**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

*            (Mark      One)*

|  **Trustreet                Properties, Inc.**                                           |
|-----------------------------------------------------------------------------------------------|
| _____________________________________________________________________________________________ |
| (Exact                name of registrant as specified in its                charter)          |

|  **Maryland**                          |   |  **75-2687420**               |
|---------------------------------------------|--------|------------------------------------|
| (State                or other jurisdiction |   | (IRS                Employer       |
| of                incorporation)            |   | Identification                No.) |

|  **450                South Orange Avenue****Orlando,                Florida** |  **32801**                |
|-------------------------------------------------------------------------------------|--------------------------------|
| _________________________________________                                           | ______________________________ |
| (Address                of principal executive offices)                             | (Zip                Code)      |

**(407)      540-2000**

| _____________________________________________________________________________________________ |
|-----------------------------------------------------------------------------------------------|

| Large                accelerated filer x | Accelerated                filer  ̈ | Non-accelerated                Filer  ̈ |
|------------------------------------------|-----------------------------------------|---------------------------------------------|

----

| Part                I - Financial Information                                                          | Page   |
|--------------------------------------------------------------------------------------------------------|--------|
|                                                                                                   |   |
| Item                1. Financial                Statements:                                       |   |
|                                                                                                   |   |
| Condensed                Consolidated Balance Sheets                                                   | 3-4    |
|                                                                                                   |   |
| Condensed                Consolidated Statements of Income                                             | 5      |
|                                                                                                   |   |
| Condensed                Consolidated Statement of                                                     |   |
| Stockholders’                Equity and Comprehensive Income                                     | 6      |
|                                                                                                   |   |
| Condensed                Consolidated Statements of Cash Flows                                         | 7-8    |
|                                                                                                   |   |
| Notes                to Condensed Consolidated Financial                                               |   |
| Statements                                                                                             | 9-20   |
|                                                                                                   |   |
| Item                2. Management’s                Discussion and Analysis of Financial     | 21-34  |
| Condition                and Results of Operations                                                     |   |
|                                                                                                   |   |
| Item                3. Quantitative                and Qualitative Disclosures About              | 34     |
| Market                Risk                                                                             |   |
|                                                                                                   |   |
| Item                4. Controls                and Procedures                                     | 34     |
|                                                                                                   |   |
| Part                II - Other Information                                                             |   |
|                                                                                                   |   |
| Item                1. Legal                Proceedings                                           | 35     |
|                                                                                                   |   |
| Item                1A. Risk                Factors                                               | 35     |
|                                                                                                   |   |
| Item                2. Unregistered                Sales of Equity Securities and Use of Proceeds | 35     |
|                                                                                                   |   |
| Item                3. Defaults                Upon Senior Securities                             | 35     |
|                                                                                                   |        |
| Item                4. Submission                of Matters to a Vote of Security Holders         | 35-36  |
|                                                                                                   |   |
| Item                5. Other                Information                                           | 36     |
|                                                                                                   |   |
| Item                6. Exhibits                                                                   | 37-39  |
|                                                                                                   |   |

----

**Item      1. Financial Statements.**

|                                                                                                                             |   | June                30, 2006 |      |  December                31, 2005 |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------|----------------------------------------|--------|
| ASSETS                                                                                                                           |   |                         |      |                              |   |
|                                                                                                                             |   |                         |      |                              |   |
| Real                estate investment properties                                                                                 |   | $                            | 1,757,151 |                                   | $      | 1,726,493 |   |
| Net                investment in capital leases                                                                                  |   |                         | 144,825   |                                   |   | 147,995 |   |
| Real                estate held for sale                                                                                         |   |                         | 221,366   |                                   |   | 242,777 |   |
| Mortgage,                equipment and other notes receivable, net of allowanceof                $3,286 and $5,706, respectively |   |                         | 84,115    |                                   |   | 88,239 |   |
| Cash                and cash equivalents                                                                                         |   |                         | 15,987    |                                   |   | 20,459 |   |
| Restricted                cash                                                                                                   |   |                         | 37,524    |                                   |   | 32,465 |   |
| Receivables,                less allowance for doubtful accountsof                $2,764 and $2,394, respectively                |   |                         | 9,523     |                                   |   | 7,665 |   |
| Accrued                rental income                                                                                             |   |                         | 40,148    |                                   |   | 34,295 |   |
| Intangible                lease costs, net of accumulated amortization of $15,082and                $9,628, respectively         |   |                         | 75,538    |                                   |   | 77,716 |   |
| Goodwill                                                                                                                         |   |                         | 235,895   |                                   |   | 235,895 |   |
| Other                assets                                                                                                      |   |                         | 70,475    |                                   |   | 69,481 |   |
|                                                                                                                             |   | $                            | 2,692,547 |                                   | $      | 2,683,480 |   |
|                                                                                                                             |   |                         |      |                                   |   |   |   |
| LIABILITIES                AND STOCKHOLDERS’ EQUITY                                                                        |   |                         |      |                                   |   |   |   |
|                                                                                                                             |   |                         |      |                                   |   |   |   |
| Revolver                                                                                                                         |   | $                            | 101,500   |                                   | $      | 55,000 |   |
| Notes                payable                                                                                                     |   |                         | 576,887   |                                   |   | 579,002 |   |
| Mortgage                warehouse facilities                                                                                     |   |                         | 145,163   |                                   |   | 122,722 |   |
| Bonds                payable                                                                                                     |   |                         | 705,735   |                                   |   | 742,201 |   |
| Below                market lease liability, net of accumulated amortization of $5,914                and $3,772, respectively   |   |                         | 29,754    |                                   |   | 31,649 |   |
| Due                to related parties                                                                                            |   |                         | 354       |                                   |   | 232 |   |
| Other                payables                                                                                                    |   |                         | 49,584    |                                   |   | 56,097 |   |
| Total                liabilities                                                                                                 |   | $                            | 1,608,977 |                                   | $      | 1,586,903 |   |

----

|                                                                                                                                                                                                                                                                                                                                               |   | June                30, 2006 |      |  December                31, 2005 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                               |   |                         |      |                              |   |
| Minority                interests                                                                                                                                                                                                                                                                                                                  |   | $                            | 4,230     |                                   | $      | 4,077 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |                         |      |                                   |   |   |   |
| Commitments                and contingencies (Note 11)                                                                                                                                                                                                                                                                                             |   |                         |      |                                   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                               |   |                         |      |                                   |   |   |   |
| Stockholders’                equity:                                                                                                                                                                                                                                                                                                         |   |                         |      |                                   |   |   |   |
| Preferred                stock, $0.001 par value per share: 84,500 shares authorized and                unissued                                                                                                                                                                                                                                   |   |                         | —   |                                   |   | — |   |
| Preferred                stock, $0.001 par value per share: Series A Cumulative Convertible                Preferred Stock - 8,000 shares authorized, 7,834 shares issued and                outstanding (aggregate liquidation value of $195,855)                                                                                                 |   |                         | 8         |                                   |   | 8 |   |
| Preferred                stock, $0.001 par value per share: Series C Redeemable                Convertible Preferred Stock - 7,500 shares authorized, 7,244 shares                issued                and outstanding (aggregate liquidation value of $181,101)                                                                                  |   |                         | 7         |                                   |   | 7 |   |
| Excess                shares, $0.001 par value per share. 400,000 shares authorized and                unissued                                                                                                                                                                                                                                    |   |                         | —   |                                   |   | — |   |
| Common                stock, $0.001 par value per share; 300,000 shares authorized,                67,548 and 67,375 shares issued at June 30, 2006 and December 31,                2005,                respectively, and 67,527 and 67,357 shares outstanding at June                30,                2006 and December 31, 2005, respectively |   |                         | 67        |                                   |   | 67 |   |
| Capital                in excess of par value                                                                                                                                                                                                                                                                                                      |   |                         | 1,489,960 |                                   |   | 1,489,405 |   |
| Accumulated                other comprehensive income                                                                                                                                                                                                                                                                                              |   |                         | 9,043     |                                   |   | 3,547 |   |
| Accumulated                distributions in excess of net income                                                                                                                                                                                                                                                                                   |   |                         | (419,745  | )                                      |   | (400,534 | ) |
| Total                stockholders’ equity                                                                                                                                                                                                                                                                                                    |   |                         | 1,079,340 |                                   |   | 1,092,500 |   |
|                                                                                                                                                                                                                                                                                                                                               |   |                         |      |                                   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                               |   | $                            | 2,692,547 |                                   | $      | 2,683,480 |   |

----

|                                                                                                                                                            |   | Quarter                ended June 30, |   | Six                months ended June 30, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|------------------------------------------|--------|
|                                                                                                                                                            |   | 2006                                  |   | 2005                                     |   | 2006 |   | 2005 |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |
| Revenues:                                                                                                                                                       |   |                                  |   |                                     |   |   |   |   |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |
| Rental                income from operating leases                                                                                                              |   | $                                     | 46,656 |                                     | $      | 38,296 |   | $ | 93,768 |   | $ | 60,728 |   |
| Earned                income from capital leases                                                                                                                |   |                                  | 3,048  |                                     |   | 3,170 |   |   | 6,107 |   |   | 5,830 |   |
| Interest                income from mortgage, equipment and other notes receivables                                                                             |   |                                  | 1,961  |                                     |   | 6,554 |   |   | 3,945 |   |   | 12,835 |   |
| Investment                and interest income                                                                                                                   |   |                                  | 339    |                                     |   | 448 |   |   | 610 |   |   | 993 |   |
| Other                income                                                                                                                                     |   |                                  | 2,735  |                                     |   | 1,686 |   |   | 6,319 |   |   | 2,882 |   |
|                                                                                                                                                            |   |                                  | 54,739 |                                     |   | 50,154 |   |   | 110,749 |   |   | 83,268 |   |
| Expenses:                                                                                                                                                       |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| General                operating and administrative                                                                                                             |   |                                  | 7,259  |                                     |   | 10,041 |   |   | 15,068 |   |   | 20,987 |   |
| Interest                expense                                                                                                                                 |   |                                  | 25,412 |                                     |   | 24,868 |   |   | 50,416 |   |   | 41,759 |   |
| Property                expenses, state and other taxes                                                                                                         |   |                                  | 2,278  |                                     |   | 1,947 |   |   | 5,680 |   |   | 3,098 |   |
| Depreciation                and amortization                                                                                                                    |   |                                  | 9,757  |                                     |   | 8,487 |   |   | 20,171 |   |   | 13,436 |   |
| Impairment                provisions on assets                                                                                                                  |   |                                  | 950    |                                     |   | 125 |   |   | 1,637 |   |   | 140 |   |
|                                                                                                                                                            |   |                                  | 45,656 |                                     |   | 45,468 |   |   | 92,972 |   |   | 79,420 |   |
| Income                from continuing operations before minority interest and equity in                earnings                of unconsolidated joint ventures |   |                                  | 9,083  |                                     |   | 4,686 |   |   | 17,777 |   |   | 3,848 |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Minority                interest                                                                                                                                |   |                                  | (140   | )                                        |   | (734 | ) |   | (372 | ) |   | (1,549 | ) |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Equity                in earnings/(loss) of unconsolidated joint ventures                                                                                       |   |                                  | (25    | )                                        |   | 32 |   |   | 11 |   |   | 62 |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Income                from continuing operations                                                                                                                |   |                                  | 8,918  |                                     |   | 3,984 |   |   | 17,416 |   |   | 2,361 |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations, after income taxes                                                                                          |   |                                  | 12,930 |                                     |   | 14,142 |   |   | 21,729 |   |   | 19,215 |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Gain/(loss)                on sale of assets                                                                                                                    |   |                                  | (136   | )                                        |   | 23 |   |   | 523 |   |   | 23 |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                                                                       |   |                                  | 21,712 |                                     |   | 18,149 |   |   | 39,668 |   |   | 21,599 |   |
| Dividends                to preferred stockholders                                                                                                              |   |                                  | (7,176 | )                                        |   | (7,176 | ) |   | (14,352 | ) |   | (10,099 | ) |
| Net                income allocable to common stockholders                                                                                                      |   | $                                     | 14,536 |                                     | $      | 10,973 |   | $ | 25,316 |   | $ | 11,500 |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Basic                and diluted net income per share:                                                                                                          |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Income/(loss)                from continuing operations allocable to common                stockholders                                                         |   | $                                     | 0.03   |                                     | $      | (0.05 | ) | $ | 0.06 |   | $ | (0.15 | ) |
| Income                from discontinued operations                                                                                                              |   |                                  | 0.19   |                                     |   | 0.24 |   |   | 0.32 |   |   | 0.38 |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Basic                and diluted net income per share                                                                                                           |   | $                                     | 0.22   |                                     | $      | 0.19 |   | $ | 0.38 |   | $ | 0.23 |   |
|                                                                                                                                                            |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Weighted                average number of shares of common stockoutstanding                                                                                     |   |                                  |   |                                     |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                           |   |                                  | 67,278 |                                     |   | 57,908 |   |   | 67,260 |   |   | 50,922 |   |
| Diluted                                                                                                                                                         |   |                                  | 67,280 |                                     |   | 57,908 |   |   | 67,278 |   |   | 50,922 |   |

----

|                                                                                                              |   | Preferred                  StockSeries                  A |    | Preferred                  StockSeries                  C |   | Common                  Stock    |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |
|-------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|---------|-----------------------------------------------------------|--------|----------------------------------|--------|----------|---------|----------------------------------|--------|----------|--------|---------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------|--------|
|                                                                                                              |   | Number                  ofshares                          |    | Parvalue                                                  |   | Number                  ofshares |   | Parvalue |    | Number                  ofShares |   | Parvalue |   | Capital                  inexcess                  ofpar                  value |    | Accumulated                  distributionsin                  excessof                  netincome |   | Accumulated                  othercompre-hensiveincome |   |  Total |   | Compre-hensiveincome |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |
| Balance                  at December 31, 2005                                                                     |   |                                                      | 7,834   |                                                      | $      | 8                                |   |     | 7,244   |                             | $      | 7        |   |                                                                            | 67,357  |                                                                                              | $      | 67 |   | $ | 1,489,405 |   | $ | (400,534 | ) | $ | 3,547 |   | $ | 1,092,500 |   |   |   |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                                                       |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | — |                                                                                              |   | — |   |   | — |   |   | 39,668 |   |   | — |   |   | 39,668 |   | $ | 39,668 |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                  of deferred gain on terminated swap                                                 |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | — |                                                                                              |   | — |   |   | — |   |   | — |   |   | (198 | ) |   | (198 | ) |   | (198 | ) |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reclassification                  of other than temporary loss on                  statement of income            |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | — |                                                                                              |   | — |   |   | — |   |   | — |   |   | 585 |   |   | 585 |   |   | 585 |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                  period adjustment to recognize change in fair value of cash flow                  hedges |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | — |                                                                                              |   | — |   |   | — |   |   | — |   |   | 5,109 |   |   | 5,109 |   |   | 5,109 |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  comprehensive income                                                                       |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | — |                                                                                              |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   | $ | 45,164 |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                  declared on common stock                                                               |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | — |                                                                                              |   | — |   |   | — |   |   | (44,527 | ) |   | — |   |   | (44,527 | ) |   |   |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                  declared on preferred stock                                                            |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | — |                                                                                              |   | — |   |   | — |   |   | (14,352 | ) |   | — |   |   | (14,352 | ) |   |   |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                  of restricted stock to directors andemployees,                  net of forfeitures      |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | 170     |                                                                                              |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   |   |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                  of deferred compensation                                                            |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | — |                                                                                              |   | — |   |   | 537 |   |   | — |   |   | — |   |   | 537 |   |   |   |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                  issuance cost adjustment                                                                   |   |                                                      | — |                                                      |   | —                          |   |     | — |                             |   | —  |   |                                                                            | — |                                                                                              |   | — |   |   | 18 |   |   | — |   |   | — |   |   | 18 |   |   |   |   |
|                                                                                                              |   |                                                      |    |                                                      |   |                             |   |     |    |                             |   |     |   |                                                                            |    |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at June 30, 2006                                                                         |   |                                                      | 7,834   |                                                      | $      | 8                                |   |     | 7,244   |                             | $      | 7        |   |                                                                            | 67,527  |                                                                                              | $      | 67 |   | $ | 1,489,960 |   | $ | (419,745 | ) | $ | 9,043 |   | $ | 1,079,340 |   |   |   |   |

----

|                                                                                                                                                                   |   | Six                months ended June 30, |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                                                                                                                   |   | 2006                                     |    |  2005 |   |
| Cash                flows from operating activities:                                                                                                                   |   |                                     |    |    |   |
|                                                                                                                                                                   |   |                                     |    |    |   |
| Net                income                                                                                                                                              |   | $                                        | 39,668  |   | $ | 21,599 |   |
| Adjustments                to reconcile net income to net cashprovided                by operating activities, net of effects of business                acquisitions: |   |                                     |    |   |   |   |   |
| Depreciation                and amortization on real estate assets                                                                                                     |   |                                     | 18,967  |   |   | 13,539 |   |
| Depreciation                and amortization on non-real estate assets                                                                                                 |   |                                     | 1,518   |   |   | 1,187 |   |
| Amortization                of above and below market leases                                                                                                           |   |                                     | 414     |   |   | (40 | ) |
| Amortization                of deferred financing costs                                                                                                                |   |                                     | 4,843   |   |   | 4,716 |   |
| Impairments                and provisions on assets                                                                                                                    |   |                                     | 1,898   |   |   | 500 |   |
| Gain                on sales of assets                                                                                                                                 |   |                                     | (8,102  | ) |   | (867 | ) |
| Stock                based compensation                                                                                                                                |   |                                     | 537     |   |   | 2,255 |   |
| Increase                in accrued rental income                                                                                                                       |   |                                     | (6,002  | ) |   | (3,606 | ) |
| Amortization                of investment in capital leases                                                                                                            |   |                                     | 3,225   |   |   | 2,399 |   |
| Changes                in real estate held for sale                                                                                                                    |   |                                     | (15,398 | ) |   | 1,192 |   |
| Changes                in other assets                                                                                                                                 |   |                                     | (2,052  | ) |   | (11,153 | ) |
| Changes                in other payables and due to related parties                                                                                                    |   |                                     | (5,569  | ) |   | 19,723 |   |
| Net                cash provided by operating activities                                                                                                               |   |                                     | 33,947  |   |   | 51,444 |   |
|                                                                                                                                                                   |   |                                     |    |   |   |   |   |
| Cash                flows from investing activities:                                                                                                                   |   |                                     |    |   |   |   |   |
| Additions                to real estate investment properties and intangible assets                                                                                    |   |                                     | (47,249 | ) |   | (88,089 | ) |
| Proceeds                from sale of assets                                                                                                                            |   |                                     | 18,044  |   |   | 8,165 |   |
| Decrease                in restricted cash                                                                                                                             |   |                                     | 11,018  |   |   | 673 |   |
| Acquisition                of Income Funds                                                                                                                             |   |                                     | — |   |   | (449,997 | ) |
| Cash                acquired through merger                                                                                                                            |   |                                     | — |   |   | 43,473 |   |
| Payment                of merger costs for USRP reverse merger                                                                                                         |   |                                     | — |   |   | (13,072 | ) |
| Collection                on mortgage, equipment and other notes receivable                                                                                            |   |                                     | 10,130  |   |   | 13,930 |   |
| Other                                                                                                                                                                  |   |                                     | 161     |   |   | — |   |
| Net                cash used in investing activities                                                                                                                   |   |                                     | (7,896  | ) |   | (484,917 | ) |

----

|                                                                                                    |   | Six                months ended June 30, |    |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                                                    |   | 2006                                     |    |  2005 |   |
| Cash                flows from financing activities:                                                    |   |                                     |    |    |   |
| Proceeds                from borrowings on revolver, term loan and note payable                         |   | $                                        | 134,521 |   | $ | 1,080,098 |   |
| Payment                on revolver and note payable                                                     |   |                                     | (90,070 | ) |   | (988,875 | ) |
| Proceeds                from borrowings on mortgage warehouse facilities                                |   |                                     | 88,781  |   |   | 91,839 |   |
| Payments                on mortgage warehouse facilities                                                |   |                                     | (66,340 | ) |   | (90,230 | ) |
| Proceeds                from issuance of senior notes                                                   |   |                                     | — |   |   | 250,000 |   |
| Proceeds                from issuance of bonds                                                          |   |                                     | — |   |   | 275,000 |   |
| Retirement                of bonds payable                                                              |   |                                     | (36,525 | ) |   | (34,001 | ) |
| Payment                of bond issuance and debt refinancing costs                                      |   |                                     | (981    | ) |   | (28,306 | ) |
| Proceeds                from termination of hedge                                                       |   |                                     | — |   |   | 1,685 |   |
| Proceeds                from exercised stock options                                                    |   |                                     | — |   |   | 475 |   |
| Retirement                of convertible preferred stock                                                |   |                                     | — |   |   | (32,500 | ) |
| Repayment                of loans from stockholders                                                     |   |                                     | — |   |   | (33,860 | ) |
| Acquisition                of minority interest                                                         |   |                                     | — |   |   | (655 | ) |
| Distributions                to minority interest                                                       |   |                                     | (1,063  | ) |   | (1,062 | ) |
| Reimbursement/(payment)                of stock issuance costs                                          |   |                                     | 18      |   |   | (1,543 | ) |
| Distributions                to common stockholders                                                     |   |                                     | (44,512 | ) |   | (36,961 | ) |
| Distributions                to preferred stockholders                                                  |   |                                     | (14,352 | ) |   | (12,088 | ) |
| Net                cash provided by/(used in) financing activities                                      |   |                                     | (30,523 | ) |   | 439,016 |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Net                increase/(decrease) in cash and cash equivalents                                     |   |                                     | (4,472  | ) |   | 5,543 |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Cash                and cash equivalents at beginning of period                                         |   |                                     | 20,459  |   |   | 22,744 |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Cash                and cash equivalents at end of period                                               |   | $                                        | 15,987  |   | $ | 28,287 |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Supplemental                disclosures of cash flow information:                                       |   |                                     |    |   |   |   |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Interest                paid                                                                            |   | $                                        | 48,795  |   | $ | 33,745 |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Income                taxes paid                                                                        |   | $                                        | 3,133   |   | $ | 2,899 |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Supplemental                disclosures of non-cash investing and financing                activities:  |   |                                     |    |   |   |   |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Redemption                of minority interest in lieu of payment on accounts                receivable |   | $                                        | — |   | $ | 1,798 |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Note                receivable accepted in exchange for sale of property                                |   | $                                        | 8,246   |   | $ | — |   |
|                                                                                                    |   |                                     |    |   |   |   |   |
| Distributions                declared and unpaid at June 30                                             |   | $                                        | 7,428   |   | $ | 6,371 |   |

----

| 1. | Organization                and Nature of Business: |
|----|-----------------------------------------------------|

| 2. | Basis                of Presentation: |
|----|---------------------------------------|

----

| 2. | Basis                of Presentation - Continued: |
|----|---------------------------------------------------|

|                                                             |   |  (in                thousands)Six                months ended June                30, 2005 |    |
|------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|---------|
|                                                             |   |                                                                                            |    |   |
| Revenues                                                         |   | $                                                                                               | 104,827 |   |
|                                                             |   |                                                                                            |    |   |
| Net                income/(loss)                                 |   | $                                                                                               | 15,454  |   |
| Dividends                to preferred stockholders               |   |                                                                                            | (14,351 | ) |
| Net                income allocable to common stockholders       |   | $                                                                                               | 1,103   |   |
|                                                             |   |                                                                                            |    |   |
| Basic                and diluted earnings/(loss) per share       |   | $                                                                                               | 0.02    |   |
|                                                             |   |                                                                                            |    |   |
| Basic                weighted average shares outstanding         |   |                                                                                            | 57,789  |   |
|                                                             |   |                                                                                            |    |   |
| Diluted                weighted average shares  outstanding |   |                                                                                            | 57,789  |   |

|   | During                the six months ended June 30, 2005, the Company recorded non-recurring                charges of approximately $11.4 million. These one-time expenses consisted                of a non-cash tax charge of $2.7 million and $8.7 million of expenses                related to the Merger. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 2. | Basis                of Presentation - Continued: |
|----|---------------------------------------------------|

| 3. | New                Accounting Standards: |
|----|------------------------------------------|

*8,*
* *
*.      *

| 4. | Real                Estate Held for Sale: |
|----|-------------------------------------------|

----

| 4. | Real                Estate Held for Sale -                Continued: |
|----|----------------------------------------------------------------------|

|                                                                 |   | (In                thousands)          |    |
|----------------------------------------------------------------------|--------|----------------------------------------|---------|
|                                                                 |   | Quarters                ended June 30, |    | Six                months ended June 30, |   |
|                                                                 |   | 2006                                   |    | 2005 |   | 2006 |   | 2005 |   |
|                                                                 |   |                                   |    |   |   |   |   |   |   |
| Rental                income                                         |   | $                                      | 3,757   |   | $ | 3,548 |   | $ | 7,879 |   | $ | 6,795 |   |
| Food,                beverage and retail revenues                    |   |                                   | — |   |   | 15,215 |   |   | — |   |   | 20,460 |   |
| Food,                beverage and retail expenses                    |   |                                   | — |   |   | (14,963 | ) |   | — |   |   | (19,597 | ) |
| Other                property related expenses                       |   |                                   | (451    | ) |   | (661 | ) |   | (555 | ) |   | (1,610 | ) |
| Interest                expense                                      |   |                                   | (2,188  | ) |   | (1,249 | ) |   | (4,214 | ) |   | (2,076 | ) |
| Impairment                provisions                                 |   |                                   | (73     | ) |   | (167 | ) |   | (215 | ) |   | (359 | ) |
|                                                                 |   |                                   |    |   |   |   |   |   |   |   |   |   |   |
| Earnings                from discontinued operations                 |   |                                   | 1,045   |   |   | 1,723 |   |   | 2,895 |   |   | 3,613 |   |
|                                                                 |   |                                   |    |   |   |   |   |   |   |   |   |   |   |
| Sales                of real estate                                  |   |                                   | 105,790 |   |   | 84,036 |   |   | 160,584 |   |   | 141,270 |   |
| Cost                of real estate sold                              |   |                                   | (91,941 | ) |   | (71,803 | ) |   | (139,179 | ) |   | (119,260 | ) |
|                                                                 |   |                                   |    |   |   |   |   |   |   |   |   |   |   |
| Gain                on disposal of discontinued operations           |   |                                   | 13,849  |   |   | 12,233 |   |   | 21,405 |   |   | 22,010 |   |
|                                                                 |   |                                   |    |   |   |   |   |   |   |   |   |   |   |
| Income                tax benefit/(provision)                        |   |                                   | (1,964  | ) |   | 186 |   |   | (2,571 | ) |   | (6,408 | ) |
|                                                                 |   |                                   |    |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations, after income tax |   | $                                      | 12,930  |   | $ | 14,142 |   | $ | 21,729 |   | $ | 19,215 |   |

|  5. |  Borrowings: |
|----------|-------------------|

| 6. | Income                Tax: |
|----|----------------------------|

----

| 6. | Income                Tax: - Continued |
|----|----------------------------------------|

| 7. | Related                Party Transactions: |
|----|--------------------------------------------|

| 8. | Flexible                Incentive Plan: |
|----|-----------------------------------------|

|                                                  |   |  Number                of shares(in                thousands) |   | Weighted                average fair value at grant date |   |
|-------------------------------------------------------|--------|--------------------------------------------------------------------|--------|----------------------------------------------------------|--------|
|                                                  |   |                                                               |   |                                                     |   |   |   |
| Non-vested                shares at beginning of year |   |                                                               | 120    |                                                     | $      | 16.98 |   |
| Granted                                               |   |                                                               | 172    |                                                     | $      | 14.78 |   |
| Vested                                                |   |                                                               | (48    | )                                                        | $      | 16.28 |   |
| Forfeited                                             |   |                                                               | (2     | )                                                        | $      | 17.20 |   |
|                                                  |   |                                                               |   |                                                     |   |   |   |
| Non-vested                shares at June 30, 2006     |   |                                                               | 242    |                                                     | $      | 15.55 |   |

----

| 8. | Flexible                Incentive Plan - Continued: |
|----|-----------------------------------------------------|

| 9. | Earnings                Per Share: |
|----|------------------------------------|

|   | For                the quarters and six months ended June 30, 2006 and 2005, basic and                diluted earnings per common share for income (loss) from continuing                operations available to common shareholders has been computed as                follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                               |   | Quarter                ended June 30, |    |      |   | Six                months ended June 30, |   |   |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|-----------|--------|------------------------------------------|--------|--------|---------|
|                                                                                                                                               |   | 2006                                  |    |      |   | 2005                                     |   |   |    | 2006 |   |   |   | 2005 |   |   |   |
|                                                                                                                                               |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |
| Numerator:                                                                                                                                         |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |
| Income                from continuing operations                                                                                                   |   | $                                     | 8,918   |      |   |                                     |   | $      | 3,984   |   |   |   |   | $ | 17,416 |   |   |   |   | $ | 2,361 |   |   |   |   |
| Gain/(loss)                on sale of assets                                                                                                       |   |                                  | (136    | )         |   |                                     |   |   | 23      |   |   |   |   |   | 523 |   |   |   |   |   | 23 |   |   |   |   |
| Less:                Preferred stock dividends                                                                                                     |   |                                  | (7,176  | )         |   |                                     |   |   | (7,176  | ) |   |   |   |   | (14,352 | ) |   |   |   |   | (10,099 | ) |   |   |   |
|                                                                                                                                               |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income/(loss)                from continuing operations available to common                stockholders                                            |   | $                                     | 1,606   |      |   |                                     |   | $      | (3,169  | ) |   |   |   | $ | 3,587 |   |   |   |   |   | (7,715 | ) |   |   |   |
|                                                                                                                                               |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                                                                                                                       |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                weighted average number of shares outstanding                                                                                 |   |                                  | 67,278  |      |   |                                     |   |   | 57,908  |   |   |   |   |   | 67,260 |   |   |   |   |   | 50,922 |   |   |   |   |
|                                                                                                                                               |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect                of dilutive securities:                                                                                                      |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                option                                                                                                                        |   |                                  | — |  (1) |   |                                     |   |   | — |  (3) |   |   |   |   | 1 |   |   |   |   |   | — |  (3)  |   |   |   |
| Restricted                stock                                                                                                                    |   |                                  | 2       |  (1) |   |                                     |   |   | — |  (3) |   |   |   |   | 17 |   |   |   |   |   | — |  (3) |   |   |   |
| Warrants                                                                                                                                           |   |                                  | — |  (2) |   |                                     |   |   | — |  (3) |   |   |   |   | — |  (2) |   |   |   |   | — |  (3) |   |   |   |
| Convertible                preferred stock                                                                                                         |   |                                  | — |  (2) |   |                                     |   |   | — |  (3) |   |   |   |   | — |  (2) |   |   |   |   | — |  (3) |   |   |   |
| Diluted                weighted average shares outstanding                                                                                         |   |                                  | 67,280  |      |   |                                     |   |   | 57,908  |   |   |   |   |   | 67,278 |   |   |   |   |   | 50,922 |   |   |   |   |
|                                                                                                                                               |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                               |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                and diluted income/(loss) from continuing operations allocable to                common                stockholders per share |   | $                                     | 0.03    |      |   |                                     |   | $      | (0.05   | ) |   |   |   | $ | 0.06 |   |   |   |   | $ | (0.15 | ) |   |   |   |
|                                                                                                                                               |   |                                  |    |      |   |                                     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|   | (1) | For                the quarter ended June 30, 2006, the Company excluded stock options                to                purchase approximately 0.012 million shares of common stock and                approximately 0.2 million shares of restricted common stock from                the                computation of diluted earnings per share as these common stock                equivalents were anti-dilutive. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 9. | Earnings                Per Share - Continued: |
|----|------------------------------------------------|

|   | (2) | For                the quarter and six months ended June 30, 2006, the Company excluded                Series A and Series C Preferred Stock convertible into 16.6 million                shares                of common stock and warrants to purchase 0.4 million shares of common                stock from the computation of diluted earnings per share as these                common                stock equivalents were                anti-dilutive. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | For                the quarter and six months ended June 30, 2005, the Company excluded                stock                options to purchase approximately 0.012 million shares of common                stock,                warrants to purchase 0.4 million shares of common stock, approximately                0.12 million shares of restricted common stock and Series A and Series                C                Preferred Stock convertible into 16.6 million shares of common stock                from                the computation of diluted earnings per share as these common stock                equivalents were anti-dilutive. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                       |   | (in                thousands)Six                months endedJune                30, 2005 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                       |   |                                                                                     |   |
| Historical                income (loss) from continuing operations and gain on sale of assets                less                preferred stock dividends |   | $                                                                                        | (7,715 | ) |
| Proforma                adjustment for Series C Preferred Stock dividends                                                                                  |   |                                                                                     | (2,264 | ) |
| Proforma                income (loss) from continuing operations allocable to common                stockholders                                           |   | $                                                                                        | (9,979 | ) |
|                                                                                                                                                       |   |                                                                                     |   |   |
| Basic                and diluted proforma earnings (loss) per share:                                                                                       |   |                                                                                     |   |   |
|                                                                                                                                                       |   |                                                                                     |   |   |
| From                continuing operations                                                                                                                  |   | $                                                                                        | (0.20  | ) |
| From                discontinued operations                                                                                                                |   |                                                                                     | 0.38   |   |
| Total                                                                                                                                                      |   | $                                                                                        | 0.18   |   |

| 10. | Segment                Information: |
|-----|-------------------------------------|

----

| 10. | Segment                Information - Continued: |
|-----|-------------------------------------------------|

|                                                                  |   | Quarter                ended June 30, 2006(In                thousands) |   |
|-----------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                  |   | Real                estate segment                                      |   | Specialty                finance segment |   | Other |   | ConsolidatedTotals |   |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |
| Revenues                                                              |   | $                                                                       | 52,830 |   | $ | 3,469 |   | $ | (1,560 | ) | $ | 54,739 |   |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                             |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| General                operating and administrative                   |   |                                                                    | 3,326  |   |   | 5,064 |   |   | (1,131 | ) |   | 7,259 |   |
| Interest                expense                                       |   |                                                                    | 23,362 |   |   | 2,127 |   |   | (77 | ) |   | 25,412 |   |
| Property                expenses, state and other taxes               |   |                                                                    | 2,546  |   |   | 60 |   |   | (328 | ) |   | 2,278 |   |
| Depreciation                and amortization                          |   |                                                                    | 8,788  |   |   | 969 |   |   | — |   |   | 9,757 |   |
| Impairment                provisions on assets                        |   |                                                                    | 950    |   |   | — |   |   | — |   |   | 950 |   |
| Minority                interest net of equity in earnings            |   |                                                                    | 161    |   |   | 4 |   |   | — |   |   | 165 |   |
|                                                                  |   |                                                                    | 39,133 |   |   | 8,224 |   |   | (1,536 | ) |   | 45,821 |   |
| Discontinued                operations:                               |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations, net of income tax |   |                                                                    | 5,312  |   |   | 7,618 |   |   | — |   |   | 12,930 |   |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Loss                on sale of assets                                 |   |                                                                    | (136   | ) |   | — |   |   | — |   |   | (136 | ) |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net                income/(loss)                                      |   | $                                                                       | 18,873 |   | $ | 2,863 |   | $ | (24 | ) | $ | 21,712 |   |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |

----

| 10. | Segment                Information - (Continued): |
|-----|---------------------------------------------------|

|                                                                  |   | Quarter                ended June 30, 2005(In                thousands) |   |
|-----------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                  |   | Real                estate segment                                      |   | Specialty                finance segment |   | Other |   | ConsolidatedTotals |   |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |
| Revenues                                                              |   | $                                                                       | 48,898 |   | $ | 2,817 |   | $ | (1,561 | ) | $ | 50,154 |   |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                             |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| General                operating and administrative                   |   |                                                                    | 3,829  |   |   | 7,317 |   |   | (1,105 | ) |   | 10,041 |   |
| Interest                expense                                       |   |                                                                    | 23,354 |   |   | 1,590 |   |   | (76 | ) |   | 24,868 |   |
| Property                expenses, state and other taxes               |   |                                                                    | 2,050  |   |   | 170 |   |   | (273 | ) |   | 1,947 |   |
| Depreciation                and amortization                          |   |                                                                    | 8,203  |   |   | 284 |   |   | — |   |   | 8,487 |   |
| Impairment                provisions on assets                        |   |                                                                    | 66     |   |   | 59 |   |   | — |   |   | 125 |   |
| Minority                interest net of equity in earnings            |   |                                                                    | 64     |   |   | 638 |   |   | — |   |   | 702 |   |
|                                                                  |   |                                                                    | 37,566 |   |   | 10,058 |   |   | (1,454 | ) |   | 46,170 |   |
| Discontinued                operations:                               |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations, net of income tax |   |                                                                    | 2,474  |   |   | 11,668 |   |   | — |   |   | 14,142 |   |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Gain                on sale of assets                                 |   |                                                                    | 23     |   |   | — |   |   | — |   |   | 23 |   |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net                income/(loss)                                      |   | $                                                                       | 13,829 |   | $ | 4,427 |   | $ | (107 | ) | $ | 18,149 |   |
|                                                                  |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |

----

| 10. | Segment                Information - (Continued): |
|-----|---------------------------------------------------|

|                                                                  |   | Six                months ended June 30, 2006(In                thousands) |      |
|-----------------------------------------------------------------------|--------|----------------------------------------------------------------------------|-----------|
|                                                                  |   | Real                estate segment                                         |      | Specialty                finance segment |   | Other |   | ConsolidatedTotals |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |
| Revenues                                                              |   | $                                                                          | 106,426   |   | $ | 7,130 |   | $ | (2,807 | ) | $ | 110,749 |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                             |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| General                operating and administrative                   |   |                                                                       | 6,820     |   |   | 10,536 |   |   | (2,288 | ) |   | 15,068 |   |
| Interest                expense                                       |   |                                                                       | 46,424    |   |   | 4,159 |   |   | (167 | ) |   | 50,416 |   |
| Property                expenses, state and other taxes               |   |                                                                       | 5,960     |   |   | 48 |   |   | (328 | ) |   | 5,680 |   |
| Depreciation                and amortization                          |   |                                                                       | 18,702    |   |   | 1,469 |   |   | — |   |   | 20,171 |   |
| Impairment                provisions on assets                        |   |                                                                       | 1,637     |   |   | — |   |   | — |   |   | 1,637 |   |
| Minority                interest net of equity in earnings            |   |                                                                       | 361       |   |   | — |   |   | — |   |   | 361 |   |
|                                                                  |   |                                                                       | 79,904    |   |   | 16,212 |   |   | (2,783 | ) |   | 93,333 |   |
| Discontinued                operations:                               |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations, net of income tax |   |                                                                       | 8,874     |   |   | 12,855 |   |   | — |   |   | 21,729 |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Gain                on sale of assets                                 |   |                                                                       | 523       |   |   | — |   |   | — |   |   | 523 |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Net                income/(loss)                                      |   | $                                                                          | 35,919    |   | $ | 3,773 |   | $ | (24 | ) | $ | 39,668 |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Assets                at June 30, 2006                                |   | $                                                                          | 2,305,300 |   | $ | 388,847 |   | $ | (1,600 | ) | $ | 2,692,547 |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |

----

| 10. | Segment                Information - (Continued): |
|-----|---------------------------------------------------|

|                                                                  |   | Six                months ended June 30, 2005(In                thousands) |      |
|-----------------------------------------------------------------------|--------|----------------------------------------------------------------------------|-----------|
|                                                                  |   | Real                estate segment                                         |      | Specialty                finance segment |   | Other |   | ConsolidatedTotals |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |
| Revenues                                                              |   | $                                                                          | 75,812    |   | $ | 9,635 |   | $ | (2,179 | ) | $ | 83,268 |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                             |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| General                operating and administrative                   |   |                                                                       | 7,113     |   |   | 15,523 |   |   | (1,649 | ) |   | 20,987 |   |
| Interest                expense                                       |   |                                                                       | 35,867    |   |   | 6,041 |   |   | (149 | ) |   | 41,759 |   |
| Property                expenses, state and other taxes               |   |                                                                       | 3,147     |   |   | 318 |   |   | (367 | ) |   | 3,098 |   |
| Depreciation                and amortization                          |   |                                                                       | 12,878    |   |   | 558 |   |   | — |   |   | 13,436 |   |
| Impairment                provisions on assets                        |   |                                                                       | 66        |   |   | 74 |   |   | — |   |   | 140 |   |
| Minority                interest net of equity in earnings            |   |                                                                       | 100       |   |   | 1,387 |   |   | — |   |   | 1,487 |   |
|                                                                  |   |                                                                       | 59,171    |   |   | 23,901 |   |   | (2,165 | ) |   | 80,907 |   |
| Discontinued                operations:                               |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operations, net of income tax |   |                                                                       | 3,148     |   |   | 16,067 |   |   | — |   |   | 19,215 |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Gain                on sale of assets                                 |   |                                                                       | 23        |   |   | — |   |   | — |   |   | 23 |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Net                income/(loss)                                      |   | $                                                                          | 19,812    |   | $ | 1,801 |   | $ | (14 | ) | $ | 21,599 |   |
|                                                                  |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Assets                at June 30, 2005                                |   | $                                                                          | 2,337,118 |   | $ | 351,019 |   | $ | (18,444 | ) | $ | 2,669,693 |   |

----

| 11. | Commitments                and Contingencies: |
|-----|-----------------------------------------------|

----

**Item      2. Management’s Discussion and Analysis of Financial Condition and Results of      Operations.**

|   | · | changes                in general economic conditions; |
|--------|--------|--------------------------------------------------------|

|   | · | general                risks affecting the real estate industry (including, without limitation,                the inability to enter into or renew leases on favorable terms, dependence                on tenants’ financial condition, and competition from other developers,                owners and operators of real                estate); |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | general                risks affecting the restaurant industry (including, without limitation,                any disruption in the supply or quality of ingredients, the availability                of labor, and the continued demand for restaurant                dining); |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | financing                may not be available on favorable terms or at all, and our cash flow                from                operations and access to attractive capital may be insufficient to                fund                existing operations, or growth in new acquisitions and                developments; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes                in interest rates; |
|--------|--------|-------------------------------------------|

|   | · | our                ability to refinance existing financial obligations at favorable                terms; |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | our                ability to locate suitable tenants for our properties; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | our                ability to resolve any tenant defaults that could lead to a decline                in                value and as a result, subject us to impairment                charges; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                ability of tenants and borrowers to make payments under their agreements                with us; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | possible                adverse changes in tax and environmental laws, as well as the impact                of                newly adopted accounting principles on our accounting policies and                on                period-to-period comparisons of financial                results; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | risks                associated with our potential failure to qualify as a REIT under                the                Internal Revenue Code of 1986, as                amended; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                ability to re-lease or sell properties that are currently vacant                or that                may become vacant; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                ability to sell properties through our investment property sales                program                as a result of any possible changes in tax legislation such as elimination                or change of capital gains rates or change to the like-kind exchange                (Section 1031) provisions; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                ability to continue to make distributions at historical                rates; |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | our                ability to manage our debt levels that could adversely affect our                cash                flow, limit our flexibility to raise additional capital and prevent                us                from making distributions on the outstanding shares of common stock;                and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                loss of certain members of our management team that could adversely                affect                our business. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

----

*Overview      of Management’s Discussion and Analysis*

|   | 1. | restaurant                operators of major national and regional                chains; |
|--------|----|-------------------------------------------------------------------------------------------|

|   | 2. | restaurant                property investors; and |
|--------|----|---------------------------------------------------|

|   | 3. | retail                real estate developers. |
|--------|----|-----------------------------------------------|

|   | 1. | financing                free-standing restaurant and retail real                estate; |
|--------|----|------------------------------------------------------------------------------------------|

|   | 2. | maximizing                the potential of our real estate                portfolio; |
|--------|----|--------------------------------------------------------------------------------------|

|   | 3. | sale                of real estate to investors; and |
|--------|----|------------------------------------------------------|

|   | 4. | real                estate development and                redevelopment. |
|--------|----|--------------------------------------------------------------------------|

*Strategy      1: Financing Free-standing Restaurant and Retail Real Estate*

|   | · | ability                to execute transactions in excess of $100 million as committed, including                properties with a single concept; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · |  the                review and approval by our investment committee that includes the                CEO and                CFO. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

*Strategy      2: Maximizing the Potential of our Real Estate Portfolio*

| **Concept**                                    |   | **Number                of Properties** |   | **Percentage                of Total Properties** |   | **Percentage                of Total Annualized Base Rent (*)** |   | **Average                Remaining Lease Term (Years)** |   |
|------------------------------------------------|--------|-----------------------------------------|--------|---------------------------------------------------|--------|-----------------------------------------------------------------|--------|---------------------------------------------------------|--------|
|                                           |   |                                    |   |                                              |   |                                                            |   |                                                    |   |
| Wendy’s                (*)               |   |                                    | 191    |                                              |   | 9.5                                                             | %      |                                                    | 8.5    | % |   | 10.3 |   |
| Burger                King                     |   |                                    | 173    |                                              |   | 8.6                                                             | %      |                                                    | 7.1    | % |   | 10.8 |   |
| Golden                Corral                   |   |                                    | 82     |                                              |   | 4.1                                                             | %      |                                                    | 7.0    | % |   | 6.2 |   |
| Jack                in the Box                 |   |                                    | 114    |                                              |   | 5.7                                                             | %      |                                                    | 6.7    | % |   | 8.3 |   |
| Arby’s                                   |   |                                    | 151    |                                              |   | 7.5                                                             | %      |                                                    | 6.2    | % |   | 10.4 |   |
| International                House of Pancakes |   |                                    | 63     |                                              |   | 3.1                                                             | %      |                                                    | 4.2    | % |   | 13.3 |   |
| Captain                D’s               |   |                                    | 100    |                                              |   | 5.0                                                             | %      |                                                    | 3.9    | % |   | 16.7 |   |
| Pizza                Hut                       |   |                                    | 144    |                                              |   | 7.1                                                             | %      |                                                    | 2.9    | % |   | 6.3 |   |
| Bennigan’s                               |   |                                    | 25     |                                              |   | 1.2                                                             | %      |                                                    | 2.9    | % |   | 10.9 |   |
| Denny’s                                  |   |                                    | 47     |                                              |   | 2.3                                                             | %      |                                                    | 2.6    | % |   | 7.9 |   |

|   |                 (*) |  Includes                contingent rent                for units with leases where rent is based on actual store sales,                generally                without a minimum threshold. |
|--------|-----------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **Tenant**                                |   | **Number                of Properties** |   | **Percentage                of Total Properties** |   | **Percentage                of Total Annualized Base Rent (*)** |   | **Average                Remaining Lease Term (Years)** |   |
|-------------------------------------------|--------|-----------------------------------------|--------|---------------------------------------------------|--------|-----------------------------------------------------------------|--------|---------------------------------------------------------|--------|
|                                      |   |                                    |   |                                              |   |                                                            |   |                                                    |   |
| Jack                in the Box, Inc.      |   |                                    | 114    |                                              |   | 5.7                                                             | %      |                                                    | 6.8    | % |   | 8.3 |   |
| Golden                Corral Corporation  |   |                                    | 71     |                                              |   | 3.5                                                             | %      |                                                    | 6.1    | % |   | 5.7 |   |
| IHOP                Properties, Inc.      |   |                                    | 60     |                                              |   | 3.0                                                             | %      |                                                    | 4.0    | % |   | 13.4 |   |
| Captain                D’s, LLC     |   |                                    | 91     |                                              |   | 4.5                                                             | %      |                                                    | 3.7    | % |   | 17.2 |   |
| Sybra                Inc.                 |   |                                    | 84     |                                              |   | 4.2                                                             | %      |                                                    | 3.4    | % |   | 11.6 |   |
| S&A                Properties Corp.   |   |                                    | 30     |                                              |   | 1.5                                                             | %      |                                                    | 3.0    | % |   | 12.1 |   |
| Texas                Taco Cabana, LP      |   |                                    | 31     |                                              |   | 1.5                                                             | %      |                                                    | 2.1    | % |   | 10.9 |   |
| El                Chico Restaurants, Inc. |   |                                    | 23     |                                              |   | 1.1                                                             | %      |                                                    | 1.9    | % |   | 10.1 |   |
| The                Restaurant Company     |   |                                    | 18     |                                              |   | 0.9                                                             | %      |                                                    | 1.8    | % |   | 19.1 |   |
| Vicorp                Restaurants, Inc.   |   |                                    | 20     |                                              |   | 1.0                                                             | %      |                                                    | 1.6    | % |   | 8.8 |   |

|   |                 (*) |   Includes                contingent                rent for units with leases where rent is based on actual store sales,                generally without a minimum                threshold. |
|--------|-----------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **State**                     |   | **Number                of Properties** |   | **Percentage                of Total Properties** |   | **Percentage                of Total Annualized Base Rent (*)** |   | **Average                Remaining Lease Term (Years)** |   |
|-------------------------------|--------|-----------------------------------------|--------|---------------------------------------------------|--------|-----------------------------------------------------------------|--------|---------------------------------------------------------|--------|
|                          |   |                                    |   |                                              |   |                                                            |   |                                                    |   |
| Texas                         |   |                                    | 399    |                                              |   | 19.8                                                            | %      |                                                    | 19.5   | % |   | 8.9 |   |
| Florida                       |   |                                    | 186    |                                              |   | 9.2                                                             | %      |                                                    | 10.4   | % |   | 10.5 |   |
| Georgia                       |   |                                    | 126    |                                              |   | 6.3                                                             | %      |                                                    | 5.8    | % |   | 11.4 |   |
| Tennessee                     |   |                                    | 97     |                                              |   | 4.8                                                             | %      |                                                    | 4.0    | % |   | 10.0 |   |
| Illinois                      |   |                                    | 64     |                                              |   | 3.2                                                             | %      |                                                    | 3.8    | % |   | 9.8 |   |
| California                    |   |                                    | 53     |                                              |   | 2.6                                                             | %      |                                                    | 3.7    | % |   | 11.0 |   |
| North                Carolina |   |                                    | 91     |                                              |   | 4.5                                                             | %      |                                                    | 3.5    | % |   | 9.2 |   |
| Ohio                          |   |                                    | 90     |                                              |   | 4.5                                                             | %      |                                                    | 3.3    | % |   | 8.5 |   |
| Missouri                      |   |                                    | 52     |                                              |   | 2.6                                                             | %      |                                                    | 2.8    | % |   | 10.9 |   |
| South                Carolina |   |                                    | 56     |                                              |   | 2.8                                                             | %      |                                                    | 2.5    | % |   | 10.9 |   |

|   |                 (*)   | Includes                contingent rent for units with leases where rent is based on actual                store                sales, generally without a minimum                threshold. |
|--------|-----------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Strategy      3: Sale of Real Estate to Investors*

*Strategy      4: Real Estate Development and Redevelopment*

----

*Liquidity      and Capital Resources*

| **Debt**                                       | **Balance****(in                millions)** |   | **Approximate****Interest                Rates** |   | **Expected                Maturity Date** |   | **Type**         |   |
|------------------------------------------------|---------------------------------------------|--------|--------------------------------------------------|--------|-------------------------------------------|--------|------------------|--------|
|                                           |                                        |   |                                             |   |                                      |   |             |   |
| Mortgage                Warehouse Facility (c) | 68.8                                        |   | LIBOR                + 1.25%                     |   | Mar-07                                    |   | Collateralized   |   |
| Mortgage                Warehouse Facility (c) | 76.3                                        |   | LIBOR                + 1.15%                     |   | May-07                                    |   | Collateralized   |   |
| Series                2001-A Bonds (a)         | 123.8                                       |   | LIBOR                + .98%                      |   | Aug-06                                    |   | Collateralized   |   |
| Series                2001 Bonds (a)           | 85.8                                        |   | LIBOR                + .94%                      |   | Oct-06                                    |   | Collateralized   |   |
| Notes                Payable                   | 0.8                                         |   | 7.16%                                            |   | Jun-07                                    |   | Collateralized   |   |
| Revolver                (a)                    | 101.5                                       |   | LIBOR                + 2.25%                     |   | April-08                                  |   | Uncollateralized | (d)    |
| Term                Loan (a)                   | 275.0                                       |   | LIBOR                + 2.00%                     |   | April-10                                  |   | Uncollateralized | (d)    |
| Series                2003 Bonds (a)           | 1.5                                         |   | LIBOR                + 5.00%                     |   | Mar-07                                    |   | Collateralized   |   |
| Series                2001-4 Bonds             | 23.3                                        |   | 8.90%                                            |   | 2009-2013                                 |   | Collateralized   |   |
| Series                2005 Bonds               | 260.3                                       |   | 4.67%                                            |   | 2012                                      |   | Collateralized   |   |
| Senior                Unsecured Notes (b)      | 301.1                                       |   | 7.50%                                            |   | April-15                                  |   | Uncollateralized |   |
| Series                2000-A Bonds             | 211.1                                       |   | 7.97%                                            |   | 2009-2017                                 |   | Collateralized   |   |
|                                           |                                        |   |                                             |   |                                      |   |             |   |
| Total                Debt                      | 1,529.3                                     |   |                                             |   |                                      |   |             |   |

|   | (a) | We                have entered into hedging transactions to reduce our sensitivity                to                floating rate debt in the form of swaps and caps, as described further                under “Market Risk”. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Balance                includes a premium of $1.1 million at June 30,                2006. |
|--------|-----|--------------------------------------------------------------------------------------------|

|   | (c) | We                also paid exit fees to the lenders upon the sale of properties financed                by                the warehouse facilities which we recorded as interest expense. We                paid                exit fees of $0.3 million and $0.7 million during the six months                ended                June 30, 2006 and 2005, respectively. Effective March 31, 2006 and                May 31,                2006, we eliminated the exit fees under the $160 million warehouse                facility and the $100 million warehouse facility, respectively, as                part of                the renewals of the agreements. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | The                Revolver and Term Loan are subject to borrowing base asset                requirements. |
|--------|-----|------------------------------------------------------------------------------------------------------------|

*Bonds      Payable*

|                                         |   | (In                millions) |   |
|----------------------------------------------|--------|------------------------------|--------|
|                                         |   |                         |   |
| Mortgage                Warehouse Facilities |   | $                            | 114.9  |   |
| Revolver                                     |   |                         | 73.5   |   |
| Cash                and Cash Equivalents     |   |                         | 16.0   |   |
|                                         |   | $                            | 204.4  |   |

*Mortgage      Warehouse Facilities*

*Bonds      Payable. *

*Revolver.      *

*Notes      Payable. *

*Litigation*

*Contractual      Cash Obligations*

*Cash      Flows*

|                                                                 |   | Six                months ended June 30, |   |
|----------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                 |   | (in                millions)             |   |
|                                                                 |   | 2006                                     |   | 2005 |   |
| Cash                flows provided by operating activities           |   | $                                        | 33.9   |   | $ | 51.5 |   |
| Cash                flows used in investing activities               |   |                                     | (7.9   | ) |   | (484.9 | ) |
| Cash                flows provided by/(used in) financing activities |   |                                     | (30.5  | ) |   | 439.0 |   |
|                                                                 |   |                                     |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents  |   |                                     | (4.5   | ) |   | 5.6 |   |
| Cash                and cash equivalents at beginning of year        |   |                                     | 20.5   |   |   | 22.7 |   |
|                                                                 |   |                                     |   |   |   |   |   |
| Cash                and cash equivalents at end of period            |   | $                                        | 16.0   |   | $ | 28.3 |   |

*Cash      Flows Provided by Operating Activities*

----

*Investing      Activities*

*Financing      Activities*

----

*Liquidity      Risks *

*Off-Balance      Sheet Transactions*

----

|                                                         |   |  (in                millions)  |   |
|--------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                         |   |  Mortgage                loans |   | Bonds                outstanding |   |
|                                                         |   |  in                pool at par |   | at                face value |   |
|                                                         |   |                           |   |
| Loans                and debt supporting 1998-1 Certificates |   | $                                   | 124.0  |   | $ | 124.0 |   |
| Loans                and debt supporting 1999-1 Certificates |   |                                | 183.1  |   |   | 183.1 |   |
|                                                         |   | $                                   | 307.1  |   | $ | 307.1 |   |
|                                                         |   |                                |   |   |   |   |   |

*Quantitative      and Qualitative Disclosures About Market Risk*

| Type                of Hedge      |   | NotionalAmount                atJune                30, 2006(in                millions) |   | LIBORCap                Strike Price or Swap Rate |   | Trade                Date |   | Maturity                Date |     | Estimated                ValueatJune                30, 2006(in                millions) |   |
|-----------------------------------|--------|------------------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|---------------------------|--------|------------------------------|----------|------------------------------------------------------------------------------------------|--------|
|                              |   |                                                                                     |   |                                              |   |                      |   |                         |     |                                                                                     |   |
| Interest                Rate Cap  |   | $                                                                                        | 137.5  |                                              |   | 6.000                     | %      |                         | 08/13/01 |                                                                                     |   | 08/26/06 |   | $ | — |   |
| Interest                Rate Cap  |   | $                                                                                        | 102.8  |                                              |   | 4.500                     | %      |                         | 09/28/01 |                                                                                     |   | 10/25/06 |   | $ | 0.3 |   |
| Interest                Rate Swap |   | $                                                                                        | 175.0  |                                              |   | 4.202                     | %      |                         | 05/16/05 |                                                                                     |   | 04/01/10 |   | $ | 7.7 |   |
| Interest                Rate Cap  |   | $                                                                                        | 19.7   |                                              |   | 3.500                     | %      |                         | 12/17/03 |                                                                                     |   | 02/01/11 |   | $ | 0.9 |   |

*Inflation*

----

*New      Accounting Pronouncements*

*Results      of Operations*

*Real      estate segment*

*Specialty      finance segment*

|                                                                                                   |   | Quarter                ended June 30,(in                millions) |   |
|--------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                                                   |   | 2006                                                              |   | 2005 |   |
| Revenues:                                                                                              |   |                                                              |   |   |   |
| Real                estate                                                                             |   | $                                                                 | 52.9   |   | $ | 48.9 |   |
| Specialty                finance                                                                       |   |                                                              | 3.5    |   |   | 2.8 |   |
| Other*                                                                                                 |   |                                                              | (1.6   | ) |   | (1.6 | ) |
| Total                revenues                                                                          |   |                                                              | 54.8   |   |   | 50.1 |   |
|                                                                                                   |   |                                                              |   |   |   |   |   |
| Expenses:                                                                                              |   |                                                              |   |   |   |   |   |
| Operating                expenses excluding interest, depreciation, and                amortization:** |   |                                                              |   |   |   |   |   |
| Real                estate                                                                             |   |                                                              | 7.1    |   |   | 6.0 |   |
| Specialty                finance                                                                       |   |                                                              | 5.1    |   |   | 8.2 |   |
| Other*                                                                                                 |   |                                                              | (1.5   | ) |   | (1.4 | ) |
| Total                operating expenses excluding interest, depreciation, and amortization**           |   |                                                              | 10.7   |   |   | 12.8 |   |
|                                                                                                   |   |                                                              |   |   |   |   |   |
| Depreciation                and amortization expense:                                                  |   |                                                              |   |   |   |   |   |
| Real                estate                                                                             |   |                                                              | 8.8    |   |   | 8.2 |   |
| Specialty                finance                                                                       |   |                                                              | 1.0    |   |   | 0.3 |   |
| Total                depreciation and amortization expense                                             |   |                                                              | 9.8    |   |   | 8.5 |   |
|                                                                                                   |   |                                                              |   |   |   |   |   |
| Interest                expense:                                                                       |   |                                                              |   |   |   |   |   |
| Real                estate                                                                             |   |                                                              | 23.4   |   |   | 23.4 |   |
| Specialty                finance                                                                       |   |                                                              | 2.1    |   |   | 1.6 |   |
| Other*                                                                                                 |   |                                                              | (0.1   | ) |   | (0.1 | ) |
| Total                interest expense                                                                  |   |                                                              | 25.4   |   |   | 24.9 |   |
|                                                                                                   |   |                                                              |   |   |   |   |   |
| Total                expenses                                                                          |   |                                                              | 45.9   |   |   | 46.2 |   |
|                                                                                                   |   |                                                              |   |   |   |   |   |
| Income                from continuing operations                                                       |   |                                                              | 8.9    |   |   | 3.9 |   |
|                                                                                                   |   |                                                              |   |   |   |   |   |
| Income                from discontinued operations, after income taxes:                                |   |                                                              |   |   |   |   |   |
| Real                estate                                                                             |   |                                                              | 5.3    |   |   | 2.5 |   |
| Specialty                finance                                                                       |   |                                                              | 7.6    |   |   | 11.7 |   |
| Total                income from discontinued operations, after income taxes                           |   |                                                              | 12.9   |   |   | 14.2 |   |
|                                                                                                   |   |                                                              |   |   |   |   |   |
| Loss                on sale of assets - Real estate segment                                            |   |                                                              | (0.1   | ) |   | — |   |
|                                                                                                   |   |                                                              |   |   |   |   |   |
| Net                income                                                                              |   | $                                                                 | 21.7   |   | $ | 18.1 |   |

|               ** | also                includes the minority interest in earnings of consolidated joint                ventures                net of the equity in earnings of unconsolidated joint                ventures |
|----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                   |   | Six                months ended June 30,(in                millions) |   |
|--------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                                                                                                   |   | 2006                                                                 |   | 2005 |   |
| Revenues:                                                                                              |   |                                                                 |   |   |   |   |   |
| Real                estate                                                                             |   | $                                                                    | 106.4  |   | $ | 75.8 |   |
| Specialty                finance                                                                       |   |                                                                 | 7.2    |   |   | 9.7 |   |
| Other*                                                                                                 |   |                                                                 | (2.8   | ) |   | (2.2 | ) |
| Total                revenues                                                                          |   |                                                                 | 110.8  |   |   | 83.3 |   |
|                                                                                                   |   |                                                                 |   |   |   |   |   |
| Expenses:                                                                                              |   |                                                                 |   |   |   |   |   |
| Operating                expenses excluding interest, depreciation, and                amortization:** |   |                                                                 |   |   |   |   |   |
| Real                estate                                                                             |   |                                                                 | 14.8   |   |   | 10.4 |   |
| Specialty                finance                                                                       |   |                                                                 | 10.6   |   |   | 17.3 |   |
| Other*                                                                                                 |   |                                                                 | (2.6   | ) |   | (2.0 | ) |
| Total                operating expenses excluding interest, depreciation, and amortization**           |   |                                                                 | 22.8   |   |   | 25.7 |   |
|                                                                                                   |   |                                                                 |   |   |   |   |   |
| Depreciation                and amortization expense:                                                  |   |                                                                 |   |   |   |   |   |
| Real                estate                                                                             |   |                                                                 | 18.7   |   |   | 12.9 |   |
| Specialty                finance                                                                       |   |                                                                 | 1.5    |   |   | 0.6 |   |
| Total                depreciation and amortization expense                                             |   |                                                                 | 20.2   |   |   | 13.5 |   |
|                                                                                                   |   |                                                                 |   |   |   |   |   |
| Interest                expense:                                                                       |   |                                                                 |   |   |   |   |   |
| Real                estate                                                                             |   |                                                                 | 46.4   |   |   | 35.9 |   |
| Specialty                finance                                                                       |   |                                                                 | 4.2    |   |   | 6.0 |   |
| Other*                                                                                                 |   |                                                                 | (0.2   | ) |   | (0.1 | ) |
| Total                interest expense                                                                  |   |                                                                 | 50.4   |   |   | 41.8 |   |
|                                                                                                   |   |                                                                 |   |   |   |   |   |
| Total                expenses                                                                          |   |                                                                 | 93.4   |   |   | 81.0 |   |
|                                                                                                   |   |                                                                 |   |   |   |   |   |
| Income                from continuing operations                                                       |   |                                                                 | 17.4   |   |   | 2.3 |   |
|                                                                                                   |   |                                                                 |   |   |   |   |   |
| Income                from discontinued operations, after income taxes:                                |   |                                                                 |   |   |   |   |   |
| Real                estate                                                                             |   |                                                                 | 8.9    |   |   | 3.2 |   |
| Specialty                finance                                                                       |   |                                                                 | 12.8   |   |   | 16.1 |   |
| Total                income from discontinued operations, after income taxes                           |   |                                                                 | 21.7   |   |   | 19.3 |   |
|                                                                                                   |   |                                                                 |   |   |   |   |   |
| Gain                on sale of assets - Real estate segment                                            |   |                                                                 | 0.5    |   |   | — |   |
|                                                                                                   |   |                                                                 |   |   |   |   |   |
| Net                income                                                                              |   | $                                                                    | 39.6   |   | $ | 21.6 |   |

|              ** | also                includes the minority interest in earnings of consolidated joint                ventures                net of the equity in earnings of unconsolidated joint                ventures |
|----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Revenues:*

|                           |   | Quarter                Ended June 30,(in                millions) |   | Six                Months Ended June 30,(in                millions) |   |
|--------------------------------|--------|-------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                           |   | 2006                                                              |   | %                of total                                            |   | 2005 |   | %                of total |   | 2006 |   | %                of total |   | 2005 |   | %                of total |   |
| Rental                income   |   | $                                                                 | 48.8   |                                                                 |   | 92 | % | $ | 41.5 |   |   | 85 | % | $ | 98.1 |   |   | 92 | % | $ | 66.4 |   |   | 88 | % |
| Interest                income |   |                                                              | 1.4    |                                                                 |   | 3 | % |   | 6.1 |   |   | 12 | % |   | 2.7 |   |   | 3 | % |   | 7.6 |   |   | 10 | % |
| Other                          |   |                                                              | 2.7    |                                                                 |   | 5 | % |   | 1.3 |   |   | 3 | % |   | 5.6 |   |   | 5 | % |   | 1.8 |   |   | 2 | % |
| Total                Revenues  |   | $                                                                 | 52.9   |                                                                 |   | 100 | % | $ | 48.9 |   |   | 100 | % | $ | 106.4 |   |   | 100 | % | $ | 75.8 |   |   | 100 | % |

|                           |   | Quarter                Ended June 30,(in                millions) |   | Six                Months Ended June 30,(in                millions) |   |
|--------------------------------|--------|-------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                           |   | 2006                                                              |   | %                of total                                            |   | 2005 |   | %                of total |   | 2006 |   | %                of total |   | 2005 |   | %                of total |   |
| Rental                income   |   | $                                                                 | 0.9    |                                                                 |   | 26 | % | $ | 0.3 |   |   | 11 | % | $ | 1.8 |   |   | 25 | % | $ | 0.5 |   |   | 5 | % |
| Interest                income |   |                                                              | 1.0    |                                                                 |   | 29 | % |   | 1.0 |   |   | 36 | % |   | 2.0 |   |   | 28 | % |   | 6.4 |   |   | 66 | % |
| Other                          |   |                                                              | 1.6    |                                                                 |   | 45 | % |   | 1.5 |   |   | 53 | % |   | 3.4 |   |   | 47 | % |   | 2.8 |   |   | 29 | % |
| Total                Revenues  |   | $                                                                 | 3.5    |                                                                 |   | 100 | % | $ | 2.8 |   |   | 100 | % | $ | 7.2 |   |   | 100 | % | $ | 9.7 |   |   | 100 | % |

*Operating      expenses, excluding depreciation, amortization and interest:*

|                                                                     |   | Quarter                Ended June 30,(in                millions) |   | Six                Months Ended June 30,(in                millions) |   |
|--------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                                                                     |   | 2006                                                              |   | %                of total                                            |   | 2005 |   | %                of total |   | 2006 |   | %                of total |   | 2005 |   | %                of total |   |
| General                operating and                 administrative |   | $                                                                 | 3.3    |                                                                 |   | 46 | % | $ | 3.8 |   |   | 63 | % | $ | 6.8 |   |   | 46 | % | $ | 7.1 |   |   | 68 | % |
| Property                expenses, state                and other taxes   |   |                                                              | 2.6    |                                                                 |   | 37 | % |   | 2.1 |   |   | 35 | % |   | 5.9 |   |   | 40 | % |   | 3.2 |   |   | 31 | % |
| Other                                                                    |   |                                                              | 1.2    |                                                                 |   | 17 | % |   | 0.1 |   |   | 2 | % |   | 2.1 |   |   | 14 | % |   | 0.1 |   |   | 1 | % |
|                                                                     |   | $                                                                 | 7.1    |                                                                 |   | 100 | % | $ | 6.0 |   |   | 100 | % | $ | 14.8 |   |   | 100 | % | $ | 10.4 |   |   | 100 | % |

|                                                                     |   | Quarter                Ended June 30,(in                millions) |   | Six                Months Ended June 30,(in                millions) |   |
|--------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                                                                     |   | 2006                                                              |   | %                of total                                            |   | 2005 |   | %                of total |   | 2006 |   | %                of total |   | 2005 |   | %                of total |   |
| General                operating and                 administrative |   | $                                                                 | 5.1    |                                                                 |   | 100 | % | $ | 7.3 |   |   | 89 | % | $ | 10.5 |   |   | 99 | % | $ | 15.5 |   |   | 90 | % |
| Property                expenses, state                and other taxes   |   |                                                              | 0.0    |                                                                 |   | 0 | % |   | 0.2 |   |   | 2 | % |   | 0.1 |   |   | 1 | % |   | 0.3 |   |   | 2 | % |
| Other                                                                    |   |                                                              | 0.0    |                                                                 |   | 0 | % |   | 0.7 |   |   | 9 | % |   | 0.0 |   |   | 0 | % |   | 1.5 |   |   | 8 | % |
|                                                                     |   | $                                                                 | 5.1    |                                                                 |   | 100 | % | $ | 8.2 |   |   | 100 | % | $ | 10.6 |   |   | 100 | % | $ | 17.3 |   |   | 100 | % |

|   | · | Commission                and bonus expenses were higher in the quarter ended June 30, 2005                due to a                large property acquisition that closed in that quarter. During the                six                months ended 2005, expenses in this segment included a one time charge                of                $2 million resulting from a grant of non-restricted stock and related                cash                compensation to members of our Board of Directors and                employees. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | During                2005, we incurred certain costs related to the upgrade of our property                management software to account for leasing transactions and to capture                other tenant and lease information. We also incurred certain costs                to                in-source the information technology, human resources and other functions                previously outsourced to related parties. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In                2005 we incurred additional expenses with the integration of the                merged                portfolios. While our servicing fee income in this segment for the                management of the larger portfolio increased after the Merger, we                incurred                various one-time setup expenses during 2005 to add new properties                creating                an excess of new expenses over new revenues that have stabilized                in 2006.                The Income Fund portfolio had been previously serviced by the specialty                finance segment and did not create significant additional integration                costs. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Interest      Expense*

|                             |   | Quarter                Ended June 30,(in                millions) |   | Six                Months Ended June 30,(in                millions) |   |
|----------------------------------|--------|-------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                             |   | 2006                                                              |   | %                of total                                            |   | 2005 |   | %                of total |   | 2006 |   | %                of total |   | 2005 |   | %                of total |   |
| Real                estate       |   | $                                                                 | 23.4   |                                                                 |   | 92 | % | $ | 23.4 |   |   | 94 | % | $ | 46.4 |   |   | 92 | % | $ | 35.9 |   |   | 86 | % |
| Specialty                finance |   |                                                              | 2.1    |                                                                 |   | 8 | % |   | 1.6 |   |   | 6 | % |   | 4.2 |   |   | 8 | % |   | 6.0 |   |   | 14 | % |
| Other                            |   |                                                              | (0.1   | )                                                                    |   | 0 | % |   | (0.1 | ) |   | 0 | % |   | (0.2 | ) |   | 0 | % |   | (0.1 | ) |   | 0 | % |
|                             |   | $                                                                 | 25.4   |                                                                 |   | 100 | % | $ | 24.9 |   |   | 100 | % | $ | 50.4 |   |   | 100 | % | $ | 41.8 |   |   | 100 | % |

*Depreciation      and Amortization*

|                             |   | Quarter                Ended June 30,(in                millions) |   | Six                Months Ended June 30,(in                millions) |   |
|----------------------------------|--------|-------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                             |   | 2006                                                              |   | %                of total                                            |   | 2005 |   | %                of total |   | 2006 |   | %                of total |   | 2005 |   | %                of total |   |
| Real                estate       |   | $                                                                 | 8.8    |                                                                 |   | 90 | % | $ | 8.2 |   |   | 96 | % | $ | 18.7 |   |   | 93 | % | $ | 12.9 |   |   | 96 | % |
| Specialty                finance |   |                                                              | 1.0    |                                                                 |   | 10 | % |   | 0.3 |   |   | 4 | % |   | 1.5 |   |   | 7 | % |   | 0.6 |   |   | 4 | % |
|                             |   | $                                                                 | 9.8    |                                                                 |   | 100 | % | $ | 8.5 |   |   | 100 | % | $ | 20.2 |   |   | 100 | % | $ | 13.5 |   |   | 100 | % |

*Discontinued      Operations*

|                                                                                                     |   | Quarter                Ended June 30,(in                millions) |    |
|----------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|---------|
|                                                                                                     |   | 2006                                                              |    | 2005 |   |
|                                                                                                     |   | Real                EstateSegment                                 |    | Specialty                FinanceSegment |   | Real                EstateSegment |   | Specialty                FinanceSegment |   |
|                                                                                                     |   |                                                              |    |   |   |   |   |   |   |   |   |
| Sale                of real estate                                                                       |   | $                                                                 | 31.6    |   | $ | 74.2 |   | $ | 13.2 |   | $ | 70.8 |   |   |   |   |
| Cost                of real estate sold                                                                  |   |                                                              | 26.5    |   |   | 65.4 |   |   | 12.4 |   |   | 59.4 |   |   |   |   |
| Gain                on sale of real estate                                                               |   |                                                              | 5.1     |   |   | 8.8 |   |   | 0.8 |   |   | 11.4 |   |   |   |   |
| Net                other income/(expense)                                                                |   |                                                              | 0.2     |   |   | 0.8 |   |   | 1.7 |   |   | (0.2 | ) |   |   |   |
| Earnings                from real estate discontinued                operationsbefore                tax |   |                                                              | 5.3     |   |   | 9.6 |   |   | 2.5 |   |   | 11.2 |   |   |   |   |
|                                                                                                     |   |                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail                operations revenue                                                                 |   |                                                              | — |   |   | — |   |   | — |   |   | 15.2 |   |   |   |   |
| Retail                cost of sales                                                                      |   |                                                              | — |   |   | — |   |   | — |   |   | 14.9 |   |   |   |   |
| Earnings                from retail discontinued                operationsbefore                tax      |   |                                                              | — |   |   | — |   |   | — |   |   | 0.3 |   |   |   |   |   |
|                                                                                                     |   |                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                tax benefit/(provision)                                                            |   |                                                              | — |   |   | (2.0 | ) |   | — |   |   | 0.2 |   |   |   |   |
|                                                                                                     |   |                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinuedoperations,                after income taxes                     |   | $                                                                 | 5.3     |   | $ | 7.6 |   | $ | 2.5 |   | $ | 11.7 |   |   |   |   |

----

|                                                                                                     |   | Six                months ended June 30,(in                millions) |    |
|----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|---------|
|                                                                                                     |   | 2006                                                                 |    | 2005 |   |
|                                                                                                     |   | Real                EstateSegment                                    |    | Specialty                FinanceSegment |   | Real                EstateSegment |   | Specialty                FinanceSegment |   |   |   |
|                                                                                                     |   |                                                                 |    |   |   |   |   |   |   |   |   |
| Sale                of real estate                                                                       |   | $                                                                    | 45.7    |   | $ | 114.9 |   | $ | 13.5 |   | $ | 127.8 |   |   |   |   |
| Cost                of real estate sold                                                                  |   |                                                                 | 37.6    |   |   | 101.6 |   |   | 12.6 |   |   | 106.7 |   |   |   |   |
| Gain                on sale of real estate                                                               |   |                                                                 | 8.1     |   |   | 13.3 |   |   | 0.9 |   |   | 21.1 |   |   |   |   |
| Net                other income                                                                          |   |                                                                 | 0.8     |   |   | 2.1 |   |   | 2.3 |   |   | 0.5 |   |   |   |   |
| Earnings                from real estate discontinued                operationsbefore                tax |   |                                                                 | 8.9     |   |   | 15.4 |   |   | 3.2 |   |   | 21.6 |   |   |   |   |
|                                                                                                     |   |                                                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail                operations revenue                                                                 |   |                                                                 | — |   |   | — |   |   | — |   |   | 20.5 |   |   |   |   |
| Retail                cost of sales                                                                      |   |                                                                 | — |   |   | — |   |   | — |   |   | 19.6 |   |   |   |   |
| Earnings                from retail discontinued                operationsbefore                tax      |   |                                                                 | — |   |   | — |   |   | — |   |   | 0.9 |   |   |   |   |   |   |   |
|                                                                                                     |   |                                                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                tax provision                                                                      |   |                                                                 | — |   |   | (2.6 | ) |   | — |   |   | (6.4 | ) |   |   |   |
|                                                                                                     |   |                                                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                from discontinuedoperations,                after income taxes                     |   | $                                                                    | 8.9     |   | $ | 12.8 |   | $ | 3.2 |   | $ | 16.1 |   |   |   |   |

*Overview      of Management’s Discussion and Analysis - Strategy 3: Sales of Real Estate to      Investors*

**Item      3.**
**Quantitative      and Qualitative Disclosures About Market Risk.**

**Item      4.**
**Controls      and Procedures.**

*Evaluation      of Disclosure Controls and Procedures. *

*Changes      in Internal Control over Financial Reporting*

----

**Item      1.**
**Legal      Proceedings.**

|   |   | On                January 18, 2005, Robert Lewis and Sutter Acquisition Fund, LLC,                two                limited partners in several Income Funds, filed Plaintiffs’ Corrected                Original Petition for Class Action, Cause No. 05-00083-F, a purported                class action lawsuit on behalf of the limited partners of the Income                Funds                against the Company, USRP, the Income Funds and the general partners                (Mr.                Seneff, Mr. Bourne and CNL Realty Corporation) of the Income Funds,                and                subsidiaries of the Company in the District Court of Dallas County,                Texas                (the “Court”). The complaint alleged that the general partners of the                Income Funds breached their fiduciary duties in connection with the                proposed Mergers between the Income Funds and USRP and that the Company,                subsidiaries of the Company and USRP aided and abetted in the alleged                breaches of fiduciary duties. The complaint further alleged that                the                Income Fund general partners violated provisions of the Income Fund                partnership agreements and demanded an accounting as to the affairs                of the                Income Funds. On April 26, 2005, a supplemental plea to jurisdiction                was                held. On May 2, 2005, the plaintiffs filed their First Amended Petition                for Class Action. In the Amended Petition the plaintiffs did not                add any                parties or claims, but they did add allegations that the general                partners                of the Income Funds, with CNLRP and USRP, prepared and distributed                a false                and misleading final proxy statement filing to the limited partners                of the                Income Funds and the shareholders of CNLRP and USRP. The plaintiffs                are                seeking unspecified compensatory and exemplary damages and equitable                relief, which also included an injunction preventing the defendants                from                proceeding with the Mergers. On May 26, 2005, the Court entered a                Final                Order Dismissing Action for lack of subject matter jurisdiction.                On June                22, 2005, the plaintiffs filed a Notice of Appeal of the Order of                Dismissal. On September 7, 2005, the plaintiffs filed an appellants’                brief. On November 7, 2005, the Company and the other defendants                filed an                appellees’ brief. On December 12, 2005, the plaintiffs filed a brief in                reply. The Court has granted a request for postponement of oral argument                on the appeal that was originally scheduled for May 3, 2006. The                Court has                not yet set a new date. Management of the Company believes the claims                against the Company are without merit and intends to vigorously defend                against such claims. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

**Item      2.**
**Unregistered      Sale of Equity Securities and Use of Proceeds.**

**Item      3.**
**Defaults      Upon Senior Securities.**

**Item      4.**
**Submission      of Matters to a Vote of Security Holders. **

----

| Name                                      | For        | Against                (*) |
|-------------------------------------------|------------|----------------------------|
|                                      |       |                       |
| Robert                A. Bourne           | 54,196,194 | 906,815                    |
| G.                Steven Dawson           | 54,440,103 | 662,906                    |
| G.                Richard Hostetter. Esq. | 54,410,618 | 692,391                    |
| Richard                C. Huseman         | 43,190,819 | 11,912,191                 |
| James                H. Kropp             | 44,648,868 | 10,454,141                 |
| J.                Joseph Kruse            | 44,512,160 | 10,590,850                 |
| Curtis                B. McWilliams       | 54,213,204 | 889,805                    |
| James                M. Seneff, Jr.       | 54,095,510 | 1,007,499                  |

----

|   | 2.1 | Agreement                and Plan of Merger by and between the Registrant and CNL Restaurant                Properties, Inc., dated as of August 9, 2004 (previously filed as                Exhibit                2.1 to the Registrant’s current report on Form 8-K filed on August 10,                2004 and incorporated herein by                reference). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2.2 | Agreements                and Plans of Merger by and among the Registrant, a separate, wholly-owned                subsidiary of the operating partnership of the Registrant and each                of the                18 CNL Income Funds (previously filed as Exhibits 2.2 - 2.19 to the                Registrant’s current report on Form 8-K filed on August 10, 2004 and                incorporated herein by reference). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.1 | Restated                Articles of Incorporation of the Registrant dated November 11, 1997,                as                amended by the Articles of Amendment to the Articles of Restatement                of the                Registrant dated February 24, 2005 and the Articles of Amendment                to the                Articles of Restatement of the Registrant dated February 24, 2005                (previously filed as Exhibit 3.1 to the Registrant’s quarterly report on                Form 10-Q for the fiscal quarter ended March 31, 2005 and incorporated                herein by reference). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.2 | Third                Amended and Restated Bylaws (previously filed as Exhibit 3.1 to the                Company’s current report on Form 8-K filed on August 15, 2005 and                incorporated herein by reference). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.1 | Specimen                of Common Stock Certificate (previously filed as Exhibit 4.1 to the                Registrant’s Registration Statement on Form S-4 (File No. 333-21403) and                incorporated herein by reference). |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.2 | Articles                Supplementary Classifying and Designating a Series of Preferred Stock                as                Series A Cumulative Convertible Preferred Stock (previously filed                as                Exhibit 3.2 to the Registrant’s current report on Form 8-K filed on                November 14, 1997 and incorporated herein by                reference). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.3 | Amendment                to Articles Supplementary Classifying and Designating a Series of                Preferred Stock as Series A Cumulative Convertible Preferred Stock                (previously filed as Exhibit 3.2 to the Registrant’s current report on                Form 8-K filed on February 25, 2005 and incorporated herein by                reference). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.4 | Articles                Supplementary Classifying and Designating a Series of Preferred Stock                as                8% Series B Convertible Preferred Stock (previously filed as Exhibit                4.01                to the Registrant’s Form 10-Q for the fiscal quarter ended June 30, 2003                and incorporated herein by                reference). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.5 | Articles                Supplementary Classifying and Designating a Series of Preferred Stock                as                8% Series B-1 Convertible Preferred Stock (previously filed as Exhibit                99.5 to the Registrant’s current report on Form 8-K filed on September 16,                2004 and incorporated herein by                reference). |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.6 | Articles                Supplementary Establishing and Fixing The Rights and Preferences                of 7.5%                Series C Redeemable Convertible Preferred Stock (previously filed                as                Exhibit 4.1 to the Registrant’s registration statement on Form 8-A (File                No. 001-13089) and incorporated herein by                reference). |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.7 | Specimen                of 7.5% Series C Redeemable Convertible Preferred Stock Certificate                (previously filed as Exhibit 4.2 to the Registrant’s registration                statement on Form 8-A (File No. 001-13089) and incorporated herein                by                reference). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.8 | Indenture                dated as of March 4, 2005, among Net Lease Funding 2005, LP, MBIA                Insurance Corporation and Wells Fargo Bank, N.A., as indenture trustee                relating to $275,000,000 Triple Net Lease Mortgage Notes, Series                2005                (previously filed as Exhibit 99.1 to the Registrant’s current report on                Form 8-K filed on March 10, 2005 and incorporated herein by                reference). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 4.9 | Securities                Purchase Agreement relating to the Series B Preferred Stock (previously                filed as Exhibit 4.02 to the Registrant’s Form 10-Q for the fiscal quarter                ended June 30, 2003 and incorporated herein by                reference). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.10 | Registration                Rights Agreement relating to Series B Preferred Stock (previously                filed as                Exhibit 4.03 to the Registrant’s Form 10-Q for the fiscal quarter ended                June 30, 2003 and incorporated herein by                reference). |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.11 | Stock                Purchase Warrant - Omnicron Master Trust (previously filed as Exhibit                4.04                to the Registrant’s Form 10-Q for the fiscal quarter ended June 30, 2003                and incorporated herein by                reference). |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.12 | Stock                Purchase Warrant - The Riverview Group, LLC (previously filed as                Exhibit                4.05 to the Registrant’s Form 10-Q for the fiscal quarter ended June 30,                2003 and incorporated herein by                reference). |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.13 | Indenture,                dated as of March 23, 2005, between the Registrant and Wells Fargo                Bank,                National Association, as trustee, relating to the Registrant’s 7 1⁄2% Senior                Notes due 2015 (previously filed as Exhibit 4.1 to the Registrant’s                current report on Form 8-K filed on March 28, 2005 and incorporated                herein                by reference). |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4* | Pursuant                to Regulation S-K Item 601(b)(4)(iii), the Registrant by this filing                agrees, upon request, to furnish to the Securities and Exchange Commission                a copy of instruments defining the rights of holders of long-term                debt of                the Registrant. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                    10.1 | Form                of Indemnification Agreement dated as of April 18, 1995, between                CNL                American Properties Fund, Inc. and each of James M. Seneff, Jr.,                Robert A.                Bourne, G. Richard Hostetter, J. Joseph Kruse, and Richard C. Huseman,                dated as of January 27, 1997, between CNL American Properties Fund,                Inc.                and Steven D. Shackelford, dated as of February 18, 1998, and between                CNL                American Properties Fund, Inc. and Curtis B. McWilliams, dated as                of                September 1, 1999, (included as Exhibit 10.9 to the Registration                Statement                of CNL American Properties Fund, Inc. (No. 333-15411) on Form S-11                and                incorporated herein by reference). |
|--------|----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                    10.2 | Employment                Agreement dated as of May 5, 2003 by and between CNL Franchise Network                GP                Corp. and Steven D. Shackelford (included as Exhibit 10.21 to the                Form                10-K for the year ended December 31, 2003 of CNL Restaurant Properties,                Inc. and incorporated herein by                reference). |
|--------|----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                    10.3 | Employment                Agreement dated as of May 5, 2003 by and between CNL Franchise Network                GP                Corp. and Curtis B. McWilliams (included as Exhibit 10.22 to the                Form 10-K                for the year ended December 31, 2003 of CNL Restaurant Properties,                Inc.                and incorporated herein by reference). |
|--------|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                    10.4 | Employment                Agreement dated as of January 1, 2004 by and between CNL Restaurant                Investments, Inc. and Thomas G. Kindred, Jr. (included as Exhibit                10.23 to                Form 10-Q for the quarter ended March 31, 2004 of CNL Restaurant                Properties, Inc. and incorporated herein by                reference). |
|--------|----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                    10.5 | Employment                Agreement dated as of September 15, 2004 by and between CNL Restaurant                Capital GP, Corp. and Michael T. Shepardson. (filed                herewith). |
|--------|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                    10.6 |                    Registrant Flexible Incentive Plan, as amended, (previously filed                as                Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March                20, 2006 and incorporated herein by                reference). |
|--------|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 10.7 | Credit                Agreement, dated as of April 8, 2005, by and among the Registrant,                as                borrower, certain subsidiaries of the Registrant, as guarantors,                Bank of                America, N.A., as Administrative Agent, L/C Issuer and Swing Line                Lender,                Bank of America Securities LLC, as Sole Lead Arranger and Sole Book                Manager, Key Bank, National Association, as Syndication Agent, Credit                Suisse First Boston, Societe Generale, and Wachovia Bank National                Association, as Co-Documentation Agents, and the lenders party thereto                (previously filed as Exhibit 10.1 to the Registrant’s current report on                Form 8-K filed on April 13, 2005 and incorporated herein by                reference). |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.8 | Pledge                Agreement, dated as of April 8, 2005, by substantially all of the                Borrower’s domestic subsidiaries, in favor of Bank of America, N.A., in                its capacity as Administrative Agent (previously filed as Exhibit                10.2 to                the Registrant’s current report on Form 8-K filed on April 13, 2005 and                incorporated herein by reference). |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                    10.9 |                    Addenda to Employment Agreements of Curtis B. McWilliams, Steven                D.                Shackelford, Michael T. Shepardson and Thomas G. Kindred, Jr. dated                as of                January 1, 2006 (filed herewith) . |
|--------|----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.1 | Certification                of Chief Executive Officer pursuant to Rule 13a-14(a) as adopted                pursuant                to Section 302 of the Sarbanes-Oxley Act of 2002 (filed                herewith). |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification                of Chief Financial Officer pursuant to Rule 13a-14(a) as adopted                pursuant                to Section 302 of the Sarbanes-Oxley Act of 2002 (filed                herewith). |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certification                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed                herewith). |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.2 | Certification                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed                herewith). |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

| Date:                August 8, 2006 | TRUSTREET                PROPERTIES, INC. |
|-------------------------------------|-------------------------------------------|
|                                |                                      |
|                                | By:                                       |   |
|                                |                                      |   |
|                                |                                      | /s/                CURTIS B. MCWILLIAMS |
|                                |                                      | Curtis                B. McWilliams |
|                                |                                      | Chief                Executive Officer |
|                                |                                      |   |
|                                |                                      |   |
|                                | By:                                       |   |
|                                |                                      |   |
|                                |                                      | /s/                STEVEN D. SHACKELFORD |
|                                |                                      | Steven                D. Shackelford |
|                                |                                      | Chief                Financial Officer |
|                                |                                      |   |

----

**EXHIBIT      INDEX**

|   | 2.1 | Agreement                and Plan of Merger by and between the Registrant and CNL Restaurant                Properties, Inc., dated as of August 9, 2004 (previously filed as                Exhibit                2.1 to the Registrant’s current report on Form 8-K filed on August 10,                2004 and incorporated herein by                reference). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2.2 | Agreements                and Plans of Merger by and among the Registrant, a separate, wholly-owned                subsidiary of the operating partnership of the Registrant and each                of the                18 CNL Income Funds (previously filed as Exhibits 2.2 - 2.19 to the                Registrant’s current report on Form 8-K filed on August 10, 2004 and                incorporated herein by reference). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.1 | Restated                Articles of Incorporation of the Registrant dated November 11, 1997,                as                amended by the Articles of Amendment to the Articles of Restatement                of the                Registrant dated February 24, 2005 and the Articles of Amendment                to the                Articles of Restatement of the Registrant dated February 24, 2005                (previously filed as Exhibit 3.1 to the Registrant’s quarterly report on                Form 10-Q for the fiscal quarter ended March 31, 2005 and incorporated                herein by reference). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.2 | Third                Amended and Restated Bylaws (previously filed as Exhibit 3.1 to the                Company’s current report on Form 8-K filed on August 15, 2005 and                incorporated herein by reference). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.1 | Specimen                of Common Stock Certificate (previously filed as Exhibit 4.1 to the                Registrant’s Registration Statement on Form S-4 (File No. 333-21403) and                incorporated herein by reference). |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.2 | Articles                Supplementary Classifying and Designating a Series of Preferred Stock                as                Series A Cumulative Convertible Preferred Stock (previously filed                as                Exhibit 3.2 to the Registrant’s current report on Form 8-K filed on                November 14, 1997 and incorporated herein by                reference). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.3 | Amendment                to Articles Supplementary Classifying and Designating a Series of                Preferred Stock as Series A Cumulative Convertible Preferred Stock                (previously filed as Exhibit 3.2 to the Registrant’s current report on                Form 8-K filed on February 25, 2005 and incorporated herein by                reference). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.4 | Articles                Supplementary Classifying and Designating a Series of Preferred Stock                as                8% Series B Convertible Preferred Stock (previously filed as Exhibit                4.01                to the Registrant’s Form 10-Q for the fiscal quarter ended June 30, 2003                and incorporated herein by                reference). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.5 | Articles                Supplementary Classifying and Designating a Series of Preferred Stock                as                8% Series B-1 Convertible Preferred Stock (previously filed as Exhibit                99.5 to the Registrant’s current report on Form 8-K filed on September 16,                2004 and incorporated herein by                reference). |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.6 | Articles                Supplementary Establishing and Fixing The Rights and Preferences                of 7.5%                Series C Redeemable Convertible Preferred Stock (previously filed                as                Exhibit 4.1 to the Registrant’s registration statement on Form 8-A (File                No. 001-13089) and incorporated herein by                reference). |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.7 | Specimen                of 7.5% Series C Redeemable Convertible Preferred Stock Certificate                (previously filed as Exhibit 4.2 to the Registrant’s registration                statement on Form 8-A (File No. 001-13089) and incorporated herein                by                reference). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.8 | Indenture                dated as of March 4, 2005, among Net Lease Funding 2005, LP, MBIA                Insurance Corporation and Wells Fargo Bank, N.A., as indenture trustee                relating to $275,000,000 Triple Net Lease Mortgage Notes, Series                2005                (previously filed as Exhibit 99.1 to the Registrant’s current report on                Form 8-K filed on March 10, 2005 and incorporated herein by                reference). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 4.9 | Securities                Purchase Agreement relating to the Series B Preferred Stock (previously                filed as Exhibit 4.02 to the Registrant’s Form 10-Q for the fiscal quarter                ended June 30, 2003 and incorporated herein by                reference). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.10 | Registration                Rights Agreement relating to Series B Preferred Stock (previously                filed as                Exhibit 4.03 to the Registrant’s Form 10-Q for the fiscal quarter ended                June 30, 2003 and incorporated herein by                reference). |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.11 | Stock                Purchase Warrant - Omnicron Master Trust (previously filed as Exhibit                4.04                to the Registrant’s Form 10-Q for the fiscal quarter ended June 30, 2003                and incorporated herein by                reference). |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.12 | Stock                Purchase Warrant - The Riverview Group, LLC (previously filed as                Exhibit                4.05 to the Registrant’s Form 10-Q for the fiscal quarter ended June 30,                2003 and incorporated herein by                reference). |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.13 | Indenture,                dated as of March 23, 2005, between the Registrant and Wells Fargo                Bank,                National Association, as trustee, relating to the Registrant’s 7 1⁄2% Senior                Notes due 2015 (previously filed as Exhibit 4.1 to the Registrant’s                current report on Form 8-K filed on March 28, 2005 and incorporated                herein                by reference). |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4* | Pursuant                to Regulation S-K Item 601(b)(4)(iii), the Registrant by this filing                agrees, upon request, to furnish to the Securities and Exchange Commission                a copy of instruments defining the rights of holders of long-term                debt of                the Registrant. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |     10.1 | Form                of Indemnification Agreement dated as of April 18, 1995, between                CNL                American Properties Fund, Inc. and each of James M. Seneff, Jr.,                Robert A.                Bourne, G. Richard Hostetter, J. Joseph Kruse, and Richard C. Huseman,                dated as of January 27, 1997, between CNL American Properties Fund,                Inc.                and Steven D. Shackelford, dated as of February 18, 1998, and between                CNL                American Properties Fund, Inc. and Curtis B. McWilliams, dated as                of                September 1, 1999, (included as Exhibit 10.9 to the Registration                Statement                of CNL American Properties Fund, Inc. (No. 333-15411) on Form S-11                and                incorporated herein by reference). |
|--------|------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |     10.2 | Employment                Agreement dated as of May 5, 2003 by and between CNL Franchise Network                GP                Corp. and Steven D. Shackelford (included as Exhibit 10.21 to the                Form                10-K for the year ended December 31, 2003 of CNL Restaurant Properties,                Inc. and incorporated herein by                reference). |
|--------|------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |     10.3 | Employment                Agreement dated as of May 5, 2003 by and between CNL Franchise Network                GP                Corp. and Curtis B. McWilliams (included as Exhibit 10.22 to the                Form 10-K                for the year ended December 31, 2003 of CNL Restaurant Properties,                Inc.                and incorporated herein by reference). |
|--------|------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |     10.4 | Employment                Agreement dated as of January 1, 2004 by and between CNL Restaurant                Investments, Inc. and Thomas G. Kindred, Jr. (included as Exhibit                10.23 to                Form 10-Q for the quarter ended March 31, 2004 of CNL Restaurant                Properties, Inc. and incorporated herein by reference).  |
|--------|------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                    10.5 | Employment                Agreement dated as of September 15, 2004 by and between CNL Restaurant                Capital GP, Corp. and Michael T. Shepardson. (filed                herewith). |
|--------|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                    10.6 |                    Registrant Flexible Incentive Plan, as amended, (previously filed                as                Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March                20, 2006 and incorporated herein by                reference). |
|--------|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 10.7 | Credit                Agreement, dated as of April 8, 2005, by and among the Registrant,                as                borrower, certain subsidiaries of the Registrant, as guarantors,                Bank of                America, N.A., as Administrative Agent, L/C Issuer and Swing Line                Lender, Bank of America Securities LLC, as Sole Lead Arranger and                Sole                Book Manager, Key Bank, National Association, as Syndication Agent,                Credit                Suisse First Boston, Societe Generale, and Wachovia Bank National                Association, as Co-Documentation Agents, and the lenders party thereto                (previously filed as Exhibit 10.1 to the Registrant’s current report on                Form 8-K filed on April 13, 2005 and incorporated herein by                reference). |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.8 | Pledge                Agreement, dated as of April 8, 2005, by substantially all of the                Borrower’s domestic subsidiaries, in favor of Bank of America, N.A., in                its capacity as Administrative Agent (previously filed as Exhibit                10.2 to                the Registrant’s current report on Form 8-K filed on April 13, 2005 and                incorporated herein by reference). |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.9 | Addenda                to Employment Agreements of Curtis B. McWilliams, Steven D. Shackelford,                Michael T. Shepardson and Thomas G. Kindred, Jr. dated as of January                1,                2006 (filed herewith) . |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.1 | Certification                of Chief Executive Officer pursuant to Rule 13a-14(a) as adopted                pursuant                to Section 302 of the Sarbanes-Oxley Act of 2002 (filed                herewith). |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification                of Chief Financial Officer pursuant to Rule 13a-14(a) as adopted                pursuant                to Section 302 of the Sarbanes-Oxley Act of 2002 (filed                herewith). |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certification                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed                herewith). |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.2 | Certification                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as                adopted                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed                herewith). |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----