, she was the Executive Vice President and Chief
Financial Officer of Arden Realty, Inc., a NYSE publicly
traded real estate investment trust and the largest owner and
operator of commercial office properties in the Southern
California region. Ms. Laing received a BS in accounting
from Oklahoma State University and is a Texas Certified Public
Accountant. Ms. Laing currently serves as the Chairman of
the Audit Committee of the Board of Directors of The Macerich
Company, a publicly traded real estate investment trust which
owns and operates regional malls. In addition, she serves as the
Chief Financial Officer of our advisor and of
T REIT, Inc., an affiliate. Effective April 22,
2004, Ms. Laing resigned her position as our chief
financial officer.

Talle A. Voorhieshas served as Vice President and
Secretary of our company since December 2001. She has served as
Executive Vice President of our advisor from April 1998 to
December 2001, when she became Chief Operating Officer of our
advisor. Ms. Voorhies is President and Financial Principal
of NNN Capital Corp., our dealer manager. From December 1987 to
January 1999, Ms. Voorhies worked with the TMP
Group, Inc., where she served as Chief Administrative
Officer and Vice President of Broker/ Dealer Relations. She is
responsible for communications with the broker dealer network,
due diligence activities, marketing and compliance, and investor
services. Ms. Voorhies is a registered financial principal
with the NASD.

Jack R. Maurerhas
served as Executive Vice President of our company since December
2001. He has served as Chief Financial Officer of our advisor
from April 1998 to December 2001, when he became Financial
Principal of NNN Capital Corp., our dealer manager and has
served as Secretary and Treasurer of T REIT, Inc., an
affiliate, since December 1999. Mr. Maurer has over
29 years of real estate financial management experience,
including Chief Financial Officer and Controller positions in
residential and commercial development and the banking industry.
From 1986 to April 1998, he was a General Partner and CEO of
Wescon Properties, where he was involved in finance, accounting
and forecasting. His previous experience also includes the
national accounting firm of Kenneth Leventhal &
Company. Mr. Maurer received a BS from California
University at Northridge in 1973 and is a Registered Operations
and Financial Principal with the NASD.

Committees of Our Board of Directors

Acquisition
Committee

Each of our acquisitions must be approved by the
acquisition committee, a majority of whom are independent
directors, or a majority of our board of directors, including a
majority of the independent directors, as being fair and
reasonable to our company and consistent with our investment
objectives. Currently our acquisition committee is comprised of
all members of our board of directors. Our board of directors
may establish additional acquisition committees from time to
time based on property type or other relevant factors. Our
advisor will recommend suitable properties for consideration by
the appropriate acquisition committee or our board of directors
from time to time. If the members of the acquisition committee
unanimously approve a given acquisition, then our advisor will
be directed to acquire the property on our behalf, if such
acquisition can be completed on terms approved by the committee.
In the event we appoint an acquisition committee in the future,
and if the acquisition committee does not approve

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a proposed acquisition, then the property may be
presented to our full board of directors for consideration, who,
by majority vote, may elect to acquire or reject the property.
Properties may be acquired from our advisor or its affiliates or
our officers and directors, provided that any interested or
affiliated directors shall not vote on such an acquisition.




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

Our audit committee, consisting of a majority of
independent directors, is comprised of Messrs. Inlow,
Wallace and Wescombe. Our board of directors has determined that
Mr. Wescombe qualifies as an audit committee
financial expert under the rules of the Securities and
Exchange Commission. The 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; and                                                        
|
| |  | consults with the independent public accountants
    regarding the adequacy of our internal accounting controls.



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

Our board of directors has established an
executive compensation committee consisting of up to three
directors, including at least two independent directors, to
establish compensation policies and programs for our directors
and executive officers. The members of our executive
compensation committee are Messrs. Thompson, Wallace and
Inlow. At present, our executive compensation committee serves
only to determine the stock option grants under our two stock
option plans. However, at a later date, the executive
compensation committee may exercise all powers of our board of
directors in connection with establishing and implementing
compensation matters, including incentive compensation and
benefit plans, except for those which require actions by all of
the directors under our articles of incorporation, bylaws or
applicable law. Stock-based compensation plans will be
administered by the board of directors if the members of the
executive compensation committee do not qualify as
non-employee directors within the meaning of the
Exchange Act.

Director Compensation

We pay each independent and outside director a
fee of $1,000 for attending, in person or by telephone, each
meeting of the board or committee thereof; however, such
compensation, including fees for attending meetings, may not
exceed $12,000 annually. Our independent and outside directors
also qualify for the independent director stock option plan.

Independent Director Stock Option
Plan

On July 22, 2002, we adopted the independent
director stock option plan. Only outside and independent
directors are eligible to participate in the independent
director stock option plan. We have authorized and reserved a
total of 100,000 shares of common stock for issuance under
the independent director stock option plan.

The independent director stock option plan
provides for the grant of initial and subsequent options.
Initial options are non-qualified stock options to purchase
5,000 shares of common stock at the applicable option
exercise price described below granted to each independent
director and each outside director as of the date such
individual becomes an independent or outside director.
Subsequent options to purchase 5,000 shares of common stock
at the applicable option exercise price may be granted on the
date of each

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annual shareholders meeting to each
independent and outside director so long as the individual is
still in office. In 2003, we granted options to purchase
5,000 shares at $9.05 per share to each of the four
independent and outside directors. As of December 31, 2003,
we have granted options to purchase 40,000 shares in
accordance with the plan. The plan was approved at our annual
shareholder meeting on June 28, 2003.


Officer and Employee Stock Option
Plan

On July 22, 2002, we adopted the officer and
employee stock option plan. All of our officers and employees
are eligible to participate in the officer and employee stock
option plan.

We have authorized and reserved a total of
400,000 shares of common stock for issuance under the
officer and employee stock option plan. Our board of directors,
acting on the recommendation of the compensation committee, has
discretion to grant options to officers and employees effective
as of each annual meeting of our shareholders. No options were
granted in 2003. As of December 31, 2003, we have granted
options to purchase 90,000 shares to officers of our
company. The plan was approved at our annual shareholder meeting
on June 28, 2003.






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

Compensation of Executive Officers

We have no employees and our companys
executive officers are all employees of our advisor and/or its
affiliates. Our executive officers are compensated by our
advisor and/or its affiliates and will not receive any
compensation from us for their services.

Option/ SAR Grants in Last Fiscal
Year

No option grants were made to officers in the
last fiscal year ended December 31, 2003.

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

|                 |  |             |     |             |  |                           |     |                           |  |  |          |  |  |     |        | 
|---------------- |  | ----------- | --- | ----------- |  | ------------------------- | --- | ------------------------- |  |  | -------- |  |  | --- | ------ | 
|                 |  |             |     |             |  |                           |     | (e)                      
|                 |  |             |     |             |  | (d)                       |     | Value of Unexercised     
|                 |  | (b)         |     |             |  | Number of Securities      |     | In-the-Money             
|                 |  | Shares      |     | (c)         |  | Underlying Unexercised    |     | Options/SARs             
|(a)              |  | Acquired on |     | Value       |  | Options/SARs at FY-End    |     | at FY-End($)             
|Name             |  | Exercise($) |     | Realized($) |  | Exercisable/Unexercisable |     | Exercisable/Unexercisable
|                 |  |             |     |             |  |                           |     |                          
|Anthony Thompson |  |             | -0- |             |  |                           | -0- |                           |  |  | 0/45,000 |  |  | 0/$ | 43,989 | 

Compensation Committee Interlocks and Insider
Participation

During 2003, the following directors served on
our executive compensation committee: Messrs. Thompson,
Wallace and Inlow. Mr. Thompson also served as Chief
Executive Officer and President.

Board Compensation Committee Report on
Executive Compensation

The executive compensation committee may
recommend awards of stock options to officers and other
employees under our officer and employee stock option plan.

57



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##### Table of Contents








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

PRINCIPAL SHAREHOLDERS

The following table shows, as of April 9,
2004, the number and percentage of shares of our common stock
owned by (1) any person who is known by us to be the
beneficial owner of more than 5% of the outstanding shares of
our common stock, (2) the chief executive officer and each
of our four most highly compensated executive officers if such
officers salary and bonus for 2003 exceeded $100,000, (3)
each director and (4) all directors and executive officers
as a group.

|                                                                         |  |                       |        |            |  |  |   | 
|------------------------------------------------------------------------ |  | --------------------- | ------ | ---------- |  |  | - | 
|                                                                         |  | Number of Shares of   |        |           
|                                                                         |  | Common Stock          |        | Percent of
|Name                                                                     |  | Beneficially Owned(1) |        | Class     
|                                                                         |  |                       |        |           
|Anthony W. Thompson, Chairman, Chief Executive
    Officer and President |  |                       | 29,122 | (2)        |  |  | * | 
|Gary T. Wescombe, Director                                               |  |                       | -0-    |            |  |  | * | 
|Edward A. Johnson, Director                                              |  |                       | -0-    |            |  |  | * | 
|D. Fleet Wallace, Director                                               |  |                       | -0-    |            |  |  | * | 
|W. Brand Inlow, Director                                                 |  |                       | -0-    |            |  |  | * | 
|All Named Executive Officers and Directors as a
    Group                |  |                       | 29,122 |            |  |  | * | 



---



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



|    |                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These amounts include shares issuable upon
    exercise of options granted to each individual under our
    independent director stock option plan or our officer and
    employee stock option plan, to the extent that such options are
    currently exercisable or will become exercisable within
    60 days after the date of this prospectus.
|   
|(2) | Includes 6,135 shares owned by AWT Family
    LP, a limited partnership controlled by Mr. Thompson and
    22,987 shares owned by our advisor, Triple Net Properties,
    LLC. Mr. Thompson is the President and approximately 35%
    owner of Triple Net Properties, LLC.                                                                         






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

Triple Net Properties, LLC, our advisor, is
primarily responsible for managing our day to day business
affairs and assets and carrying out the directives of our board
of directors. Our advisor is a Virginia limited liability
company that was formed in April of 1998 to advise syndicated
limited partnerships, limited liability companies, and other
entities regarding the acquisition, management and disposition
of real estate assets. Several of our companys officers
and directors serve in that same capacity for our advisor, and
own approximately 40% of the equity interest in our advisor. Our
advisor currently advises more than 70 entities that have
invested in properties located in California, Colorado,
Delaware, Florida, Hawaii, Illinois, Kansas, Nebraska, Nevada,
North Dakota, Pennsylvania, South Dakota, Texas and Washington.

Before the commencement of our initial public
offering, our advisor purchased 22,100 shares of our common
stock at a price of $9.05 per share for approximately
$200,005 in cash. Our advisor intends to retain such shares
while serving as the advisor to our company.

Our advisor bears the expenses incurred in
connection with supervising, monitoring and inspecting real
property or other assets owned by our company (excluding
proposed acquisitions) or otherwise relating to its duties under
the advisory agreement. Such expenses include employing its
personnel, rent, telephone, equipment and other administrative
expenses. We reimburse our advisor for certain expenses
incurred, including those related to proposed acquisitions and
travel expenses. However, we will not reimburse our advisor for
any operating expenses that, in any four consecutive fiscal
quarters, exceed the greater of 2% of average invested assets or
25% of net income for such year. If our advisor receives an
incentive distribution, net income (for purposes of calculating
operating expenses) excludes any gain from the sale of assets.
Any amount exceeding the greater of 2% of average invested
assets or 25% of net income paid to

58



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##### Table of Contents



our advisor during a fiscal quarter will be
repaid to our company within 60 days after the end of the
fiscal year. We bear our own expenses for functions not required
to be performed by our advisor under the advisory agreement,
which generally include capital raising and financing
activities, corporate governance matters, and other activities
not directly related to real estate properties and other assets.
To date, no reimbursements have been made to our advisor
pursuant to the provisions of the advisory agreement.


Under the terms of our advisory agreement, our
advisor has responsibility for our day to day operations,
administers our accounting and bookkeeping functions, serves as
a consultant in connection with policy decisions to be made by
our board of directors, manages our property and renders other
services deemed appropriate by our board of directors. Our
advisor bears expenses incurred for the performance of its
services and is entitled to reimbursement subject to certain
limitations. Fees and costs reimbursed to our advisor cannot
exceed the greater of 2% of average invested assets or 25% of
net income for the previous four quarters. During the years
ended December 31, 2003 and 2002, we paid our advisor
$14,381,482 and $2,141,122, respectively, for advisory services.

For the year ended December 31, 2003,
approximately $6,067,000 has been earned by our advisor and
affiliates of our advisor in connection with our acquisition of
properties.

For the year ended December 31, 2003, we
paid approximately $11,515,000 of selling commissions, due
diligence and certain fees paid to NNN Capital Corp., the dealer
manager of the offering, which is wholly owned by Anthony W.
Thompson, the chief executive officer of our company.

We pay Realty a property management fee equal to
5% of the gross income from our properties; however, a portion
of this fee may be re-allowed to a third-party property manager.
These fees are paid monthly. For the year ended
December 31, 2003, we have incurred approximately $457,000
in property management fees for our properties payable to Realty.






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

Squar Milner Reehl & Williamson, LLP
served as our independent auditors from our formation in 2001
until they were dismissed by us on August 22, 2002. Grant
Thornton LLP served as our independent auditors from
August 22, 2002 until they were dismissed by us on
February 8, 2004. Effective February 8, 2004, our
board of directors, based on the approval and recommendation of
the audit committee, has selected Deloitte & Touche,
LLP as our independent auditors. Deloitte & Touche, LLP
will audit our financial statements for the year ended
December 31, 2003.

The following table lists the fees for services
rendered by our independent auditors for 2003 and 2002:

|                      |  |      |         |      |  |   |        | 
|--------------------- |  | ---- | ------- | ---- |  | - | ------ | 
|Services              |  | 2003 |         | 2002
|                      |  |      |         |     
|Audit Fees(1)         |  | $    | 288,815 |      |  | $ | 44,880 | 
|Audit-Related Fees(2) |  |      | 6,250   |      |  |   |       | 
|Tax Fees(3)           |  |      | 55,840  |      |  |   |       | 
|All Other Fees(4)     |  |      |        |      |  |   |       | 
|                      |  |      |         |      |  |   |        | 
|Total                 |  | $    | 350,905 |      |  | $ | 44,880 | 
|                      |  |      |         |      |  |   |        | 



---



|    |                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees billed in 2003 and 2002 consisted of
    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 Securities and Exchange Commission.
|   
|(2) | Audit-related fees billed in 2003 and 2002
    consisted of financial accounting and reporting consultations.                                                                                                                                                                                                
|   
|(3) | Tax services billed in 2003 and 2002 consisted of
    tax compliance and tax planning and advice.                                                                                                                                                                                                            
|   
|(4) | There were no fees billed for other services in
    2003 or 2002.                                                                                                                                                                                                                                            

59



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##### Table of Contents



The audit committee has determined that the
provision by Grant Thornton LLP of non-audit services for us in
2003 is compatible with Grant Thorntons maintaining its
independence.

The audit committee has approved
Deloitte & Touche, LLP and Grant Thornton LLP to
perform the following non-audit services for us during 2004:



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




PART IV






|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K

(a) List of documents filed:



| |     |                                                                                                          
| | --- | ---------------------------------------------------------------------------------------------------------
| | (1) | The consolidated financial statements of the
    company included in this report are set forth in Item 8.



| |                                   
| | ----------------------------------
| | (2) Financial Statement Schedules:



| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | The following financial statement schedule for
    the year ended December 31, 2003 is submitted herewith:

|                                                            |  |      |    | 
|----------------------------------------------------------- |  | ---- | -- | 
|                                                            |  | Page
|                                                            |  |     
|Real Estate and Accumulated Depreciation
    (Schedule III) |  |      | 51 | 



| |                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All schedules other than the one listed above
    have been omitted as the required information is inapplicable or
    the information is presented in the consolidated financial
    statements or related notes.



| |                                                                             
| | ----------------------------------------------------------------------------
| | (3) Exhibits. The following exhibits are
    filed as part of this document:

EXHIBIT LIST

|        |      |         |  |                                                                                                                                                                                                                                                                          
|------- | ---- | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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).                              
|        | 3.1  |         |  | Third Amended and Restated Articles of
    Incorporation of the Registrant (included as Exhibit 3.6 to
    Amendment No. 3 to our Registration Statement on
    Form S-11 filed on July 7, 2002 (File
    No. 333-76498) and incorporated herein by reference).          
|        | 3.2  |         |  | Amended and Restated Bylaws of the Registrant
    (included as Exhibit 3.4 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).                                 
|        | 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).    

60



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|        |       |         |  |                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ----- | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |        
|Number  |       | Exhibit
|        |       |        
|        | 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  |         |  | Amended and Restated Real Estate Purchase and
    Sale Agreement dated June 19, 2002 by and between MFPB 290
    West, Ltd. And Triple Net Properties, LLC, as assigned to G
    REIT  55 Highway 290 West, LP (included as
    Exhibit 10.8 to the Current Report on Form 8-K filed
    on January 24, 2003 and incorporated herein by reference).                             
|        | 10.8  |         |  | 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).                                                                      
|        | 10.9  |         |  | Agreement of Sale and Purchase dated as of
    August 14, 2002 by and between ASP Two Corporate Plaza,
    P.P. and Triple Net Properties, LLC, as amended and reinstated,
    and as assigned to G REIT  Two Corporate Plaza
    (included as Exhibit 10.9 to the Current Report on
    Form 8-K filed on December 13, 2002 and incorporated
    herein by reference).         
|        | 10.10 |         |  | Purchase Agreement dated October 10, 2002
    between Congress Center, LLC and Triple Net Properties, LLC, as
    assigned to NNN Congress Center, LLC, GREIT  Congress
    Center, LLC and WREIT  Congress Center, LLC (included
    as Exhibit 10.10 to the Current Report on Form 8-K
    filed on January 24, 2003 and incorporated herein by
    reference).              
|        | 10.11 |         |  | Agreement of Sale and Purchase dated
    September 9, 2002 between 1200 N Street, Ltd. And Triple
    Net Properties, LLC, as assigned to GREIT  Atrium
    Building LLC (included as Exhibit 10.12 to Post Effective
    Amendment No. 2 to our Registration Statement on
    Form S-11 filed on March 13, 2003 (File
    No. 333-76498) and incorporated herein by reference).
|        | 10.12 |         |  | Agreement of Sale and Purchase dated
    August 16, 2002 by and between Park Sahara Office Center,
    Ltd., LLC and Triple Net Properties, LLC, as partially assigned
    to G REIT  Park Sahara, LLC (included as
    Exhibit 10.1 to the Current Report on Form 8-K filed
    on March 28, 2003 and incorporated herein by reference).                                       
|        | 10.13 |         |  | Form of Escrow Agreement with PriVest Bank dated
    March   , 2003 (included as Exhibit 10.13 to
    Post Effective Amendment No. 2 to our Registration
    Statement on Form S-11 filed on March 13, 2003 (File
    No. 333-76498) and incorporated herein by reference).                                                                                                      
|        | 10.14 |         |  | Agreement of Purchase and Sale dated as of
    April 22, 2003 by and between Procacci Financial Group,
    Ltd. F/ K/ A Procacci Real Estate Management Co. Ltd. and
    GREIT  DCF Campus, LLC (included as Exhibit 10.1
    to the Current Report on Form 8-K filed on May 5, 2003
    and incorporated herein by reference).                                                 
|        | 10.15 |         |  | Agreement of Purchase and Sale effective as of
    January 10, 2003 by and between CCI-1150 Gemini, Ltd. and
    Triple Net Properties, LLC (included as Exhibit 10.2 to the
    Current Report on Form 8-K filed on May 5, 2003 and
    incorporated herein by reference).                                                                                                      
|        | 10.16 |         |  | Agreement of Purchase and Sale and Joint Escrow
    Instructions dated as of May 6, 2003 between LNR Harbor
    Bay, LLC and Triple Net Properties, LLC (included as
    Exhibit 10.1 to the Current Report on Form 8-K filed
    on August 12, 2003 and incorporated herein by reference).                                                                                      

61



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##### Table of Contents



|        |       |         |  |                                                                                                                                                                                                                                                                                                                          
|------- | ----- | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |        
|Number  |       | Exhibit
|        |       |        
|        | 10.17 |         |  | Real Property Purchase and Sale Agreement and
    Escrow Instructions dated as of July 2, 2003 by and between
    Government Property Fund IV, LLC and Triple Net Properties,
    LLC (included as Exhibit 10.2 to the Current Report on
    Form 8-K filed on August 12, 2003 and incorporated
    herein by reference).
|        | 10.18 |         |  | Real Property Purchase and Sale Agreement and
    Escrow Instructions dated as of July 2, 2003 by and between
    Government Property Fund IV, LLC and Triple Net Properties,
    LLC (included as Exhibit 10.02 to the Form 8-K filed
    by the Company on August 12, 2003 and incorporated herein
    by reference).  
|        | 10.19 |         |  | First Amendment to Contract of Sale dated as of
    September 26, 2003 by and between Savannah Teachers
    Properties, Inc. and Triple Net Properties, LLC (included
    as Exhibit 10.01 to the Form 8-K filed by the Company
    on October 24, 2003 and incorporated herein by reference).                           
|        | 10.20 |         |  | Agreement of Purchase and Sale of Real Property
    and Escrow Instructions dated July 16, 2003 by and between
    RPD Properties II, LLC and Triple Net Properties, LLC
    (included as Exhibit 10.01 to the Form 8-K filed by
    the Company on October 31, 2003 and incorporated herein by
    reference).          
|        | 10.21 |         |  | Purchase and Sale Agreement and Joint Escrow
    Instructions dated as of October 22, 2003 by and between
    LBWTC Real Estate Partners, LLC and Triple Net Properties, LLC
    (included as Exhibit 10.01 to the Form 8-K filed by
    the Company on December 12, 2003 and incorporated herein by
    reference).     
|        | 10.22 |         |  | Purchase and Sale Agreement and Joint Escrow
    Instructions dated as of September 26, 2003 by and between
    Intrarock 1, LLC and Triple Net Properties, LLC (included as
    Exhibit 10.01 to the Form 8-K filed by the Company on
    January 9, 2004 and incorporated herein by reference).                        
|        | 10.23 |         |  | Purchase and Sale Agreement dated as of
    October 17, 2003 by and between Austin Jack, L.L.C. and
    Triple Net Properties, LLC (included as Exhibit 10.01 to
    the Form 8-K filed by the Company on February 4, 2004
    and incorporated herein by reference).                                                    
|        | 10.24 |         |  | First Amendment and Reinstatement of Purchase and
    Sale Agreement dated as of December 8, 2003 by and between
    Austin Jack, L.L.C. and Triple Net Properties, LLC (included as
    Exhibit 10.02 to the Form 8-K filed by the Company on
    February 4, 2004 and incorporated herein by reference).               
|        | 10.25 |         |  | Purchase and Sale Agreement dated as of
    December   , 2003 by and between Consortium
    Two  Public Ledger, L.P. and Triple Net Properties,
    LLC (included as Exhibit 10.01 to the Form 8-K filed
    by the Company on February 24, 2004 and incorporated herein
    by reference).                             
|        | 10.26 |         |  | Letter Agreement (First Amendment) to Purchase
    and Sale Agreement dated as of January 8, 2004 (included as
    Exhibit 10.02 to the Form 8-K filed by the Company on
    February 24, 2004 and incorporated herein by reference).                                                                                    
|        | 10.27 |         |  | Letter Agreement (Second Amendment) to Purchase
    and Sale Agreement dated as of January 12, 2004 (included
    as Exhibit 10.03 to the Form 8-K filed by the Company
    on February 24, 2004 and incorporated herein by reference).                                                                                  
|        | 10.28 |         |  | Third Amendment to Purchase and Sale Agreement
    dated as of February 4, 2004 by and between Consortium
    Two  Public Ledger, L.P. and GREIT  Public
    Ledger, LLC (included as Exhibit 10.04 to the Form 8-K
    filed by the Company on February 24, 2004 and incorporated
    herein by reference).           
|        | 10.29 |         |  | Fourth Amendment to Purchase and Sale Agreement
    dated as of February 11, 2004 by and between Consortium
    Two  Public Ledger, L.P. and GREIT  Public
    Ledger, LLC (included as Exhibit 10.05 to the Form 8-K
    filed by the Company on February 24, 2004 and incorporated
    herein by reference).         
|        | 10.30 |         |  | Agreement for the Purchase and Sale of Property
    dated as of March 8, 2004 by and between
    20770 Madrona, LLC and Triple Net Properties, LLC (included
    as Exhibit 10.01 to the Form 8-K filed by the Company
    on April 4, 2004 and incorporated herein by reference).                                       

62



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|        |       |         |  |                                                                                                                                                                                                                                                                                                                                             
|------- | ----- | ------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |        
|Number  |       | Exhibit
|        |       |        
|        | 10.31 |         |  | Agreement for Purchase and Sale of Real Property
    and Escrow Instructions dated as of February 11, 2004 by
    and between Laeroc Partners, Inc., Laeroc Brunswig 2000 and
    Triple Net Properties, LLC (included as Exhibit 10.01 to
    the Form 8-K filed by the Company on April 4, 2004 and
    incorporated herein by reference).
|        | 10.32 |         |  | Agreement of Purchase dated as of
    January 21, 2004 by and between 2350 North Belt, L.P.
    and Triple Net Properties, LLC (included as Exhibit 10.01
    to the Form 8-K filed by the Company on April 4, 2004
    and incorporated herein by reference).                                                                              
|        | 10.33 |         |  | First Amendment to Agreement of Purchase dated as
    of February 19, 2004 by and between 2350 North Belt,
    L.P. and Triple Net Properties, LLC (included as
    Exhibit 10.01 to the Form 8-K filed by the Company on
    April 4, 2004 and incorporated herein by reference).                                                          
|        | 10.34 |         |  | Purchase and Sale Agreement and Joint Escrow
    Agreement dated as of March 12, 2004 by and between
    ITW Mortgage Investments II, Inc. and Triple Net
    Properties, LLC (included as Exhibit 10.01 to the
    Form 8-K filed by the Company on April 4, 2004 and
    incorporated herein by reference).                               
|        | 23.1  |         |  | Consent of Deloitte & Touche, LLP                                                                                                                                                                                                                                                                                                           
|        | 23.2  |         |  | Consent of Grant Thornton LLP                                                                                                                                                                                                                                                                                                               
|        | 31.1  |         |  | Certification of Chief Executive Officer,
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                    
|        | 31.2  |         |  | Certification of Chief Financial Officer,
    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 created by
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                          
|        | 32.2  |         |  | Certification of Chief Financial Officer,
    pursuant to 18 U.S.C. Section 1350, as created by
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                          

(b) Reports on Form 8-K:

The following reports on Form 8-K were filed
during the last quarter of the period covered by this annual
report.

Current Report on Form 8-K/ A, dated
July 31, 2003 and filed with the Commission on
October 14, 2003, reporting under Items 2 and 7, the
requisite financial information concerning the acquisitions of
Bay View Plaza in Alameda, California and North Pointe Corporate
Center in Sacramento, California.

Current Report on Form 8-K, dated
October 10, 2003 and filed with the Commission on
October 24, 2003, reporting under Item 2, the
requisite information concerning the acquisition of 824 Market
Street in Wilmington, Delaware.

Current Report on Form 8-K, dated
October 28, 2003 and filed with the Commission on
October 31, 2003, reporting under Item 2, the
requisite information concerning the acquisition of Sutter
Square Galleria in Sacramento, California.

Current Report on Form 8-K, dated
December 5, 2003 and filed with the Commission on
December 12, 2003, reporting under Item 2, the
requisite information concerning the acquisition of One World
Trade Center in Long Beach, California.

Current Report on Form 8-K/ A, dated
October 10, 2003 and filed with the Commission on
December 23, 2003, reporting under Items 2 and 7, the
requisite financial information concerning the acquisitions of
824 Market Street in Wilmington, Delaware, Sutter Square
Galleria in Sacramento, California and One World Trade Center in
Long Beach, California.

(c) See exhibit index included above.

(d) None

63



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the
Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf on April 14, 2004 by the undersigned, thereunto duly
authorized.



| |             
| | ------------
| | G REIT, INC.



| |     |                        
| | --- | -----------------------
| | By: | /s/ ANTHONY W. THOMPSON

| |                                           
| | ------------------------------------------
| |                                           
| | Anthony W. Thompson                       
| | Chief Executive Officer, President
    and
| | Chairman of the Board                     

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.

|                                           |  |                                                 |  |               
|------------------------------------------ |  | ----------------------------------------------- |  | --------------
|Name                                       |  | Title                                           |  | Date          
|                                           |  |                                                 |  |               
|                                          
|/s/ ANTHONY W. THOMPSONAnthony W. Thompson |  | Chief Executive Officer, President and Director |  | April 14, 2004
|                                          
|/s/ DIANA M. LAINGDiana M. Laing           |  | Chief Financial and Accounting Officer          |  | April 14, 2004
|                                          
|/s/ GARY T. WESCOMBEGary T. Wescombe       |  | Director                                        |  | April 14, 2004
|                                          
|/s/ EDWARD A. JOHNSONEdward A. Johnson     |  | Director                                        |  | April 14, 2004
|                                          
|/s/ D. FLEET WALLACED. Fleet Wallace       |  | Director                                        |  | April 14, 2004
|                                          
|/s/ W. BRAND INLOWW. Brand Inlow           |  | Director                                        |  | April 14, 2004

64



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##### Table of Contents



EXHIBIT INDEX

|        |    |         |  |                                                                                                                                                                                                                                                                                                                                                                         
|------- | -- | ------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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).                                                                                                                             
|        | 3  | .1      |  | Third Amended and Restated Articles of
    Incorporation of the Registrant (included as Exhibit 3.6 to
    Amendment No. 3 to our Registration Statement on
    Form S-11 filed on July 7, 2002 (File
    No. 333-76498) and incorporated herein by reference).                                                                                                         
|        | 3  | .2      |  | Amended and Restated Bylaws of the Registrant
    (included as Exhibit 3.4 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).                                                                                                                                
|        | 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      |  | Amended and Restated Real Estate Purchase and
    Sale Agreement dated June 19, 2002 by and between MFPB
    290 West, Ltd. And Triple Net Properties, LLC, as assigned
    to G REIT  55 Highway 290 West, LP
    (included as Exhibit 10.8 to the Current Report on
    Form 8-K filed on January 24, 2003 and incorporated
    herein by reference).                
|        | 10 | .8      |  | 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 | .9      |  | Agreement of Sale and Purchase dated as of
    August 14, 2002 by and between ASP Two Corporate Plaza,
    P.P. and Triple Net Properties, LLC, as amended and reinstated,
    and as assigned to G REIT  Two Corporate Plaza
    (included as Exhibit 10.9 to the Current Report on
    Form 8-K filed on December 13, 2002 and incorporated
    herein by reference).



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##### Table of Contents



|        |    |         |  |                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|Number  |    | Exhibit
|        |    |        
|        | 10 | .10     |  | Purchase Agreement dated October 10, 2002
    between Congress Center, LLC and Triple Net Properties, LLC, as
    assigned to NNN Congress Center, LLC, GREIT  Congress
    Center, LLC and WREIT  Congress Center, LLC (included
    as Exhibit 10.10 to the Current Report on Form 8-K
    filed on January 24, 2003 and incorporated herein by
    reference).              
|        | 10 | .11     |  | Agreement of Sale and Purchase dated
    September 9, 2002 between 1200 N Street, Ltd. And Triple
    Net Properties, LLC, as assigned to GREIT  Atrium
    Building LLC (included as Exhibit 10.12 to Post Effective
    Amendment No. 2 to our Registration Statement on
    Form S-11 filed on March 13, 2003 (File
    No. 333-76498) and incorporated herein by reference).
|        | 10 | .12     |  | Agreement of Sale and Purchase dated
    August 16, 2002 by and between Park Sahara Office Center,
    Ltd., LLC and Triple Net Properties, LLC, as partially assigned
    to G REIT  Park Sahara, LLC (included as
    Exhibit 10.1 to the Current Report on Form 8-K filed
    on March 28, 2003 and incorporated herein by reference).                                       
|        | 10 | .13     |  | Form of Escrow Agreement with PriVest Bank dated
    March   , 2003 (included as Exhibit 10.13 to
    Post Effective Amendment No. 2 to our Registration
    Statement on Form S-11 filed on March 13, 2003 (File
    No. 333-76498) and incorporated herein by reference).                                                                                                      
|        | 10 | .14     |  | Agreement of Purchase and Sale dated as of
    April 22, 2003 by and between Procacci Financial Group,
    Ltd. F/ K/ A Procacci Real Estate Management Co. Ltd. and
    GREIT  DCF Campus, LLC (included as Exhibit 10.1
    to the Current Report on Form 8-K filed on May 5, 2003
    and incorporated herein by reference).                                                 
|        | 10 | .15     |  | Agreement of Purchase and Sale effective as of
    January 10, 2003 by and between CCI-1150 Gemini, Ltd. and
    Triple Net Properties, LLC (included as Exhibit 10.2 to the
    Current Report on Form 8-K filed on May 5, 2003 and
    incorporated herein by reference).                                                                                                      
|        | 10 | .16     |  | Agreement of Purchase and Sale and Joint Escrow
    Instructions dated as of May 6, 2003 between LNR Harbor
    Bay, LLC and Triple Net Properties, LLC (included as
    Exhibit 10.1 to the Current Report on Form 8-K filed
    on August 12, 2003 and incorporated herein by reference).                                                                                      
|        | 10 | .17     |  | Real Property Purchase and Sale Agreement and
    Escrow Instructions dated as of July 2, 2003 by and between
    Government Property Fund IV, LLC and Triple Net Properties,
    LLC (included as Exhibit 10.2 to the Current Report on
    Form 8-K filed on August 12, 2003 and incorporated
    herein by reference).                                                        
|        | 10 | .18     |  | Real Property Purchase and Sale Agreement and
    Escrow Instructions dated as of July 2, 2003 by and between
    Government Property Fund IV, LLC and Triple Net Properties,
    LLC (included as Exhibit 10.02 to the Form 8-K filed
    by the Company on August 12, 2003 and incorporated herein
    by reference).                                                          
|        | 10 | .19     |  | First Amendment to Contract of Sale dated as of
    September 26, 2003 by and between Savannah Teachers
    Properties, Inc. and Triple Net Properties, LLC (included
    as Exhibit 10.01 to the Form 8-K filed by the Company
    on October 24, 2003 and incorporated herein by reference).                                                                                   
|        | 10 | .20     |  | Agreement of Purchase and Sale of Real Property
    and Escrow Instructions dated July 16, 2003 by and between
    RPD Properties II, LLC and Triple Net Properties, LLC
    (included as Exhibit 10.01 to the Form 8-K filed by
    the Company on October 31, 2003 and incorporated herein by
    reference).                                                                  
|        | 10 | .21     |  | Purchase and Sale Agreement and Joint Escrow
    Instructions dated as of October 22, 2003 by and between
    LBWTC Real Estate Partners, LLC and Triple Net Properties, LLC
    (included as Exhibit 10.01 to the Form 8-K filed by
    the Company on December 12, 2003 and incorporated herein by
    reference).                                                             
|        | 10 | .22     |  | Purchase and Sale Agreement and Joint Escrow
    Instructions dated as of September 26, 2003 by and between
    Intrarock 1, LLC and Triple Net Properties, LLC (included
    as Exhibit 10.01 to the Form 8-K filed by the Company
    on January 9, 2004 and incorporated herein by reference).                                                                                
|        | 10 | .23     |  | Purchase and Sale Agreement dated as of
    October 17, 2003 by and between Austin Jack, L.L.C. and
    Triple Net Properties, LLC (included as Exhibit 10.01 to
    the Form 8-K filed by the Company on February 4, 2004
    and incorporated herein by reference).                                                                                                            



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##### Table of Contents



|        |    |         |  |                                                                                                                                                                                                                                                                                                                                             
|------- | -- | ------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|Number  |    | Exhibit
|        |    |        
|        | 10 | .24     |  | First Amendment and Reinstatement of Purchase and
    Sale Agreement dated as of December 8, 2003 by and between
    Austin Jack, L.L.C. and Triple Net Properties, LLC (included as
    Exhibit 10.02 to the Form 8-K filed by the Company on
    February 4, 2004 and incorporated herein by reference).                                  
|        | 10 | .25     |  | Purchase and Sale Agreement dated as of
    December   , 2003 by and between Consortium
    Two  Public Ledger, L.P. and Triple Net Properties,
    LLC (included as Exhibit 10.01 to the Form 8-K filed
    by the Company on February 24, 2004 and incorporated herein
    by reference).                                                
|        | 10 | .26     |  | Letter Agreement (First Amendment) to Purchase
    and Sale Agreement dated as of January 8, 2004 (included as
    Exhibit 10.02 to the Form 8-K filed by the Company on
    February 24, 2004 and incorporated herein by reference).                                                                                                       
|        | 10 | .27     |  | Letter Agreement (Second Amendment) to Purchase
    and Sale Agreement dated as of January 12, 2004 (included
    as Exhibit 10.03 to the Form 8-K filed by the Company
    on February 24, 2004 and incorporated herein by reference).                                                                                                     
|        | 10 | .28     |  | Third Amendment to Purchase and Sale Agreement
    dated as of February 4, 2004 by and between Consortium
    Two  Public Ledger, L.P. and GREIT  Public
    Ledger, LLC (included as Exhibit 10.04 to the Form 8-K
    filed by the Company on February 24, 2004 and incorporated
    herein by reference).                              
|        | 10 | .29     |  | Fourth Amendment to Purchase and Sale Agreement
    dated as of February 11, 2004 by and between Consortium
    Two  Public Ledger, L.P. and GREIT  Public
    Ledger, LLC (included as Exhibit 10.05 to the Form 8-K
    filed by the Company on February 24, 2004 and incorporated
    herein by reference).                            
|        | 10 | .30     |  | Agreement for the Purchase and Sale of Property
    dated as of March 8, 2004 by and between
    20770 Madrona, LLC and Triple Net Properties, LLC (included
    as Exhibit 10.01 to the Form 8-K filed by the Company
    on April 4, 2004 and incorporated herein by reference).                                                          
|        | 10 | .31     |  | Agreement for Purchase and Sale of Real Property
    and Escrow Instructions dated as of February 11, 2004 by
    and between Laeroc Partners, Inc., Laeroc Brunswig 2000 and
    Triple Net Properties, LLC (included as Exhibit 10.01 to
    the Form 8-K filed by the Company on April 4, 2004 and
    incorporated herein by reference).
|        | 10 | .32     |  | Agreement of Purchase dated as of
    January 21, 2004 by and between 2350 North Belt, L.P.
    and Triple Net Properties, LLC (included as Exhibit 10.01
    to the Form 8-K filed by the Company on April 4, 2004
    and incorporated herein by reference).                                                                              
|        | 10 | .33     |  | First Amendment to Agreement of Purchase dated as
    of February 19, 2004 by and between 2350 North Belt,
    L.P. and Triple Net Properties, LLC (included as
    Exhibit 10.01 to the Form 8-K filed by the Company on
    April 4, 2004 and incorporated herein by reference).                                                          
|        | 10 | .34     |  | Purchase and Sale Agreement and Joint Escrow
    Agreement dated as of March 12, 2004 by and between
    ITW Mortgage Investments II, Inc. and Triple Net
    Properties, LLC (included as Exhibit 10.01 to the
    Form 8-K filed by the Company on April 4, 2004 and
    incorporated herein by reference).                               
|        | 23 | .1      |  | Consent of Deloitte & Touche, LLP                                                                                                                                                                                                                                                                                                           
|        | 23 | .2      |  | Consent of Grant Thornton LLP                                                                                                                                                                                                                                                                                                               
|        | 31 | .1      |  | Certification of Chief Executive Officer,
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                    
|        | 31 | .2      |  | Certification of Chief Financial Officer,
    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 created by
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                          
|        | 32 | .2      |  | Certification of Chief Financial Officer,
    pursuant to 18 U.S.C. Section 1350, as created by
    Section 906 of the Sarbanes-Oxley Act of 2002.