##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


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

Commission file number: 0-49782





T REIT, Inc.


(Exact name of registrant as specified in its charter)


|                                                                    |  |                                         
|------------------------------------------------------------------- |  | ----------------------------------------
|Virginia                                                            |  | 52-2140299                              
|(State or other jurisdiction of
     incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

1551 N. Tustin Avenue, Suite 200


Santa Ana, California 92705


(Address of principal executive offices)


(877) 888-7348


(Registrants telephone number, including area code)





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


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

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


Title of Class:




o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o o þ


12b-2 o þ














---



##### 










T REIT, INC.


(A Virginia Corporation)


TABLE OF CONTENTS


|             |  |                                                                                                                      |     |      |    | 
|------------ |  | -------------------------------------------------------------------------------------------------------------------- | --- | ---- | -- | 
|             |  |                                                                                                                      |     | Page |   
|             |  |                                                                                                                      |     |      |   
|PART I      
|Item 1.      |  | Business                                                                                                             |     |      | 1  | 
|Item 1A.     |  | Risk Factors                                                                                                         |     |      | 6  | 
|Item 2.      |  | Properties                                                                                                           |     |      | 23 | 
|Item 3.      |  | Legal Proceedings                                                                                                    |     |      | 28 | 
|Item 4.      |  | Submission of Matters to a Vote of Security
    Holders                                                              |     |      | 29 | 
|            
|PART II     
|Item 5.      |  | Market for Registrants Common Equity,
    Related Shareholder Matters and Issuer Purchases of Equity
    Securities |     |      | 30 | 
|Item 6.      |  | Selected Financial Data                                                                                              |     |      | 31 | 
|Item 7.      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |     |      | 33 | 
|Item 7A.     |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |     |      | 56 | 
|Item 8.      |  | Financial Statements and Supplementary
    Data                                                                      |     |      | 58 | 
|Item 9.      |  | Changes in and Disagreements With
    Accountants on Accounting and Financial Disclosure                             |     |      | 58 | 
|Item 9A.     |  | Controls and Procedures                                                                                              |     |      | 58 | 
|Item 9B.     |  | Other Information                                                                                                    |     |      | 58 | 
|            
|PART III    
|Item 10.     |  | Directors and Executive Officers of the
    Registrant                                                               |     |      | 59 | 
|Item 11.     |  | Executive Compensation                                                                                               |     |      | 65 | 
|Item 12.     |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Shareholder Matters                   |     |      | 65 | 
|Item 13.     |  | Certain Relationships and Related
    Transactions                                                                   |     |      | 66 | 
|Item 14.     |  | Principal Accounting Fees and Services                                                                               |     |      | 68 | 
|            
|PART IV     
|Item 15.     |  | Exhibits and Financial Statement
    Schedules                                                                       |     |      | 70 | 
|SIGNATURES   |  |                                                                                                                      | 114 |     
|EXHIBIT 31.1
|EXHIBIT 31.2
|EXHIBIT 32.1
|EXHIBIT 32.2







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##### Table of Contents






PART I







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

OUR COMPANY






day-to month-to


888-7348.


Plan of Liquidation








---



##### Table of Contents





Developments During 2005




| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our plan of liquidation was approved by our shareholders on
    July 27, 2005, and we adopted the liquidation basis of
    accounting as of June 30, 2005.                                                            
|
| |  | In August 2005, we paid a liquidating distribution of
    approximately $18,000,000, or $3.91 per share.                                                                                                              
|
| |  | In accordance with the adoption of our plan of liquidation by
    our shareholders on July 27, 2005, all outstanding options
    under our equity compensation plans were forfeited and the plans
    were terminated.
|
| |  | We sold the following properties:                                                                                                                                                                                     



| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | County Center Drive, of which we owned 16%, on April 19,
    2005 for net proceeds to us of $603,000;                                                                                                                          
|
| |  | City Center West A, of which we owned 89.1%, on July 28,
    2005 for net proceeds to us of $13,379,000;                                                                                                                       
|
| |  | Emerald Plaza, of which we owned 2.7%, on November 10, 2005
    for net proceeds to us of $1,423,000; and                                                                                                                      
|
| |  | Pacific Corporate Park Complex, of which we owned 22.8% in each
    of the three buildings, on February 11, 2005, July 20,
    2005 and the final building on December 28, 2005 for total
    net proceeds to us of $2,271,000.

Developments During 2006




| |   |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------
| |  | In February 2006, we paid a liquidating distribution of
    $12,000,000, or $2.60 per share; and
|
| |  | We sold the following properties in 2006:                                                       



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | Reno Trademark, of which we owned 40%, on January 23, 2006
    for net proceeds to us of $2,310,000;     
|
| |  | Oakey Building, of which we owned 9.8%, on January 24, 2006
    for net proceeds to us of $1,123,000; and
|
| |  | University Heights, of which we owned 100%, on January 31,
    2006 for net proceeds to us of $2,765,000.

2



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CURRENT INVESTMENT OBJECTIVES AND POLICIES


General






| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | generate cash through the sale of our properties;                         
|
| |  | preserve and protect shareholder capital; and                             
|
| |  | realize capital appreciation upon the ultimate sale of our
    properties.



Disposition Strategies






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

Operating Strategies






| |   |                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | managing costs and seeking to minimize operating expenses by
    centralizing management, leasing, marketing, financing,
    accounting, renovation and data processing activities;
|
| |  | improving rental income and cash flow by aggressively marketing
    rentable space and raising rents when feasible;                                                                
|
| |  | emphasizing regular maintenance and periodic renovation to meet
    the needs of tenants and to maximize long-term returns; and                                                    
|
| |  | refinancing properties when favorable financing terms are
    available to increase the cash flow.                                                                                 

FINANCING POLICIES


debt-to debt-to




3



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TAX STATUS








DISTRIBUTION POLICY




COMPETITION








4



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GOVERNMENT REGULATIONS




Costs of Compliance with the Americans with Disabilities
Act.


Costs of Government Environmental Regulation and Private
Litigation.


Use of Hazardous Substances by Some of Our Tenants.


Other Federal, State and Local Regulations.


5



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SIGNIFICANT TENANTS




|                       |  |              |           |               |             |  |       |          |  |                |                 |  |       |                 |        |  |  |  |               | 
|---------------------- |  | ------------ | --------- | ------------- | ----------- |  | ----- | -------- |  | -------------- | --------------- |  | ----- | --------------- | ------ |  |  |  | ------------- | 
|                       |  |              |           | Percentage of |             |  |       |          |  |                |                
|                       |  | 2005 Annual  |           |               | 2005 Annual |  |       |          |  | Square Footage |                 |  | Lease |                
|Tenant                 |  | Base Rent(1) |           |               | Base Rent   |  |       | Property |  |                | (Approximately) |  |       | Expiration Date |       
|                       |  |              |           |               |             |  |       |          |  |                |                 |  |       |                 |       
|Netsolve, Inc.         |  | $            | 1,112,000 |               |             |  | 41.0% |          |  |                | AmberOaks       |  |       |                 | 78,000 |  |  |  | April 2007    | 
|Newell Rubbermaid      |  | $            | 493,000   |               |             |  | 18.2% |          |  |                | AmberOaks       |  |       |                 | 51,000 |  |  |  | April 2007    | 
|General Services Admin |  | $            | 327,000   |               |             |  | 12.1% |          |  |                | University Hgts |  |       |                 | 21,000 |  |  |  | November 2015 | 






|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(1) | Annualized rental income is based on contractual base rent set
    forth in leases in effect as of December 31, 2005.

tenant-in


EMPLOYEES




FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS









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

Risks Associated with Our Liquidation




| |                                                  
| | -------------------------------------------------
| | We may delay or reduce our liquidating dividends.





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



6



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





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





| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | adverse changes in economic conditions;                                                                                      
|
| |  | the financial performance of our tenants, and the ability of our
    tenants to satisfy their obligations under their leases;
|
| |  | terminations and renewals of leases by our tenants;                                                                          
|
| |  | competition; and                                                                                                             
|
| |  | changes in real estate tax rates and other operating expenses.                                                               





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



7



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| |                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are not able to sell our remaining properties in a
    timely manner, we may experience severe liquidity problems, may
    not be able to meet the demands of our creditors, and ultimately
    become subject to bankruptcy proceedings.





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





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



8



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





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





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





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

winding-up


9



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





| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have terminated our regular monthly distributions and
    future liquidating distributions will be determined at the sole
    discretion of our board of directors.





| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Distributions by us, including liquidating distributions,
    may include a return of capital.





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





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





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



10



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| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Our officers and directors and our Advisor have conflicts
    of interest that differ from our shareholders as a result of the
    liquidation.













11



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

24-month 24-month




| |                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We do not have an executed advisory agreement, and we
    could lose the services of our Advisor, which may increase
    operating expenses, and delay or reduce our liquidating
    distributions.

month-to


12



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| |                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our Advisor is unable to retain our key executives and
    sufficient staff members to complete our plan of liquidation in
    a reasonably expeditious manner, our liquidating distributions
    might be delayed or reduced.







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





| |                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to realize the value of a promissory note
    taken as part of any purchase price, our liquidating
    distributions might be reduced.





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

going-concern


13



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| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | We may be unable to sell jointly held properties or our
    interests in limited liability companies at our expected
    value.





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







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



14



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| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | Our Advisor is entitled to a share of the distributions of
    the assets of the operating partnership upon its
    liquidation.



Other Risks of Our Business




| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The pending SEC investigation of our Advisor could result
    in regulatory actions against us which could negatively impact
    our ability to pay distributions.

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




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





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



15



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| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | We are currently involved in litigation, which could
    reduce the amount of our liquidation distributions.







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





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



16



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





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





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





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



17



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





| |                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Due to the limited number of properties in our portfolio,
    we are dependent upon those tenants that generate significant
    rental income, which may have a negative impact on our financial
    condition if these tenants are unable to meet their rental
    obligations.





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





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



18



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| |   |                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the risk that the co-owner(s) in the investment might become
    bankrupt;                                                                                                                                                                           
|
| |  | the risk that the co-owner(s) may at any time have economic or
    business interests or goals which are inconsistent with our
    business interests or goals;                                                                                      
|
| |  | the risk that the co-owner(s) may not be able to make required
    payments on loans under which we are jointly and severally
    liable;                                                                                                            
|
| |  | the risk that all the co-owners may not approve refinancings,
    leases and lease amendments requiring unanimous consent of
    co-owners that would have adverse consequences for our
    shareholders; or                                         
|
| |  | the risk that the co-owner(s) may be in a position to take
    action contrary to our instructions or requests or contrary to
    our policies or objectives, such as selling a property at a time
    when it would have adverse consequences to us.





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





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

day-to




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



19



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





| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we purchased assets at a time when the commercial real
    estate market was experiencing substantial influxes of capital
    investment and competition for properties, the real estate we
    purchased may not have appreciated or may have decreased in
    value.



20



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





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





| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | The conflicts of interest of our Advisors officers
    and managers mean we will not be managed solely in the best
    interests of our shareholders.





| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limit the time and services that our Advisor devotes to us,
    because they will be providing similar services to G REIT, Inc.,
    NNN 2002 Value Fund, LLC, NNN 2003 Value Fund, LLC and
    other real estate programs and properties;
|
| |  | impair our ability to compete for tenants in geographic areas
    where other properties are advised by our Advisor and its
    affiliates; and                                                                                           
|
| |  | impair our ability to compete for the disposition of properties
    with other real estate entities that are also advised by our
    Advisor and its affiliates.                                                                          





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



21



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##### Table of Contents



Risks Associated With Being a REIT




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





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







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







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



22



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










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

Real Estate Investments








|                              |  |                   |                 |  |             |   |           |       |      |  |          |        |  |         |            |  |              |             |            |              |  |  |       |   |  |   |       | 
|----------------------------- |  | ----------------- | --------------- |  | ----------- | - | --------- | ----- | ---- |  | -------- | ------ |  | ------- | ---------- |  | ------------ | ----------- | ---------- | ------------ |  |  | ----- | - |  | - | ----- | 
|                              |  |                   |                 |  |             | % |           |       | Date |  |          | Annual |  |         | % Physical |  |              | Annual Rent |           
|Property Name                 |  | Property Location |                 |  | GLA (Sq Ft) |   |           | Owned |      |  | Acquired |        |  | Rent(1) |            |  | Occupancy(2) |             |            | per Sq Ft(3) | 
|                              |  |                   |                 |  |             |   |           |       |      |  |          |        |  |         |            |  |              |             |            |              | 
|Consolidated Properties:      |  |                   |                 |  |             |   |           |       |      |  |          |        |  |         |            |  |              |             |            |              |  |  |       |   |  |   |       | 
|University Heights            |  |                   | San Antonio, TX |  |             |   | 68,000    |       |      |  | 100.0    | %      |  |         | 08/22/02   |  |              | $           | 665,000    |              |  |  | 76.7  | % |  | $ | 12.75 | 
|AmberOaks Corporate Center    |  |                   | Austin, TX      |  |             |   | 207,000   |       |      |  | 75.0     |        |  |         | 01/20/04   |  |              |             | 2,062,000  |              |  |  | 78.7  |   |  |   | 12.66 | 
|                              |  |                   |                 |  |             |   |           |       |      |  |          |        |  |         |            |  |              |             |            |              | 
|Total/ Weighted-Average       |  |                   |                 |  |             |   | 275,000   |       |      |  |          |        |  |         |            |  |              | $           | 2,727,000  |              |  |  | 78.2  | % |  | $ | 12.68 | 
|                              |  |                   |                 |  |             |   |           |       |      |  |          |        |  |         |            |  |              |             |            |              | 
|Unconsolidated Properties:    |  |                   |                 |  |             |   |           |       |      |  |          |        |  |         |            |  |              |             |            |              |  |  |       |   |  |   |       | 
|Reno Trademark Building  TIC |  |                   | Reno, NV        |  |             |   | 75,000    |       |      |  | 40.0     | %      |  |         | 09/04/01   |  |              | $           | 816,000    |              |  |  | 100.0 | % |  | $ | 10.84 | 
|Titan Building & Plaza  TIC  |  |                   | San Antonio, TX |  |             |   | 131,000   |       |      |  | 48.5     |        |  |         | 04/17/02   |  |              |             | 1,800,000  |              |  |  | 92.0  |   |  |   | 14.94 | 
|Congress Center  LLC         |  |                   | Chicago, IL     |  |             |   | 525,000   |       |      |  | 10.3     |        |  |         | 01/09/03   |  |              |             | 12,737,000 |              |  |  | 90.3  |   |  |   | 26.87 | 
|Enclave Parkway  LLC         |  |                   | Houston, TX     |  |             |   | 207,000   |       |      |  | 3.3      |        |  |         | 12/22/03   |  |              |             | 3,768,000  |              |  |  | 99.5  |   |  |   | 18.29 | 
|Oakey Building  LLC          |  |                   | Las Vegas, NV   |  |             |   | 98,000    |       |      |  | 9.8      |        |  |         | 04/02/04   |  |              |             | 2,285,000  |              |  |  | 100.0 |   |  |   | 23.32 | 
|                              |  |                   |                 |  |             |   |           |       |      |  |          |        |  |         |            |  |              |             |            |              | 
|Total/ Weighted-Average       |  |                   |                 |  |             |   | 1,036,000 |       |      |  |          |        |  |         |            |  |              | $           | 21,406,000 |              |  |  | 94.0  | % |  | $ | 23.36 | 
|                              |  |                   |                 |  |             |   |           |       |      |  |          |        |  |         |            |  |              |             |            |              | 

23



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|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(1) | Annualized rental income is based on contractual base rent from
    leases in effect as of December 31, 2005.
|   
|(2) | Physical occupancy as of December 31, 2005.                                                                  
|   
|(3) | Average effective annual rent per square foot as of
    December 31, 2005.                                   







| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we believe all of the properties are adequately covered by
    insurance and are suitable for their intended purposes;                              
|
| |  | we have no plans for any material renovations, improvements or
    development of the properties, except in accordance with planned
    budgets; and
|
| |  | our properties are located in markets where we are subject to
    competition for attracting new tenants and retaining current
    tenants.         



T REIT, Inc.





24



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##### Table of Contents



Congress Center







AmberOaks Corporate Center







25



---



##### Table of Contents



Enclave Parkway







Oakey Building







26



---



##### Table of Contents



Reno Trademark







Titan Building and Plaza







27



---



##### Table of Contents



Lease Expiration Table




|                        |       |           |   |           |          |      |             |             |  |             |            |     |   |   |           |           | 
|----------------------- | ----- | --------- | - | --------- | -------- | ---- | ----------- | ----------- |  | ----------- | ---------- | --- | - | - | --------- | --------- | 
|                        |       |           |   |           |          | % of |             |             | 
|                        |       |           |   | Total Sq. |          |      | Leased Area |             |  | Annual Base |           
|                        |       | Number    |   |           | Ft. of   |      |             | Represented |  |             | Rent Under |    
|                        |       | of Leases |   |           | Expiring |      |             | by Expiring |  |             | Expiring   |    
|Year Ending December 31 |       | Expiring  |   |           | Leases   |      |             | Leases      |  |             | Leases     |    
|                        |       |           |   |           |          |      |             |             |  |             |            |    
|2006                    |       |           | 8 |           |          |      | 41,000      |             |  |             | 19.1       | %   |   | $ | 533,000   |          
|2007                    |       |           | 2 |           |          |      | 80,000      |             |  |             | 37.4       |     |   |   | 1,130,000 |          
|2008                    |       |           | 3 |           |          |      | 63,000      |             |  |             | 29.6       |     |   |   | 621,000   |          
|2009                    |       |           | 1 |           |          |      | 3,000       |             |  |             | 1.5        |     |   |   | 35,000    |          
|2010                    |       |           | 1 |           |          |      | 3,000       |             |  |             | 1.3        |     |   |   | 32,000    |          
|2011                    |       |           | 1 |           |          |      | 3,000       |             |  |             | 1.3        |     |   |   | 34,000    |          
|2012                    |       |           | 0 |           |          |      |            |             |  |             |           |     |   |   |          |          
|2013                    |       |           | 0 |           |          |      |            |             |  |             |           |     |   |   |          |          
|2014                    |       |           | 0 |           |          |      |            |             |  |             |           |     |   |   |          |          
|2015                    |       |           | 1 |           |          |      | 21,000      |             |  |             | 9.8        |     |   |   | 327,000   |          
|Thereafter              |       |           | 0 |           |          |      |            |             |  |             |           |     |   |   |          |          
|                        |       |           |   |           |          |      |             |             |  |             |            |    
|                        | Total |           |   | 17        |          |      |             | 214,000     |  |             |            | 100 | % |   | $         | 2,712,000 | 
|                        |       |           |   |           |          |      |             |             |  |             |            |    

Indebtedness









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

SEC Investigation


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


Accounting for
Contingencies


Prior Performance Tables




28



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##### Table of Contents





Litigation













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



29



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PART II







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

Market Information








Shareholders




Distributions






Equity Compensation Plan Information




30



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



10-K.


|                                                         |  |                   |            | 
|-------------------------------------------------------- |  | ----------------- | ---------- | 
|                                                         |  | Liquidation Basis |           
|                                                         |  |                   |           
|                                                         |  | As of             |           
|Selected Financial Data(1)                               |  | December 31, 2005 |           
|                                                         |  |                   |           
|STATEMENT OF NET ASSETS:                                 |  |                   |            | 
|Total assets                                             |  | $                 | 48,322,000 | 
|Mortgage loans payable secured by property held for sale |  |                   | 15,464,000 | 
|Net assets in liquidation                                |  |                   | 32,529,000 | 
|Net asset value per share                                |  | $                 | 7.06       | 

|                                                                                 |                                          |                   |             |            | 
|-------------------------------------------------------------------------------- | ---------------------------------------- | ----------------- | ----------- | ---------- | 
|                                                                                 |                                          | Liquidation Basis |            
|                                                                                 |                                          |                   |            
|                                                                                 |                                          | Period from       |            
|                                                                                 |                                          | June 30, 2005     |            
|                                                                                 |                                          | through           |            
|                                                                                 |                                          | December 31, 2005 |            
|                                                                                 |                                          |                   |            
|STATEMENT OF CHANGES IN NET ASSETS:                                              |                                          |                   |             |           
|Net assets in liquidation, beginning of period                                   |                                          | $                 | 47,953,000  |           
|                                                                                 |                                          |                   |            
|Change in estimated receipts in excess of estimated costs during
    liquidation |                                          |                   | (1,689,000  | )         
|Net increase in fair value                                                       |                                          |                   | 4,265,000   |           
|Distributions to shareholders                                                    |                                          |                   | (18,000,000 | )         
|                                                                                 |                                          |                   |            
|Change in net assets in liquidation                                              |                                          |                   | (15,424,000 | )         
|                                                                                 |                                          |                   |            
|                                                                                 | Net assets in liquidation, end of period |                   | $           | 32,529,000 | 
|                                                                                 |                                          |                   |            

|                                                         |  |                     |            |  |      |   |            |      |  |   |            |  |  |   |            | 
|-------------------------------------------------------- |  | ------------------- | ---------- |  | ---- | - | ---------- | ---- |  | - | ---------- |  |  | - | ---------- | 
|                                                         |  | Going Concern Basis |           
|                                                         |  |                     |           
|                                                         |  | As of               |           
|                                                         |  | December 31,        |           
|                                                         |  |                     |           
|Selected Financial Data(1)                               |  | 2004                |            |  | 2003 |   |            | 2002 |  |   | 2001       | 
|                                                         |  |                     |            |  |      |   |            |      |  |   |            | 
|BALANCE SHEET DATA:                                      |  |                     |            |  |      |   |            |      |  |   |            |  |  |   |            | 
|Total assets                                             |  | $                   | 60,553,000 |  |      | $ | 49,369,000 |      |  | $ | 67,769,000 |  |  | $ | 45,441,000 | 
|Mortgage loans payable, including property held for sale |  |                     | 19,285,000 |  |      |   | 9,250,000  |      |  |   | 28,090,000 |  |  |   | 24,737,000 | 
|Shareholders equity                                     |  |                     | 36,819,000 |  |      |   | 38,107,000 |      |  |   | 38,216,000 |  |  |   | 19,765,000 | 
|Book value per share                                     |  | $                   | 7.98       |  |      | $ | 8.20       |      |  | $ | 8.14       |  |  | $ | 8.00       | 

31



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|                                                                       |                                            |                     |            |       |                          |   |             |      |  |   |           |      |  |      |             |       |   |   |            |       |  
|---------------------------------------------------------------------- | ------------------------------------------ | ------------------- | ---------- | ----- | ------------------------ | - | ----------- | ---- |  | - | --------- | ---- |  | ---- | ----------- | ----- | - | - | ---------- | ----- | -
|                                                                       |                                            | Going Concern Basis |           
|                                                                       |                                            |                     |           
|                                                                       |                                            | Period from         |            |       |                         
|                                                                       |                                            | January 1, 2005     |            |       | Years Ended December 31, |  
|                                                                       |                                            | through             |            |       |                          |  
|                                                                       |                                            | June 30, 2005       |            |       | 2004                     |   |             | 2003 |  |   | 2002      |      |  | 2001 |            
|                                                                       |                                            |                     |            |       |                          |   |             |      |  |   |           |      |  |      |            
|OPERATING DATA:                                                        |                                            |                     |            |       |                          |   |             |      |  |   |           |      |  |      |             |       |   |   |            |      
|Total revenues                                                         |                                            | $                   |           |       |                          | $ |            |      |  | $ |          |      |  | $    |            |       |   | $ |           |      
|Income (loss) from continuing operations                               |                                            |                     | 332,000    |       |                          |   | 47,000      |      |  |   | 499,000   |      |  |      | (88,000     | )     |   |   | (408,000   | )    
|Income (loss) from discontinued operations, including gain on
    sale |                                            |                     | (272,000   | )     |                          |   | 2,497,000   |      |  |   | 3,690,000 |      |  |      | 2,381,000   |       |   |   | (56,000    | )    
|Net income (loss)                                                      |                                            |                     | 60,000     |       |                          |   | 2,544,000   |      |  |   | 4,189,000 |      |  |      | 2,293,000   |       |   |   | (464,000   | )    
|Income (loss) per common share, basic and diluted(2):                  |                                            |                     |            |       |                          |   |             |      |  |   |           |      |  |      |             |       |   |   |            |      
|                                                                       | Income (loss) from continuing operations   |                     | $          | 0.07  |                          |   | $           | 0.01 |  |   | $         | 0.11 |  |      | $           | (0.02 | ) |   | $          | (0.29 | )
|                                                                       | Income (loss) from discontinued operations |                     |            | (0.06 | )                        |   |             | 0.54 |  |   |           | 0.79 |  |      |             | 0.59  |   |   |            | (0.04 | )
|                                                                       |                                            |                     |            |       |                          |   |             |      |  |   |           |      |  |      |            
|                                                                       | Net income(loss)                           |                     | $          | 0.01  |                          |   | $           | 0.55 |  |   | $         | 0.90 |  |      | $           | 0.57  |   |   | $          | (0.33 | )
|                                                                       |                                            |                     |            |       |                          |   |             |      |  |   |           |      |  |      |            
|OTHER DATA:                                                            |                                            |                     |            |       |                          |   |             |      |  |   |           |      |  |      |             |       |   |   |            |      
|Cash flows provided by (used in) operating activities                  |                                            | $                   | 883,000    |       |                          | $ | 3,590,000   |      |  | $ | 2,950,000 |      |  | $    | 2,290,000   |       |   | $ | (1,242,000 | )    
|Cash flows provided by (used in) investing activities                  |                                            |                     | 249,000    |       |                          |   | (14,333,000 | )    |  |   | 2,517,000 |      |  |      | (19,279,000 | )     |   |   | (7,492,000 | )    
|Cash flows (used in) provided by financing activities                  |                                            |                     | (2,121,000 | )     |                          |   | 5,783,000   |      |  |   | 593,000   |      |  |      | 19,471,000  |       |   |   | 12,133,000 |      
|Distributions declared                                                 |                                            | $                   | 1,910,000  |       |                          | $ | 3,806,000   |      |  | $ | 3,843,000 |      |  | $    | 3,312,000   |       |   | $ | 1,146,000  |      
|Distributions declared per share(2)                                    |                                            | $                   | 0.41       |       |                          | $ | 0.82        |      |  | $ | 0.82      |      |  | $    | 0.83        |       |   | $ | 0.83       |      
|Funds from operations(3)                                               |                                            | $                   | 1,516,000  |       |                          | $ | 3,487,000   |      |  | $ | 3,307,000 |      |  | $    | 2,825,000   |       |   | $ | 308,000    |      






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pursuant to our plan of liquidation, certain amounts in the
    prior years have been reclassified as discontinued operations
    related to all properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(2) | Net income (loss) and distributions per share are based upon the
    weighted-average number of shares of our common stock
    outstanding. Distributions by us of our current and accumulated
    earnings and profits for federal income tax purposes are taxable
    to shareholders as ordinary income. Distributions in excess of
    these earnings and profits generally are treated as a
    non-taxable reduction of the shareholders basis in the
    shares to the extent thereof (a return of capital for tax
    purposes) and, thereafter, as taxable gain. These distributions
    in excess of earnings and profits will have the effect of
    deferring taxation of the distributions until the sale of the
    shareholders common stock.                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(3) | Prior to the adoption of our plan of liquidation, one of our
    primary objectives was to provide cash distributions to our
    shareholders from cash generated by our operations. We consider
    Funds from Operations, or FFO, to be an appropriate supplemental
    measure of a REITs operating performance, as it is based
    on a net income analysis of property portfolio performance that
    excludes non-cash items such as depreciation. We computed FFO in
    accordance with the White Paper on FFO approved by the Board of
    Governors of the National Association of Real Estate Investment
    Trusts, or NAREIT, as revised in February 2004. The White Paper
    defines FFO as net income or loss computed in accordance with
    GAAP, excluding extraordinary items, as defined by GAAP, and
    gains and losses from sales of depreciable operating property,
    plus real estate related depreciation and amortization
    (excluding amortization of deferred financing costs and
    depreciation of non-real estate assets), and after adjustment
    for unconsolidated partnerships and joint ventures. Other REITs
    may use different

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| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | methodologies for calculating FFO, and accordingly, our FFO may
    not be comparable to other REITs.












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

The following discussion should be read in conjunction with
Item 6, Selected Financial Data, and our
historical consolidated financial statements and related notes
thereto included elsewhere in this report.


Forward-Looking Statements




33



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##### Table of Contents





Overview and Background






day-to month-to


Business Strategy and Plan of Liquidation




34



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##### Table of Contents







Dispositions in 2005




| |                                                          
| | ---------------------------------------------------------
| | 25351 Commerce Centre Drive  Lake Forest,
    California





| |                                               
| | ----------------------------------------------
| | County Center Drive  Temecula,
    California





| |                                                          
| | ---------------------------------------------------------
| | 25391 Commerce Centre Drive  Lake Forest,
    California



35



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##### Table of Contents





| |                                             
| | --------------------------------------------
| | City Center West A  Las Vegas,
    Nevada





| |                                          
| | -----------------------------------------
| | Emerald Plaza  San Diego,
    California





| |                                                          
| | ---------------------------------------------------------
| | 25371 Commerce Centre Drive  Lake Forest,
    California



Acquisitions in 2004




| |                          
| | -------------------------
| | AmberOaks  Austin, Texas

tenant-in




36



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##### Table of Contents







| |                                               
| | ----------------------------------------------
| | Gateway Mall Land  Bismarck, North
    Dakota





| |                                   
| | ----------------------------------
| | Oakey Building  Las Vegas, Nevada





| |                                          
| | -----------------------------------------
| | Emerald Plaza  San Diego,
    California





|                                                                          |  |                 
|------------------------------------------------------------------------- |  | ----------------
|AWT Family LP, a limited partnership 70% owned by Anthony
    W. Thompson |  | 1.9%            
|NNN Emerald Plaza, LLC                                                    |  | 20.5%           
|Unaffiliated third parties                                                |  | 77.6% (combined)



|                         |  |                        |      |   |                           |  |      |  
|------------------------ |  | ---------------------- | ---- | - | ------------------------- |  | ---- | -
|                         |  | Membership Interest in |      |   |                          
|Member                   |  | NNN Emerald Plaza, LLC |      |   | Interest in Emerald Plaza | 
|                         |  |                        |      |   |                           | 
|NNN 2003 Value Fund, LLC |  |                        | 22.2 | % |                           |  | 4.6  | %
|T REIT, L.P.             |  |                        | 13.2 | % |                           |  | 2.7  | %
|Affiliated Members       |  |                        | 0.4  | % |                           |  | 0.08 | %
|Unaffiliated Members     |  |                        | 64.2 | % |                           |  | 13.2 | %





37



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Dispositions in 2004




| |                                      
| | -------------------------------------
| | Gateway Mall  Bismarck, North Dakota





| |                                               
| | ----------------------------------------------
| | Gateway Mall Land  Bismarck, North
    Dakota





| |                                                           
| | ----------------------------------------------------------
| | Saddleback Financial Center  Laguna Hills,
    California



Acquisitions in 2003




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





|                                         |  |               |                  | 
|---------------------------------------- |  | ------------- | ---------------- | 
|Tenant in Common                         |  | Interest Held |                 
|                                         |  |               |                 
|G REIT, Inc. (our affiliate)             |  |               | 30.0%            | 
|NNN Congress Center, LLC (our affiliate) |  |               | 28.9%            | 
|Unaffiliated third parties               |  |               | 41.1% (combined) | 

38



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|                         |  |                          |                  |  |                             |  |                 | 
|------------------------ |  | ------------------------ | ---------------- |  | --------------------------- |  | --------------- | 
|                         |  | Membership Interest in   |                  |  |                            
|Member                   |  | NNN Congress Center, LLC |                  |  | Interest in Congress Center | 
|                         |  |                          |                  |  |                             | 
|NNN 2002 Value Fund, LLC |  |                          | 42.5%            |  |                             |  | 12.3%           | 
|T REIT, Inc.             |  |                          | 35.5%            |  |                             |  | 10.3%           | 
|Unaffiliated members     |  |                          | 22.0% (combined) |  |                             |  | 6.3% (combined) | 



30-day 30-day 30-year




| |                                      
| | -------------------------------------
| | Gateway Mall  Bismarck, North Dakota

45-acre 5-year




| |                                 
| | --------------------------------
| | Enclave Parkway  Houston, Texas



Dispositions in 2003




| |                                                        
| | -------------------------------------------------------
| | Northstar Crossing Shopping Center  Garland,
    Texas



39



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##### Table of Contents





| |                                                       
| | ------------------------------------------------------
| | Thousand Oaks Shopping Center 
    San Antonio, Texas





| |                                                              
| | -------------------------------------------------------------
| | Pahrump Valley Junction Shopping Center 
    Pahrump, Nevada



Critical Accounting Policies




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





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





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



40



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|                                                                                       |                                                                                     |          |            |            |                |   |            |            |   |   |              |            |   |   |            |            |  
|-------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | -------- | ---------- | ---------- | -------------- | - | ---------- | ---------- | - | - | ------------ | ---------- | - | - | ---------- | ---------- | -
|                                                                                       |                                                                                     | June 30, |            |            | Cash Payments  |   |            | Change in  |   |   | December 31, |           
|                                                                                       |                                                                                     | 2005     |            |            | and (Receipts) |   |            | Estimates  |   |   | 2005         |           
|                                                                                       |                                                                                     |          |            |            |                |   |            |            |   |   |              |           
|Assets:                                                                                |                                                                                     |          |            |            |                |   |            |            |   |   |              |            |   |   |            |           
|                                                                                       | Estimated net inflows from consolidated and unconsolidated
    operating activities |          | $          | 3,808,000  |                |   | $          | (2,034,000 | ) |   | $            | 860,000    |   |   | $          | 2,634,000  |  
|Liabilities:                                                                           |                                                                                     |          |            |            |                |   |            |            |   |   |              |            |   |   |            |           
|                                                                                       | Liquidation costs                                                                   |          |            | (1,464,000 | )              |   |            | 387,000    |   |   |              | (74,000    | ) |   |            | (1,151,000 | )
|                                                                                       | Distributions                                                                       |          |            | (316,000   | )              |   |            | 316,000    |   |   |              |           |   |   |            |           |  
|                                                                                       | Other                                                                               |          |            | (72,000    | )              |   |            | 238,000    |   |   |              | (1,382,000 | ) |   |            | (1,216,000 | )
|                                                                                       |                                                                                     |          |            |            |                |   |            |            |   |   |              |           
|                                                                                       |                                                                                     |          | (1,852,000 | )          |                |   | 941,000    |            |   |   | (1,456,000   | )          |   |   | (2,367,000 | )         
|                                                                                       |                                                                                     |          |            |            |                |   |            |            |   |   |              |           
|Total asset for estimated receipts in excess of estimated costs
    during liquidation |                                                                                     | $        | 1,956,000  |            |                | $ | (1,093,000 | )          |   | $ | (596,000     | )          |   | $ | 267,000    |           
|                                                                                       |                                                                                     |          |            |            |                |   |            |            |   |   |              |           



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



|                                                                                  |  |   |            |  
|--------------------------------------------------------------------------------- |  | - | ---------- | -
|Shareholders equity as of June 30, 2005 
    going concern basis                |  | $ | 34,922,000 |  
|Increase due to estimated net realizable value of operating
    properties        |  |   | 4,734,000  |  
|Increase due to estimated net realizable value of unconsolidated
    investment   |  |   | 8,559,000  |  
|Assets for estimated receipts in excess of estimated costs
    during liquidation |  |   | 1,956,000  |  
|Decrease due to the write-off of other intangible assets                          |  |   | (2,218,000 | )
|                                                                                  |  |   |           
|Adjustment to reflect the change to the liquidation basis of
    accounting       |  |   | 13,031,000 |  
|                                                                                  |  |   |           
|Estimated value of net assets in liquidation as of June 30,
    2005              |  | $ | 47,953,000 |  
|                                                                                  |  |   |           





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

Accounting for the Impairment or Disposal of
Long Lived Assets


41



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##### Table of Contents









| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Revenue Recognition, Tenant Receivables and Allowance for
    Uncollectible Accounts

Accounting for Leases






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





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



42



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##### Table of Contents







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



Qualification as a REIT






Factors Which May Influence Future Changes in Net Assets in
Liquidation




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





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





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



43



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##### Table of Contents





Changes In Net Assets In Liquidation




| |                                                        
| | -------------------------------------------------------
| | Period from June 30, 2005 through December 31,
    2005



Results of Operations






| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | Comparison of the results of operations for the period
    from January 1, 2005 through June 30, 2005 to the year
    ended December 31, 2004





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





| |             
| | ------------
| | Other Income





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



44



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





| |                                      
| | -------------------------------------
| | Gain on Sale of Marketable Securities





| |                                           
| | ------------------------------------------
| | Gain on Sale of Unconsolidated Real Estate





| |                                                 
| | ------------------------------------------------
| | Equity in Earnings of Unconsolidated Real Estate





| |                                         
| | ----------------------------------------
| | Income (Loss) From Continuing Operations





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





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





| |           
| | ----------
| | Net Income



45



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##### Table of Contents





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



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





| |             
| | ------------
| | Other Income





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





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





| |                                      
| | -------------------------------------
| | Gain on Sale of Marketable Securities





| |                                                 
| | ------------------------------------------------
| | Equity in Earnings of Unconsolidated Real Estate





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





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



46



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##### Table of Contents







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





| |           
| | ----------
| | Net Income



Liquidity and Capital Resources






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







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





47



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##### Table of Contents













|                  |  |                          |           |  |      |  |       |      |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|----------------- |  | ------------------------ | --------- |  | ---- |  | ----- | ---- |  | - | --------- |  |  |  | ----- | - |  | - | --------- |  |  |  | ----- | -
|                  |  | Years Ended December 31, |          
|                  |  |                          |          
|                  |  | 2005                     |           |  | 2004 |  |       | 2003 | 
|                  |  |                          |           |  |      |  |       |      | 
|Ordinary income   |  | $                        | 157,000   |  |      |  | 6.2   | %    |  | $ | 930,000   |  |  |  | 24.4  | % |  | $ | 332,000   |  |  |  | 8.6   | %
|Capital gain      |  |                          | 614,000   |  |      |  | 24.3  | %    |  |   | 2,877,000 |  |  |  | 75.6  | % |  |   | 1,519,000 |  |  |  | 39.5  | %
|Return of capital |  |                          | 1,759,000 |  |      |  | 69.5  | %    |  |   |          |  |  |  |      |   |  |   | 1,993,000 |  |  |  | 51.9  | %
|                  |  |                          |           |  |      |  |       |      |  |   |           |  |  |  |       |   |  |  
|                  |  | $                        | 2,530,000 |  |      |  | 100.0 | %    |  | $ | 3,807,000 |  |  |  | 100.0 | % |  | $ | 3,844,000 |  |  |  | 100.0 | %
|                  |  |                          |           |  |      |  |       |      |  |   |           |  |  |  |       |   |  |  







48



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##### Table of Contents







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



| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Comparison of the period from January 1, 2005 through
    June 30, 2005 to the year ended December 31, 2004











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











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



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





49



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##### Table of Contents









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











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



50



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##### Table of Contents





|                                    |  |            |       |               |              |   |                |            |              |               |              |  |                |            |             |  |  |   |            | 
|----------------------------------- |  | ---------- | ----- | ------------- | ------------ | - | -------------- | ---------- | ------------ | ------------- | ------------ |  | -------------- | ---------- | ----------- |  |  | - | ---------- | 
|                                    |  |            |       | Mortgage and  |              |   |                |            | Mortgage and |               |              | 
|                                    |  |            |       | Other Debt    |              |   |                |            | Other Debt   |               |              | 
|                                    |  |            |       | Balance as of |              |   | T REIT, Inc.s |            |              | Balance as of |              |  | T REIT, Inc.s |           
|                                    |  | Ownership  |       |               | December 31, |   |                | Portion of |              |               | December 31, |  |                | Portion of |            
|Property                            |  | Percentage |       |               | 2005         |   |                | Debt       |              |               | 2004         |  |                | Debt       |            
|                                    |  |            |       |               |              |   |                |            |              |               |              |  |                |            |            
|Reno Trademark Building  TIC       |  |            | 40.0% |               |              | $ | 4,449,000      |            |              | $             | 1,780,000    |  |                | $          | 4,504,000   |  |  | $ | 1,802,000  | 
|County Center Drive                 |  |            | 16.0% |               |              |   |               |            |              |               |             |  |                |            | 3,103,000   |  |  |   | 496,000    | 
|City Center West A Building  TIC |  |            | 89.1% |               |              |   |               |            |              |               |             |  |                |            | 12,484,000  |  |  |   | 11,127,000 | 
|Titan Building & Plaza  TIC        |  |            | 48.5% |               |              |   | 5,900,000      |            |              |               | 2,861,000    |  |                |            | 5,795,000   |  |  |   | 2,811,000  | 
|Pacific Corporate Park  LLC        |  |            | 22.8% |               |              |   |               |            |              |               |             |  |                |            | 5,554,000   |  |  |   | 1,266,000  | 
|Congress Center  LLC               |  |            | 10.3% |               |              |   | 97,500,000     |            |              |               | 9,962,000    |  |                |            | 97,500,000  |  |  |   | 9,962,000  | 
|Enclave Parkway  LLC               |  |            | 3.3%  |               |              |   | 23,000,000     |            |              |               | 749,000      |  |                |            | 23,310,000  |  |  |   | 759,000    | 
|Oakey Building  LLC                |  |            | 9.8%  |               |              |   | 8,757,000      |            |              |               | 855,000      |  |                |            | 4,000,000   |  |  |   | 390,000    | 
|Emerald Plaza  LLC                 |  |            | 2.7%  |               |              |   |               |            |              |               |             |  |                |            | 68,500,000  |  |  |   | 1,850,000  | 
|                                    |  |            |       |               |              |   |                |            |              |               |              |  |                |            |            
|Total                               |  |            |       |               |              | $ | 139,606,000    |            |              | $             | 16,207,000   |  |                | $          | 224,750,000 |  |  | $ | 30,463,000 | 
|                                    |  |            |       |               |              |   |                |            |              |               |              |  |                |            |            











51



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





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







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





| |                  
| | -----------------
| | REIT Requirements



Commitment and Contingencies




| |                   
| | ------------------
| | Insurance Coverage



|                                          |  |                                                                                               
|----------------------------------------- |  | ----------------------------------------------------------------------------------------------
|Type of Insurance Coverage                |  | Loss Exposure/Deductible                                                                      
|                                          |  |                                                                                               
|Property damage and business interruption |  | $300 million per occurrence loss limit, subject to a
    $10,000 per occurrence deductible    
|Boiler and machinery                      |  | $100 million per occurrence loss limit, subject to a
    $10,000 per occurrence deductible    
|Property Terrorism                        |  | $100 million per occurrence loss limit, subject to a
    $10,000 per occurrence deductible    
|Earthquake (all states, except CA & OK)   |  | $20 million annual aggregate loss sublimit, subject to a
    $50,000 per occurrence deductible

52



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



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



|           |  |   |            | 
|---------- |  | - | ---------- | 
|2006       |  | $ | 183,000    | 
|2007       |  |   | 11,202,000 | 
|2008       |  |   | 4,079,000  | 
|2009       |  |   |           | 
|2010       |  |   |           | 
|Thereafter |  |   |           | 
|           |  |   |           
|           |  | $ | 15,464,000 | 
|           |  |   |           

53



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##### Table of Contents





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



|                                                                          |  |           |           |  |             |   |            |             |           |              |   |       |  |   |   |  |  |   |            | 
|------------------------------------------------------------------------- |  | --------- | --------- |  | ----------- | - | ---------- | ----------- | --------- | ------------ | - | ----- |  | - | - |  |  | - | ---------- | 
|                                                                          |  | Less Than |           |  |             |   |            |             | More Than |              |  
|                                                                          |  | 1 Year    |           |  | 1-3 Years   |   |            | 4-5 Years   |           | 5 Years      |   |      
|                                                                          |  | (2006)    |           |  | (2007-2008) |   |            | (2009-2010) |           | (After 2010) |   | Total | 
|                                                                          |  |           |           |  |             |   |            |             |           |              |   |       | 
|Principal payments  fixed rate debt                                      |  | $         | 63,000    |  |             | $ | 4,151,000  |             |           | $            |  |       |  | $ |  |  |  | $ | 4,214,000  | 
|Interest payments  fixed rate debt                                       |  |           | 223,000   |  |             |   | 238,000    |             |           |              |  |       |  |   |  |  |  |   | 461,000    | 
|Principal payments  variable rate debt                                   |  |           | 120,000   |  |             |   | 11,130,000 |             |           |              |  |       |  |   |  |  |  |   | 11,250,000 | 
|Interest payments  variable rate debt (rate as of
    December 31, 2005) |  |           | 831,000   |  |             |   | 84,000     |             |           |              |  |       |  |   |  |  |  |   | 915,000    | 
|                                                                          |  |           |           |  |             |   |            |             |           |              |   |       |  |   |  
|Total                                                                     |  | $         | 1,237,000 |  |             | $ | 15,603,000 |             |           | $            |  |       |  | $ |  |  |  | $ | 16,840,000 | 
|                                                                          |  |           |           |  |             |   |            |             |           |              |   |       |  |   |  



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





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

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


Accounting for Contingencies




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



Funds from Operations




54



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|                                                                   |                                                                                     |                 |           |           |                          |   |            |           |  |   |            |           | 
|------------------------------------------------------------------ | ----------------------------------------------------------------------------------- | --------------- | --------- | --------- | ------------------------ | - | ---------- | --------- |  | - | ---------- | --------- | 
|                                                                   |                                                                                     | Period from     |           |           |                         
|                                                                   |                                                                                     | January 1, 2005 |           |           | Years Ended December 31, |  
|                                                                   |                                                                                     | through         |           |           |                          |  
|                                                                   |                                                                                     | June 30, 2005   |           |           | 2004                     |   |            | 2003      | 
|                                                                   |                                                                                     |                 |           |           |                          |   |            |           | 
|Net income                                                         |                                                                                     | $               | 60,000    |           |                          | $ | 2,544,000  |           |  | $ | 4,189,000  |          
|Add:                                                               |                                                                                     |                 |           |           |                          |   |            |           |  |   |            |          
|                                                                   | Depreciation and Amortization  continuing operations                               |                 |           |          |                          |   |            |          |  |   |            |          | 
|                                                                   | Depreciation and Amortization  discontinued operations                             |                 |           | 1,026,000 |                          |   |            | 50,000    |  |   |            | 321,000   | 
|                                                                   | Depreciation and Amortization  unconsolidated real
    estate operating properties |                 |           | 430,000   |                          |   |            | 3,359,000 |  |   |            | 1,411,000 | 
|Less:                                                              |                                                                                     |                 |           |           |                          |   |            |           |  |   |            |          
|Gain on sale of property                                           |                                                                                     |                 |          |           |                          |   | (2,466,000 | )         |  |   | (2,614,000 | )        
|                                                                   |                                                                                     |                 |           |           |                          |   |            |           | 
|Funds from operations                                              |                                                                                     | $               | 1,516,000 |           |                          | $ | 3,487,000  |           |  | $ | 3,307,000  |          
|                                                                   |                                                                                     |                 |           |           |                          |   |            |           | 
|Weighted-average common shares outstanding  basic and
    diluted |                                                                                     |                 | 4,605,000 |           |                          |   | 4,630,000  |           |  |   | 4,676,000  |          
|                                                                   |                                                                                     |                 |           |           |                          |   |            |           | 
|Gain on sale of investments included in net income and FFO         |                                                                                     | $               | 317,000   |           |                          |   |            |           |  |   |            |          

Subsequent Events






55



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##### Table of Contents









New Accounting Pronouncements


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


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


Accounting for Certain
Investments in Debt and Equity Securities 115-1 124-1




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



56



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|                                                                                   |  |      |         |   |      |   |            |      |  |   |           |   |      |   |            |  |       |   |   |            |  |   |   |  |  |   |            |   |  |   |            | 
|---------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ---------- | ---- |  | - | --------- | - | ---- | - | ---------- |  | ----- | - | - | ---------- |  | - | - |  |  | - | ---------- | - |  | - | ---------- | 
|                                                                                   |  | 2006 |         |   | 2007 |   |            | 2008 |  |   | 2009      |   | 2010 |   | Thereafter |  | Total |   |   | Fair Value | 
|                                                                                   |  |      |         |   |      |   |            |      |  |   |           |   |      |   |            |  |       |   |   |            | 
|Fixed rate debt                                                                    |  | $    | 63,000  |   |      | $ | 72,000     |      |  | $ | 4,079,000 |   |      | $ |           |  |       | $ |  |            |  | $ |  |  |  | $ | 4,214,000  |   |  | $ | 4,214,000  | 
|Average interest rate on maturing fixed rate debt                                  |  |      | 5.25    | % |      |   | 5.25       | %    |  |   | 5.25      | % |      |   |           |  |       |   |  |            |  |   |  |  |  |   | 5.25       | % |  |   |            | 
|Variable rate debt                                                                 |  | $    | 120,000 |   |      | $ | 11,130,000 |      |  | $ |          |   |      | $ |           |  |       | $ |  |            |  | $ |  |  |  | $ | 11,250,000 |   |  | $ | 11,250,000 | 
|Average interest rate on maturing variable rate debt (as of
    December 31, 2005) |  |      | 8.0     | % |      |   | 8.0        | %    |  |   |          |   |      |   |           |  |       |   |  |            |  |   |  |  |  |   | 8.0        | % |  |   |            | 





|                                                                                   |  |      |        |   |      |   |         |      |  |   |            |   |  |      |           |            |  |       |   |  |            |   |   |  |  |   |            |   |  |   |            | 
|---------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ---------- | - |  | ---- | --------- | ---------- |  | ----- | - |  | ---------- | - | - |  |  | - | ---------- | - |  | - | ---------- | 
|                                                                                   |  | 2005 |        |   | 2006 |   |         | 2007 |  |   | 2008       |   |  | 2009 |           | Thereafter |  | Total |   |  | Fair Value |  
|                                                                                   |  |      |        |   |      |   |         |      |  |   |            |   |  |      |           |            |  |       |   |  |            |  
|Fixed rate debt                                                                    |  | $    | 65,000 |   |      | $ | 69,000  |      |  | $ | 72,000     |   |  | $    | 4,079,000 |            |  | $     |  |  |            | $ |  |  |  | $ | 4,285,000  |   |  | $ | 4,662,000  | 
|Average interest rate on maturing fixed rate debt                                  |  |      | 5.25   | % |      |   | 5.25    | %    |  |   | 5.25       | % |  |      | 5.25      | %          |  |       |  |  |            |   |  |  |  |   | 5.25       | % |  |   |            | 
|Variable rate debt                                                                 |  | $    |       |   |      | $ | 197,000 |      |  | $ | 14,803,000 |   |  | $    |          |            |  | $     |  |  |            | $ |  |  |  | $ | 15,000,000 |   |  | $ | 16,072,000 | 
|Average interest rate on maturing variable rate debt (as of
    December 31, 2004) |  |      |       |   |      |   | 5.75    | %    |  |   | 5.75       | % |  |      |          |            |  |       |  |  |            |   |  |  |  |   | 5.75       | % |  |   |            | 



57



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








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








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

Evaluation of disclosure controls and
procedures.


10-K 13a-14(a) 15d-14(a) 10-K


13a-15(e) 15d-15(e) 10-K.




Changes in internal control over financial
reporting.







|         |                  
|-------- | -----------------
|Item 9B. | Other Information



58



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##### Table of Contents






PART III







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



|                    |  |     |    |  |          |                                                      |                |  |            | 
|------------------- |  | --- | -- |  | -------- | ---------------------------------------------------- | -------------- |  | ---------- | 
|Name                |  | Age |    |  | Position |                                                      | Term of Office | 
|                    |  |     |    |  |          |                                                      |                | 
|Anthony W. Thompson |  |     | 59 |  |          | Chairman of the Board of Directors                   |                |  | Since 1999 | 
|D. Fleet Wallace    |  |     | 38 |  |          | Director                                             |                |  | Since 2002 | 
|W. Brand Inlow      |  |     | 52 |  |          | Director                                             |                |  | Since 2002 | 
|Scott D. Peters     |  |     | 48 |  |          | Executive Vice President and Chief Financial Officer |                |  | Since 2004 | 
|Jack R. Maurer      |  |     | 62 |  |          | Chief Executive Officer and President                |                |  | Since 2004 | 
|Andrea R. Biller    |  |     | 55 |  |          | Secretary                                            |                |  | Since 2004 | 



Anthony W. (Tony) Thompson


D. Fleet Wallace


59



---



##### Table of Contents





W. Brand Inlow


Scott D. Peters


Jack R. Maurer


Andrea R. Biller


Our Advisors Managers and Executive Officers




60



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##### Table of Contents





Anthony W. (Tony) Thompson


Scott D. Peters


Jack R. Maurer


Andrea R. Biller


Talle A. Voorhies


Louis J. Rogers


Daniel R. Dan Baker cum laude


Richard T. Hutton Jr.


61



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##### Table of Contents







Shannon Alter


Fiduciary Relationship of our Advisor to Us








Committees of Our Board of Directors




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





| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | makes recommendations to our board of directors concerning the
    engagement of independent public accountants;
|
| |  | reviews the plans and results of the audit engagement with the
    independent public accountants;              
|
| |  | approves professional services provided by, and the independence
    of, the independent public accountants;    
|
| |  | considers the range of audit and non-audit fees;                                                                

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| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | consults with the independent public accountants regarding the
    adequacy of our internal accounting controls; and                                                                                                                   
|
| |  | periodically meets with representatives of our disclosure
    committee on various subjects within the scope of the discloser
    committees charter (the disclosure committee is comprised
    of representatives of our management).



| |                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) W. Brand Inlow, who is an audit committee financial
    expert, will not be deemed expertfor any purpose
    including, without limitation, for purposes of section 11
    of the Securities Act as a result of being designated or
    identified as an audit committee financial expert.                                                                                       
|
| | (ii) The designation or identification of Mr. Inlow as
    an audit committee financial expert does not impose on such
    person any duties, obligations or liability that are greater
    than the duties, obligations and liability imposed on such
    person as a member of the audit committee and board of directors
    in the absence of such designation or identification.
|
| | (iii) The designation or identification of Mr. Inlow
    as an audit committee financial expert does not affect the
    duties, obligations or liability of any other member of the
    audit committee or board of directors.                                                                                                                                                       





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





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





Compensation of Directors






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



63



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





Section 16(a) Beneficial Ownership Reporting
Compliance






Code of Business Conduct and Ethics




64



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

Compensation of Executive Officers




Option/SAR Grants in Last Fiscal Year




Compensation Committee Interlocks and Insider
Participation




Board Compensation Committee Report on Executive
Compensation









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

PRINCIPAL SHAREHOLDERS




|                                                         |  |              |        |  |            |  |   | 
|-------------------------------------------------------- |  | ------------ | ------ |  | ---------- |  | - | 
|                                                         |  | Number of    |        |  |           
|                                                         |  | Shares of    |        |  |           
|                                                         |  | Common Stock |        |  |           
|                                                         |  | Beneficially |        |  | Percent of | 
|Name of Beneficial Owner                                 |  | Owned(1)     |        |  | Class      | 
|                                                         |  |              |        |  |            | 
|Anthony W. Thompson, Chairman(2)                         |  |              | 22,214 |  |            |  | * | 
|Jack R. Maurer, Chief Executive Officer and President(3) |  |              |       |  |            |  | * | 
|D. Fleet Wallace, Director                               |  |              | 552    |  |            |  | * | 
|W. Brand Inlow, Director                                 |  |              | 552    |  |            |  | * | 
|                                                         |  |              |        |  |            | 
|All Directors and Executive Officers as a group          |  |              | 23,318 |  |            |  | * | 






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



|    |                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Beneficial ownership includes outstanding shares and shares that
    any person has the right to acquire within 60 days after
    the date of this table. Except as indicated in the footnotes to
    this table and pursuant to applicable community property laws,
    the persons named in the table have sole voting and investment
    power with respect to all shares beneficially owned by them.
|   
|(2) | Mr. Thompson served as our chief executive officer until
    his resignation effective August 18, 2004. Includes
    114 shares owned by AWT Family LP, a limited
    partnership 70% owned by Mr. Thompson and
    22,100 shares owned by our Advisor, a limited liability
    company controlled by Mr. Thompson.                                                                                     
|   
|(3) | Mr. Maurer was appointed as our chief executive officer and
    president effective August 18, 2004.                                                                                                                                                                                                                                                                                                    

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Equity Compensation Plan Information









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

day-to




Advisory Agreement


month-to day-to




Property Management Fees




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Real Estate Commissions and Dispositions Fees




Incentive Distributions




Related Party Accounts Receivable/ Payable




Unconsolidated Debt Due to Related Parties






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







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



Related Party Accounts Receivable




| |       
| | ------
| | Leases



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Executive Officer Investments in Unconsolidated Real
Estate






| |                                          
| | -----------------------------------------
| | Emerald Plaza  San Diego,
    California









Business Relationships with Legal Counsel









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





|                      |  |      |         |  |      |   |         | 
|--------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|Services              |  | 2005 |         |  | 2004 |  
|                      |  |      |         |  |      |  
|Audit Fees(1)         |  | $    | 342,000 |  |      | $ | 401,000 | 
|Audit-Related Fees(2) |  |      | 88,000  |  |      |   | 74,000  | 
|Tax Fees(3)           |  |      | 58,000  |  |      |   | 172,000 | 
|All Other Fees(4)     |  |      |        |  |      |   |        | 
|                      |  |      |         |  |      |  
|Total                 |  | $    | 488,000 |  |      | $ | 647,000 | 
|                      |  |      |         |  |      |  






|    |                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees billed in 2005 and 2004 consisted of audit of our
    annual consolidated financial statements, acquisition audits,
    reviews of our quarterly consolidated financial statements, and
    statutory and regulatory audits, consents and other services
    related to filings with the SEC.

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|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(2) | Audit-related fees billed in 2005 and 2004 consisted of
    financial accounting and reporting consultations.
|   
|(3) | Tax services billed in 2005 and 2004 consisted of tax compliance
    and tax planning and advice.            
|   
|(4) | There were no fees billed for other services in 2005 or 2004.                                                







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



69



---



##### 













PART IV







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

Financial Statements:


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                   |  |       |     | 
|------------------------------------------------------------------ |  | ----- | --- | 
|                                                                   |  | Pages |    
|                                                                   |  |       |    
|Report of Independent Registered Public
    Accounting Firm        |  |       | 71  | 
|Consolidated Statement of Net Assets                               |  |       | 72  | 
|Consolidated Balance Sheet                                         |  |       | 73  | 
|Consolidated Statement of Changes in Net
    Assets                |  |       | 74  | 
|Consolidated Statements of Operations and
    Comprehensive Income |  |       | 75  | 
|Consolidated Statements of
    Shareholders Equity                |  |       | 76  | 
|Consolidated Statement of Cash Flows                               |  |       | 77  | 
|Notes to Consolidated Financial
    Statements                     |  |       | 79  | 
|Quarterly Financial Data                                           |  |       | 110 | 
|Schedules                                                          |  |       | 112 | 



Financial Statement Schedules:




|                                                                                 |  |      |     | 
|-------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                 |  | Page |    
|                                                                                 |  |      |    
|Valuation and Qualifying Accounts (Schedule II)                                  |  |      | 112 | 
|Real Estate Operating Properties and Accumulated Depreciation
    (Schedule III) |  |      | 113 | 



Exhibits:




Exhibits




Financial Statement Schedules


|                                                                                 |  |      |     | 
|-------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                 |  | Page |    
|                                                                                 |  |      |    
|Valuation and Qualifying Accounts (Schedule II)                                  |  |      | 112 | 
|Real Estate Operating Properties and Accumulated Depreciation
    (Schedule III) |  |      | 113 | 

70



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















| |                              
| | -----------------------------
| | /s/ Deloitte &
    Touche,LLP





71



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T REIT, INC.


CONSOLIDATED STATEMENT OF NET ASSETS


(Liquidation Basis)


December 31, 2005


|                                                                                 |                                           |   |            |            | 
|-------------------------------------------------------------------------------- | ----------------------------------------- | - | ---------- | ---------- | 
|ASSETS                                                                          
|Real estate investments:                                                         |                                           |   |            |           
|                                                                                 | Real estate held for sale                 |   | $          | 25,075,000 | 
|                                                                                 | Investments in unconsolidated real estate |   |            | 11,710,000 | 
|                                                                                 |                                           |   |           
|                                                                                 |                                           |   | 36,785,000 |           
|Cash and cash equivalents                                                        |                                           |   | 3,575,000  |           
|Restricted cash                                                                  |                                           |   | 1,111,000  |           
|Investment in marketable securities                                              |                                           |   | 1,924,000  |           
|Accounts receivable, net                                                         |                                           |   | 1,675,000  |           
|Accounts receivable from related parties                                         |                                           |   | 223,000    |           
|Notes receivable                                                                 |                                           |   | 2,762,000  |           
|Asset for estimated receipts in excess of estimated costs during
    liquidation |                                           |   | 267,000    |           
|                                                                                 |                                           |   |           
|Total assets                                                                     |                                           |   | 48,322,000 |           
|                                                                                 |                                           |   |           
|                                                                                
|LIABILITIES                                                                     
|Mortgages payable secured by properties held for sale                            |                                           |   | 15,464,000 |           
|Accounts payable and accrued liabilities                                         |                                           |   | 233,000    |           
|Security deposits and prepaid rent                                               |                                           |   | 96,000     |           
|                                                                                 |                                           |   |           
|Total liabilities                                                                |                                           |   | 15,793,000 |           
|                                                                                 |                                           |   |           
|Net assets in liquidation                                                        |                                           | $ | 32,529,000 |           
|                                                                                 |                                           |   |           



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T REIT, INC.


CONSOLIDATED BALANCE SHEET


(Going Concern Basis)


December 31, 2004


|                                                                                                                           |                                           |   |            |            | 
|-------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | - | ---------- | ---------- | 
|ASSETS                                                                                                                    
|Real estate investments:                                                                                                   |                                           |   |            |           
|                                                                                                                           | Properties held for sale, net             |   | $          | 23,874,000 | 
|                                                                                                                           | Investments in unconsolidated real estate |   |            | 19,272,000 | 
|                                                                                                                           |                                           |   |           
|                                                                                                                           |                                           |   | 43,146,000 |           
|Cash and cash equivalents                                                                                                  |                                           |   | 7,229,000  |           
|Restricted cash                                                                                                            |                                           |   | 1,691,000  |           
|Investment in marketable securities                                                                                        |                                           |   | 491,000    |           
|Accounts receivable, net                                                                                                   |                                           |   | 125,000    |           
|Accounts receivable from related parties                                                                                   |                                           |   | 514,000    |           
|Other assets  properties held for sale, net                                                                               |                                           |   | 3,822,000  |           
|Other assets                                                                                                               |                                           |   | 236,000    |           
|Notes receivable                                                                                                           |                                           |   | 3,299,000  |           
|                                                                                                                           |                                           |   |           
|Total assets                                                                                                               |                                           | $ | 60,553,000 |           
|                                                                                                                           |                                           |   |           
|                                                                                                                          
|LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS
    EQUITY                                                              
|Mortgages payable secured by properties held for sale                                                                      |                                           | $ | 19,285,000 |           
|Accounts payable and accrued liabilities                                                                                   |                                           |   | 1,904,000  |           
|Accounts payable to related parties                                                                                        |                                           |   | 49,000     |           
|Distributions payable                                                                                                      |                                           |   | 327,000    |           
|Security deposits and prepaid rent                                                                                         |                                           |   | 253,000    |           
|                                                                                                                           |                                           |   |           
|                                                                                                                           |                                           |   | 21,818,000 |           
|Minority interests  property held for sale                                                                                |                                           |   | 1,916,000  |           
|Commitments and contingencies (Note 14)                                                                                    |                                           |   |            |           
|Shareholders equity:                                                                                                      |                                           |   |            |           
|Common stock, $0.01 par value; 10,000,000 shares
    authorized; 4,720,000 shares issued, 4,612,000 shares
    outstanding |                                           |   | 47,000     |           
|Additional paid-in capital                                                                                                 |                                           |   | 41,533,000 |           
|Treasury stock, 107,000 shares                                                                                             |                                           |   | (979,000   | )         
|Distributions in excess of earnings                                                                                        |                                           |   | (3,792,000 | )         
|Accumulated other comprehensive income                                                                                     |                                           |   | 10,000     |           
|                                                                                                                           |                                           |   |           
|Total shareholders equity                                                                                                 |                                           |   | 36,819,000 |           
|                                                                                                                           |                                           |   |           
|Total liabilities, minority interests and shareholders
    equity                                                         |                                           | $ | 60,553,000 |           
|                                                                                                                           |                                           |   |           



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T REIT, INC.


CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS


(Liquidation Basis)


For the Period from June 30, 2005 through
December 31, 2005


|                                                                                             |                                                                                                                                          |   |             |             |  
|-------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | ----------- | -
|Net assets in liquidation, beginning of period                                               |                                                                                                                                          | $ | 47,953,000  |            
|                                                                                             |                                                                                                                                          |   |            
|Changes in net assets in liquidation:                                                        |                                                                                                                                          |   |             |            
|Changes to asset for estimated receipts in excess of estimated
    costs during liquidation: |                                                                                                                                          |   |             |            
|                                                                                             | Operating income                                                                                                                         |   |             | (1,381,000  | )
|                                                                                             | Distributions received from unconsolidated properties                                                                                    |   |             | (653,000    | )
|                                                                                             | Payments of liquidation costs and other amounts                                                                                          |   |             | 941,000     |  
|                                                                                             | Change in estimated receipts in excess of estimated costs during
    liquidation                                                         |   |             | (596,000    | )
|                                                                                             |                                                                                                                                          |   |            
|                                                                                             | Changes to asset for estimated receipts in excess of estimated
    costs during liquidation                                              |   |             | (1,689,000  | )
|                                                                                             |                                                                                                                                          |   |            
|Change in fair value of assets and liabilities:                                              |                                                                                                                                          |   |             |            
|                                                                                             | Change in fair value of marketable securities                                                                                            |   |             | 130,000     |  
|                                                                                             | Change in fair value of real estate investments                                                                                          |   |             | 3,042,000   |  
|                                                                                             | Change in assets and liabilities due to activity in asset for
    estimated receipts in excess of estimated costs during
    liquidation |   |             | 1,093,000   |  
|                                                                                             |                                                                                                                                          |   |            
|                                                                                             | Net increase in fair value                                                                                                               |   |             | 4,265,000   |  
|                                                                                             |                                                                                                                                          |   |            
|                                                                                             | Distributions to shareholders                                                                                                            |   |             | (18,000,000 | )
|                                                                                             |                                                                                                                                          |   |            
|Change in net assets in liquidation                                                          |                                                                                                                                          |   | (15,424,000 | )          
|                                                                                             |                                                                                                                                          |   |            
|Net assets in liquidation, end of period                                                     |                                                                                                                                          | $ | 32,529,000  |            
|                                                                                             |                                                                                                                                          |   |            



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T REIT, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME


(Going Concern Basis)


For the Period from January 1, 2005 through
June 30, 2005 and


the Years Ended December 31, 2004 and 2003


|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |           |   |           |         |           | 
|------------------------------------------------------------------ | ------------------------------------------------------------------------- | ----------------------------------------------- | ---------- | ------- | ------------------------ | - | ---------- | ------- | --------- | - | --------- | ------- | --------- | 
|                                                                   |                                                                           | Period from                                     |            |         |                         
|                                                                   |                                                                           | January 1, 2005                                 |            |         | Years Ended December 31, |  
|                                                                   |                                                                           | through                                         |            |         |                          |  
|                                                                   |                                                                           | June 30, 2005                                   |            |         | 2004                     |   |            | 2003    |          
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Expenses:                                                          |                                                                           |                                                 |            |         |                          |   |            |         |           |   |           |        
|                                                                   |                                                                           | General and administrative                      |            | $       | 1,013,000                |   |            | $       | 1,213,000 |   |           | $       | 792,000   | 
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Operating loss                                                     |                                                                           |                                                 | (1,013,000 | )       |                          |   | (1,213,000 | )       |           |   | (792,000  | )      
|Other income (expense):                                            |                                                                           |                                                 |            |         |                          |   |            |         |           |   |           |        
|                                                                   | Other income                                                              |                                                 |            | 52,000  |                          |   |            | 96,000  |           |   |           | 69,000  |          
|                                                                   | Interest expense (including amortization of deferred financing
    costs) |                                                 |            | (44,000 | )                        |   |            | (52,000 | )         |   |           | (50,000 | )        
|                                                                   | Interest and dividend income                                              |                                                 |            | 233,000 |                          |   |            | 526,000 |           |   |           | 112,000 |          
|                                                                   | Gain on sale of marketable securities                                     |                                                 |            | 126,000 |                          |   |            | 109,000 |           |   |           |        |          
|                                                                   | Gain on sale of unconsolidated real estate investments                    |                                                 |            | 191,000 |                          |   |            |        |           |   |           |        |          
|Equity in earnings of unconsolidated real estate                   |                                                                           |                                                 | 787,000    |         |                          |   | 581,000    |         |           |   | 1,160,000 |        
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Income (loss) from continuing operations                           |                                                                           |                                                 | 332,000    |         |                          |   | 47,000     |         |           |   | 499,000   |        
|Discontinued operations:                                           |                                                                           |                                                 |            |         |                          |   |            |         |           |   |           |        
|                                                                   |                                                                           | Gain on sale of real estate                     |            |         |                         |   |            |         | 2,466,000 |   |           |         | 2,614,000 | 
|                                                                   |                                                                           | Income (loss) from discontinued operations      |            |         | (272,000                 | ) |            |         | 31,000    |   |           |         | 1,076,000 | 
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Net income                                                         |                                                                           | $                                               | 60,000     |         |                          | $ | 2,544,000  |         |           | $ | 4,189,000 |        
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Comprehensive income:                                              |                                                                           |                                                 |            |         |                          |   |            |         |           |   |           |        
|                                                                   |                                                                           | Net income                                      |            |         | 60,000                   |   |            |         | 2,544,000 |   |           | $       | 4,189,000 | 
|                                                                   |                                                                           | Unrealized (loss) gain on marketable securities |            |         | (24,000                  | ) |            |         | 10,000    |   |           |         |          | 
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Comprehensive income                                               |                                                                           | $                                               | 36,000     |         |                          | $ | 2,554,000  |         |           | $ | 4,189,000 |        
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Net income (loss) per common share:                                |                                                                           |                                                 |            |         |                          |   |            |         |           |   |           |        
|                                                                   |                                                                           | Continuing operations  basic and diluted       |            | $       | 0.07                     |   |            | $       | 0.01      |   |           | $       | 0.11      | 
|                                                                   |                                                                           | Discontinued operations  basic and diluted     |            |         | (0.06                    | ) |            |         | 0.54      |   |           |         | 0.79      | 
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Total net income per common share  basic and diluted              |                                                                           | $                                               | 0.01       |         |                          | $ | 0.55       |         |           | $ | 0.90      |        
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Weighted-average common shares outstanding  basic and
    diluted |                                                                           |                                                 | 4,605,000  |         |                          |   | 4,630,000  |         |           |   | 4,676,000 |        
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          
|Distributions declared per share                                   |                                                                           | $                                               | 0.41       |         |                          | $ | 0.82       |         |           | $ | 0.82      |        
|                                                                   |                                                                           |                                                 |            |         |                          |   |            |         |          



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T REIT, INC.


CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


(Going Concern Basis)


For the Period from January 1, 2005 through
June 30, 2005 and


the Years Ended December 31, 2004 and 2003


|                                         |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       |  |   |         |   |  |   |            |  
|---------------------------------------- |  | ------------ | --------- | - | ---------------- | - | ----------- | --------------- |  | - | ---------- |  |  | --------- | ---------- | - | ------------- | - | ---------- | ----- |  | - | ------- | - |  | - | ---------- | -
|                                         |  | Common Stock |           |   |                  |   | Accumulated |                 |  |  
|                                         |  |              |           |   | Distributions in |   |             | Other           |  |   |           
|                                         |  | Number of    |           |   | Par              |   |             | Additional      |  |   | Treasury   |  |  | Excess of |            |   | Comprehensive |   |            |      
|                                         |  | Shares       |           |   | Value            |   |             | Paid-In Capital |  |   | Stock      |  |  | Earnings  |            |   | Income (Loss) |   |            | Total | 
|                                         |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       | 
|BALANCE 
    December 31, 2002          |  |              | 4,696,000 |   |                  | $ | 47,000      |                 |  | $ | 41,265,000 |  |  | $         | (220,000   | ) |               | $ | (2,876,000 | )     |  | $ |        |   |  | $ | 38,216,000 |  
|Net income                               |  |              |          |   |                  |   |            |                 |  |   |           |  |  |           |           |   |               |   | 4,189,000  |       |  |   |        |   |  |   | 4,189,000  |  
|Distributions                            |  |              |          |   |                  |   |            |                 |  |   |           |  |  |           |           |   |               |   | (3,843,000 | )     |  |   |        |   |  |   | (3,843,000 | )
|Repurchase of shares                     |  |              | (50,000   | ) |                  |   |            |                 |  |   |           |  |  |           | (455,000   | ) |               |   |           |       |  |   |        |   |  |   | (455,000   | )
|                                         |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       | 
|BALANCE 
    December 31, 2003          |  |              | 4,646,000 |   |                  |   | 47,000      |                 |  |   | 41,265,000 |  |  |           | (675,000   | ) |               |   | (2,530,000 | )     |  |   |        |   |  |   | 38,107,000 |  
|Net income                               |  |              |          |   |                  |   |            |                 |  |   |           |  |  |           |           |   |               |   | 2,544,000  |       |  |   |        |   |  |   | 2,544,000  |  
|Unrealized gain on marketable securities |  |              |          |   |                  |   |            |                 |  |   |           |  |  |           |           |   |               |   |           |       |  |   | 10,000  |   |  |   | 10,000     |  
|                                         |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       | 
|Comprehensive income                     |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       |  |   |         |   |  |   | 2,554,000  |  
|Stock based compensation                 |  |              |          |   |                  |   |            |                 |  |   | 268,000    |  |  |           |           |   |               |   |           |       |  |   |        |   |  |   | 268,000    |  
|Distributions                            |  |              |          |   |                  |   |            |                 |  |   |           |  |  |           |           |   |               |   | (3,806,000 | )     |  |   |        |   |  |   | (3,806,000 | )
|Repurchase of shares                     |  |              | (34,000   | ) |                  |   |            |                 |  |   |           |  |  |           | (304,000   | ) |               |   |           |       |  |   |        |   |  |   | (304,000   | )
|                                         |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       | 
|BALANCE 
    December 31, 2004          |  |              | 4,612,000 |   |                  |   | 47,000      |                 |  |   | 41,533,000 |  |  |           | (979,000   | ) |               |   | (3,792,000 | )     |  |   | 10,000  |   |  |   | 36,819,000 |  
|                                         |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       | 
|Net income                               |  |              |          |   |                  |   |            |                 |  |   |           |  |  |           |           |   |               |   | 60,000     |       |  |   |        |   |  |   | 60,000     |  
|Unrealized loss on marketable securities |  |              |          |   |                  |   |            |                 |  |   |           |  |  |           |           |   |               |   |           |       |  |   | (24,000 | ) |  |   | (24,000    | )
|                                         |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       | 
|Comprehensive income                     |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       |  |   |         |   |  |   | 36,000     |  
|Distributions                            |  |              |          |   |                  |   |            |                 |  |   |           |  |  |           |           |   |               |   | (1,910,000 | )     |  |   |        |   |  |   | (1,910,000 | )
|Stock based compensation                 |  |              |          |   |                  |   |            |                 |  |   | 64,000     |  |  |           |           |   |               |   |           |       |  |   |        |   |  |   | 64,000     |  
|Repurchase of shares                     |  |              | (7,000    | ) |                  |   |            |                 |  |   |           |  |  |           | (87,000    | ) |               |   |           |       |  |   |        |   |  |   | (87,000    | )
|                                         |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       | 
|BALANCE 
    June 30, 2005              |  |              | 4,605,000 |   |                  | $ | 47,000      |                 |  | $ | 41,597,000 |  |  | $         | (1,066,000 | ) |               | $ | (5,642,000 | )     |  | $ | (14,000 | ) |  | $ | 34,922,000 |  
|                                         |  |              |           |   |                  |   |             |                 |  |   |            |  |  |           |            |   |               |   |            |       | 



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T REIT, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


(Going Concern Basis)


For the Period from January 1, 2005 through
June 30, 2005 and


the Years Ended December 31, 2004 and 2003


|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |             |             |            |            |            |           | 
|------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------- | --------------------------------------------------- | ---------- | ------------------------ | ------- | ---------- | ---------- | ----------- | ----------- | ---------- | ---------- | ---------- | --------- | 
|                                                                                      |                                                                                          | Period from                                           |                                                     |            |                         
|                                                                                      |                                                                                          | January 1, 2005                                       |                                                     |            | Years Ended December 31, |        
|                                                                                      |                                                                                          | through                                               |                                                     |            |                          |        
|                                                                                      |                                                                                          | June 30, 2005                                         |                                                     |            | 2004                     |         |            | 2003       |            
|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |            
|CASH FLOWS FROM OPERATING ACTIVITIES                                                  |                                                                                          |                                                       |                                                     |            |                          |         |            |            |             |             |            |           
|Net income                                                                            |                                                                                          | $                                                     | 60,000                                              |            |                          | $       | 2,544,000  |            |             | $           | 4,189,000  |           
|Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                                          |                                                       |                                                     |            |                          |         |            |            |             |             |            |           
|                                                                                      | Distributions received in excess of equity in earnings of
    unconsolidated real estate |                                                       |                                                     | 706,000    |                          |         |            | 964,000    |             |             |            | 631,000    |           
|                                                                                      | Gain on sale of real estate investments                                                  |                                                       |                                                     |           |                          |         |            | (2,466,000 | )           |             |            | (2,614,000 | )         
|                                                                                      | Gain on sale of unconsolidated real estate investments                                   |                                                       |                                                     | (191,000   | )                        |         |            |           |             |             |            |           |           
|                                                                                      | Gain on sale of marketable securities                                                    |                                                       |                                                     | (126,000   | )                        |         |            | (109,000   | )           |             |            |           |           
|                                                                                      | Depreciation and amortization  continuing and
    discontinued operations               |                                                       |                                                     | 1,237,000  |                          |         |            | 2,404,000  |             |             |            | 472,000    |           
|                                                                                      | Stock based compensation expense                                                         |                                                       |                                                     | 64,000     |                          |         |            | 268,000    |             |             |            |           |           
|                                                                                      | Minority interest expense                                                                |                                                       |                                                     | (124,000   | )                        |         |            | (85,000    | )           |             |            |           |           
|                                                                                      | Change in operating assets and liabilities:                                              |                                                       |                                                     |            |                          |         |            |            |             |             |            |            |           
|                                                                                      | Accounts receivable                                                                      |                                                       |                                                     | (83,000    | )                        |         |            | (96,000    | )           |             |            | (308,000   | )         
|                                                                                      | Accounts receivable/payable from/to related parties                                      |                                                       |                                                     | (617,000   | )                        |         |            | 24,000     |             |             |            | 56,000     |           
|                                                                                      | Amortization of deferred financing cost                                                  |                                                       |                                                     | 57,000     |                          |         |            | 99,000     |             |             |            | 121,000    |           
|                                                                                      | Other assets                                                                             |                                                       |                                                     | 131,000    |                          |         |            | (376,000   | )           |             |            | 145,000    |           
|                                                                                      | Accounts payable and accrued liabilities                                                 |                                                       |                                                     | (440,000   | )                        |         |            | 452,000    |             |             |            | 343,000    |           
|                                                                                      | Security deposits and prepaid rent                                                       |                                                       |                                                     | 209,000    |                          |         |            | (33,000    | )           |             |            | (85,000    | )         
|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |            
|                                                                                      |                                                                                          | Net cash provided by operating activities             |                                                     |            | 883,000                  |         |            |            | 3,590,000   |             |            |            | 2,950,000  |          
|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |            
|CASH FLOWS FROM INVESTING ACTIVITIES                                                  |                                                                                          |                                                       |                                                     |            |                          |         |            |            |             |             |            |           
|                                                                                      |                                                                                          | Purchase of marketable securities                     |                                                     |            | (6,101,000               | )       |            |            | (7,236,000  | )           |            |            |           |          
|                                                                                      |                                                                                          | Proceeds from sale of marketable securities           |                                                     |            | 4,909,000                |         |            |            | 6,865,000   |             |            |            |           |          
|                                                                                      |                                                                                          | Purchase of real estate operating properties          |                                                     |            |                         |         |            |            | (23,091,000 | )           |            |            | (9,580,000 | )        
|                                                                                      |                                                                                          | Purchase of investments in unconsolidated real estate |                                                     |            |                         |         |            |            | (1,125,000  | )           |            |            | (2,438,000 | )        
|                                                                                      |                                                                                          | Restricted cash                                       |                                                     |            | 310,000                  |         |            |            | (1,117,000  | )           |            |            | 356,000    |          
|                                                                                      |                                                                                          | Capital expenditures                                  |                                                     |            | (3,000                   | )       |            |            | (80,000     | )           |            |            | (198,000   | )        
|                                                                                      |                                                                                          | Proceeds from disposition of properties               |                                                     |            |                         |         |            |            | 3,245,000   |             |            |            | 13,320,000 |          
|                                                                                      |                                                                                          | Proceeds from sale of unconsolidated real estate      |                                                     |            | 603,000                  |         |            |            | 1,619,000   |             |            |            |           |          
|                                                                                      |                                                                                          | Collections of notes receivable                       |                                                     |            | 531,000                  |         |            |            | 6,576,000   |             |            |            | (60,000    | )        
|                                                                                      |                                                                                          | Real estate deposits applied to purchases             |                                                     |            |                         |         |            |            | 11,000      |             |            |            | 1,117,000  |          
|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |            
|                                                                                      |                                                                                          |                                                       | Net cash provided by (used in) investing activities |            |                          | 249,000 |            |            |             | (14,333,000 | )          |            |            | 2,517,000 | 
|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |            
|CASH FLOWS FROM FINANCING ACTIVITIES                                                  |                                                                                          |                                                       |                                                     |            |                          |         |            |            |             |             |            |           
|                                                                                      | Borrowings under notes payable                                                           |                                                       |                                                     |           |                          |         |            | 15,000,000 |             |             |            | 5,000,000  |           
|                                                                                      | Principal payments on notes payable and credit facility                                  |                                                       |                                                     | (33,000    | )                        |         |            | (5,510,000 | )           |             |            | (106,000   | )         
|                                                                                      | Borrowings on credit facility                                                            |                                                       |                                                     |           |                          |         |            | 545,000    |             |             |            |           |           
|                                                                                      | Repurchase of shares                                                                     |                                                       |                                                     | (87,000    | )                        |         |            | (304,000   | )           |             |            | (455,000   | )         
|                                                                                      | Distributions paid                                                                       |                                                       |                                                     | (1,910,000 | )                        |         |            | (3,796,000 | )           |             |            | (3,846,000 | )         
|                                                                                      | Distributions to minority shareholders                                                   |                                                       |                                                     | (91,000    | )                        |         |            | (152,000   | )           |             |            |           |           
|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |            
|                                                                                      |                                                                                          | Net cash (used in) provided by financing activities   |                                                     |            | (2,121,000               | )       |            |            | 5,783,000   |             |            |            | 593,000    |          
|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |            
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                  |                                                                                          |                                                       | (989,000                                            | )          |                          |         | (4,960,000 | )          |             |             | 6,060,000  |           
|CASH AND CASH EQUIVALENTS  beginning of period                                       |                                                                                          |                                                       | 7,229,000                                           |            |                          |         | 12,189,000 |            |             |             | 6,129,000  |           
|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |            
|CASH AND CASH EQUIVALENTS  end of period                                             |                                                                                          | $                                                     | 6,240,000                                           |            |                          | $       | 7,229,000  |            |             | $           | 12,189,000 |           
|                                                                                      |                                                                                          |                                                       |                                                     |            |                          |         |            |            |            



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T REIT, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS 
SUPPLEMENTAL INFORMATION


(Going Concern Basis)


For the Period from January 1, 2005 through
June 30, 2005 and


the Years Ended December 31, 2004 and 2003


|                                                  |                                                         |                 |   |         |                          |  |   |           |  |  |   |            | 
|------------------------------------------------- | ------------------------------------------------------- | --------------- | - | ------- | ------------------------ |  | - | --------- |  |  | - | ---------- | 
|                                                  |                                                         | Period from     |   |         |                         
|                                                  |                                                         | January 1, 2005 |   |         | Years Ended December 31, | 
|                                                  |                                                         | through         |   |         |                          | 
|                                                  |                                                         | June 30, 2005   |   |         | 2004                     |  |   | 2003      | 
|                                                  |                                                         |                 |   |         |                          |  |   |           | 
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |                                                         |                 |   |         |                          |  |   |           |  |  |   |           
|Cash paid for:                                    |                                                         |                 |   |         |                          |  |   |           |  |  |   |           
|                                                  | Interest                                                |                 | $ | 638,000 |                          |  | $ | 1,211,000 |  |  | $ | 1,780,000  | 
|                                                  |                                                         |                 |   |         |                          |  |   |           | 
|                                                  | Income taxes                                            |                 | $ | 3,000   |                          |  | $ | 6,000     |  |  | $ | 30,000     | 
|                                                  |                                                         |                 |   |         |                          |  |   |           | 
|SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:    |                                                         |                 |   |         |                          |  |   |           |  |  |   |           
|INVESTING ACTIVITIES                              |                                                         |                 |   |         |                          |  |   |           |  |  |   |           
|                                                  | Decrease in notes payable due to the sale of properties |                 | $ |        |                          |  | $ |          |  |  | $ | 23,732,000 | 
|                                                  | Note receivable due to sale of properties               |                 | $ |        |                          |  | $ | 9,228,000 |  |  | $ |           | 
|                                                  | Minority interest liability of acquisitions             |                 | $ |        |                          |  | $ | 2,153,000 |  |  | $ |           | 



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T REIT, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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




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



day-to month-to




| |                    
| | -------------------
| | Plan of Liquidation





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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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





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





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





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

Consolidation of Variable
Interest Entities




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

tenants-in


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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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









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

Accounting for the Impairment or Disposal of
Long Lived Assets




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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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



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





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





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



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





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

Business Combinations lease-up










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



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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







|                       |  |              |           |               |             |  |       |          |  |                |                 |  |       |                 |        |  |  |  |               | 
|---------------------- |  | ------------ | --------- | ------------- | ----------- |  | ----- | -------- |  | -------------- | --------------- |  | ----- | --------------- | ------ |  |  |  | ------------- | 
|                       |  |              |           | Percentage of |             |  |       |          |  |                |                
|                       |  | 2005 Annual  |           |               | 2005 Annual |  |       |          |  | Square Footage |                 |  | Lease |                
|Tenant                 |  | Base Rent(1) |           |               | Base Rent   |  |       | Property |  |                | (Approximately) |  |       | Expiration Date |       
|                       |  |              |           |               |             |  |       |          |  |                |                 |  |       |                 |       
|Netsolve, Inc.         |  | $            | 1,112,000 |               |             |  | 41.0% |          |  |                | AmberOaks       |  |       |                 | 78,000 |  |  |  | April 2007    | 
|Newell Rubbermaid      |  | $            | 493,000   |               |             |  | 18.2% |          |  |                | AmberOaks       |  |       |                 | 51,000 |  |  |  | April 2007    | 
|General Services Admin |  | $            | 327,000   |               |             |  | 12.1% |          |  |                | University Hgts |  |       |                 | 21,000 |  |  |  | November 2015 | 



|                          |  |              |           |               |             |  |     |          |  |                 |  |  |                 |  |  |  |               | 
|------------------------- |  | ------------ | --------- | ------------- | ----------- |  | --- | -------- |  | --------------- |  |  | --------------- |  |  |  | ------------- | 
|                          |  |              |           | Percentage of |             |  |     |          |  |                 | 
|                          |  | 2004 Annual  |           |               | 2004 Annual |  |     |          |  | Square Footage  |  |  | Lease           | 
|Tenant                    |  | Base Rent(1) |           |               | Base Rent   |  |     | Property |  | (Approximately) |  |  | Expiration Date | 
|                          |  |              |           |               |             |  |     |          |  |                 |  |  |                 | 
|ACS Health Services, Inc. |  | $            | 588,000   |               |             |  | 12% |          |  | AmberOaks       |  |  | 44,000          |  |  |  | February 2005 | 
|Netsolve, Inc.            |  | $            | 1,073,000 |               |             |  | 21% |          |  | AmberOaks       |  |  | 78,000          |  |  |  | April 2007    | 



|                    |  |              |         |               |             |  |     |          |  |                |                    |  |       |                 |        |  |  |  |               | 
|------------------- |  | ------------ | ------- | ------------- | ----------- |  | --- | -------- |  | -------------- | ------------------ |  | ----- | --------------- | ------ |  |  |  | ------------- | 
|                    |  |              |         | Percentage of |             |  |     |          |  |                |                   
|                    |  | 2003 Annual  |         |               | 2003 Annual |  |     |          |  | Square Footage |                    |  | Lease |                
|Tenant              |  | Base Rent(1) |         |               | Base Rent   |  |     | Property |  |                | (Approximately)    |  |       | Expiration Date |       
|                    |  |              |         |               |             |  |     |          |  |                |                    |  |       |                 |       
|Computer Express    |  | $            | 79,000  |               |             |  | 10% |          |  |                | University Heights |  |       |                 | 8,000  |  |  |  | December 2006 | 
|The Pacesetter Corp |  | $            | 130,000 |               |             |  | 17% |          |  |                | University Heights |  |       |                 | 13,000 |  |  |  | August 2008   | 
|GSA                 |  | $            | 324,000 |               |             |  | 41% |          |  |                | University Heights |  |       |                 | 21,000 |  |  |  | November 2015 | 






|    |                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Annualized rental income is based on contractual base rent set
    forth in leases in effect as of December 31, 2005, 2004 and
    2003, respectively.



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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

Disclosures About Fair Value of
Financial Instruments










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



Derivative
Instruments and Hedging Activities


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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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

Accounting for Leases




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













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





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

Reporting Comprehensive Income


86



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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

Earnings Per Share




|                                                                      |                                             |                 |           |       |                          |   |           |      |  |   |           |      | 
|--------------------------------------------------------------------- | ------------------------------------------- | --------------- | --------- | ----- | ------------------------ | - | --------- | ---- |  | - | --------- | ---- | 
|                                                                      |                                             | Period from     |           |       |                         
|                                                                      |                                             | January 1, 2005 |           |       | Years Ended December 31, |  
|                                                                      |                                             | through         |           |       |                          |  
|                                                                      |                                             | June 30, 2005   |           |       | 2004                     |   |           | 2003 | 
|                                                                      |                                             |                 |           |       |                          |   |           |      | 
|Income (loss) from continuing operations                              |                                             | $               | 332,000   |       |                          | $ | 47,000    |      |  | $ | 499,000   |     
|Income (loss) from discontinued operations                            |                                             |                 | (272,000  | )     |                          |   | 2,497,000 |      |  |   | 3,690,000 |     
|                                                                      |                                             |                 |           |       |                          |   |           |      | 
|Net income                                                            |                                             | $               | 60,000    |       |                          | $ | 2,544,000 |      |  | $ | 4,189,000 |     
|                                                                      |                                             |                 |           |       |                          |   |           |      | 
|Net income (loss) per share:                                          |                                             |                 |           |       |                          |   |           |      |  |   |           |     
|                                                                      | Continuing operations  basic and diluted   |                 | $         | 0.07  |                          |   | $         | 0.01 |  |   | $         | 0.11 | 
|                                                                      | Discontinued operations  basic and diluted |                 |           | (0.06 | )                        |   |           | 0.54 |  |   |           | 0.79 | 
|                                                                      |                                             |                 |           |       |                          |   |           |      | 
|Total net income per share  basic and diluted                        |                                             | $               | 0.01      |       |                          | $ | 0.55      |      |  | $ | 0.90      |     
|                                                                      |                                             |                 |           |       |                          |   |           |      | 
|Weighted-average number of shares outstanding 
    basic and diluted |                                             |                 | 4,605,000 |       |                          |   | 4,630,000 |      |  |   | 4,676,000 |     
|                                                                      |                                             |                 |           |       |                          |   |           |      | 

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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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

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


|                                                                                                                  |  |                 |         |   |                          |   |           |      |  |   |           |  
|----------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | - | ------------------------ | - | --------- | ---- |  | - | --------- | -
|                                                                                                                  |  | Period from     |         |   |                         
|                                                                                                                  |  | January 1, 2005 |         |   | Years Ended December 31, |  
|                                                                                                                  |  | through         |         |   |                          |  
|                                                                                                                  |  | June 30, 2005   |         |   | 2004                     |   |           | 2003 | 
|                                                                                                                  |  |                 |         |   |                          |   |           |      | 
|Reported net income                                                                                               |  | $               | 60,000  |   |                          | $ | 2,544,000 |      |  | $ | 4,189,000 |  
|Add: Stock based employee compensation expense included in
    reported net income                                |  |                 | 64,000  |   |                          |   | 268,000   |      |  |   |          |  
|Less: Total stock based employee compensation expense determined
    under fair value based method for all awards |  |                 | (83,000 | ) |                          |   | (138,000  | )    |  |   | (49,000   | )
|                                                                                                                  |  |                 |         |   |                          |   |           |      | 
|Pro forma net income                                                                                              |  | $               | 41,000  |   |                          | $ | 2,674,000 |      |  | $ | 4,140,000 |  
|                                                                                                                  |  |                 |         |   |                          |   |           |      | 
|Reported net income per share  basic and diluted                                                                 |  | $               | 0.01    |   |                          | $ | 0.55      |      |  | $ | 0.90      |  
|                                                                                                                  |  |                 |         |   |                          |   |           |      | 
|Pro forma net income per share  basic and diluted                                                                |  | $               | 0.01    |   |                          | $ | 0.58      |      |  | $ | 0.89      |  
|                                                                                                                  |  |                 |         |   |                          |   |           |      | 



|                                                           |  |                 |           |  |                          |  |           |      |  |  |            | 
|---------------------------------------------------------- |  | --------------- | --------- |  | ------------------------ |  | --------- | ---- |  |  | ---------- | 
|                                                           |  | Period from     |           |  |                         
|                                                           |  | January 1, 2005 |           |  | Years Ended December 31, | 
|                                                           |  | through         |           |  |                          | 
|                                                           |  | June 30, 2005   |           |  | 2004                     |  |           | 2003 | 
|                                                           |  |                 |           |  |                          |  |           |      | 
|Expected life                                              |  |                 | 8.2 years |  |                          |  | 8.8 years |      |  |  | 9.25 years | 
|Risk-free interest based on the 10-year U.S. Treasury Bond |  |                 | 4.22%     |  |                          |  | 4.22%     |      |  |  | 3.53%      | 
|Expected dividend yield                                    |  |                 | 8.25%     |  |                          |  | 8.25%     |      |  |  | 7.50%      | 
|Expected volatility                                        |  |                 | 10%       |  |                          |  | 10%       |      |  |  | 0%         | 



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



88



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





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

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


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


115-1 124-1 Accounting for
Certain Investments in Debt and Equity Securities 115-1 124-1




|   |                                                                                 
|-- | --------------------------------------------------------------------------------
|3. | Asset for Estimated Receipts in Excess of Estimated Costs
    During Liquidation



89



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                       |                   |               |            |               |                |   |            |           |  |              |            |            |   |   |            |            |  
|-------------------------------------------------------------------------------------- | ----------------- | ------------- | ---------- | ------------- | -------------- | - | ---------- | --------- |  | ------------ | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                                                                       |                   |               |            | Cash Payments |                |   | Change in  |           |  | December 31, |           
|                                                                                       |                   | June 30, 2005 |            |               | and (Receipts) |   |            | Estimates |  |              | 2005       |           
|                                                                                       |                   |               |            |               |                |   |            |           |  |              |            |           
|Assets:                                                                                |                   |               |            |               |                |   |            |           |  |              |            |            |   |   |            |           
|Estimated net inflows from consolidated and unconsolidated
    operating activities    |                   | $             | 3,808,000  |               |                | $ | (2,034,000 | )         |  | $            | 860,000    |            |   | $ | 2,634,000  |           
|Liabilities:                                                                           |                   |               |            |               |                |   |            |           |  |              |            |            |   |   |            |           
|                                                                                       | Liquidation costs |               |            | (1,464,000    | )              |   |            | 387,000   |  |              |            | (74,000    | ) |   |            | (1,151,000 | )
|                                                                                       | Distributions     |               |            | (316,000      | )              |   |            | 316,000   |  |              |            |           |   |   |            |           |  
|                                                                                       | Other             |               |            | (72,000       | )              |   |            | 238,000   |  |              |            | (1,382,000 | ) |   |            | (1,216,000 | )
|                                                                                       |                   |               |            |               |                |   |            |           |  |              |            |           
|                                                                                       |                   |               | (1,852,000 | )             |                |   | 941,000    |           |  |              | (1,456,000 | )          |   |   | (2,367,000 | )         
|                                                                                       |                   |               |            |               |                |   |            |           |  |              |            |           
|Total asset for estimated receipts in excess of estimated costs
    during liquidation |                   | $             | 1,956,000  |               |                | $ | (1,093,000 | )         |  | $            | (596,000   | )          |   | $ | 267,000    |           
|                                                                                       |                   |               |            |               |                |   |            |           |  |              |            |           



|   |                          
|-- | -------------------------
|4. | Net Assets in Liquidation



|                                                                                  |  |   |            |  
|--------------------------------------------------------------------------------- |  | - | ---------- | -
|Shareholders equity as of June 30, 2005 
    going concern basis                |  | $ | 34,922,000 |  
|Increase due to estimated net realizable value of operating
    properties        |  |   | 4,734,000  |  
|Increase due to estimated net realizable value of unconsolidated
    investment   |  |   | 8,559,000  |  
|Assets for estimated receipts in excess of estimated costs
    during liquidation |  |   | 1,956,000  |  
|Decrease due to the write-off of other intangible assets                          |  |   | (2,218,000 | )
|                                                                                  |  |   |           
|Adjustment to reflect the change to the liquidation basis of
    accounting       |  |   | 13,031,000 |  
|                                                                                  |  |   |           
|Estimated value of net assets in liquidation as of June 30,
    2005              |  | $ | 47,953,000 |  
|                                                                                  |  |   |           





|   |                        
|-- | -----------------------
|5. | Real Estate Investments



90



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|                                  |  |              |            |  
|--------------------------------- |  | ------------ | ---------- | -
|                                  |  | December 31, |           
|                                  |  | 2004         |           
|                                  |  |              |           
|Buildings and tenant improvements |  | $            | 18,437,000 |  
|Land                              |  |              | 6,317,000  |  
|                                  |  |              |           
|                                  |  |              | 24,754,000 |  
|Less: accumulated depreciation    |  |              | (880,000   | )
|                                  |  |              |           
|                                  |  | $            | 23,874,000 |  
|                                  |  |              |           









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





|                                                           |  |          |                 |            |       |  |              |      |  |   |            | 
|---------------------------------------------------------- |  | -------- | --------------- | ---------- | ----- |  | ------------ | ---- |  | - | ---------- | 
|                                                           |  |          |                 | Percentage |       |  | December 31, |     
|Property                                                   |  | Location |                 |            | Owned |  |              | 2004 | 
|                                                           |  |          |                 |            |       |  |              |      | 
|City Center West A Building  TIC (sold
    during 2005) |  |          | Las Vegas, NV   |            |       |  | 89.1%        |      |  | $ | 8,004,000  | 
|Congress Center  LLC                                      |  |          | Chicago, IL     |            |       |  | 10.3%        |      |  |   | 3,875,000  | 
|Titan Building & Plaza  TIC                               |  |          | San Antonio, TX |            |       |  | 48.5%        |      |  |   | 2,027,000  | 
|Pacific Corporate Park  LLC (sold during 2005)            |  |          | Lake Forest, CA |            |       |  | 22.8%        |      |  |   | 1,830,000  | 
|Reno Trademark Building  TIC                              |  |          | Reno, NV        |            |       |  | 40.0%        |      |  |   | 1,154,000  | 
|Emerald Plaza  LLC (sold during 2005)                     |  |          | San Diego, CA   |            |       |  | 2.7%         |      |  |   | 913,000    | 
|Oakey Building  LLC                                       |  |          | Las Vegas, NV   |            |       |  | 9.8%         |      |  |   | 585,000    | 
|Enclave Parkway  LLC                                      |  |          | Houston, TX     |            |       |  | 3.3%         |      |  |   | 452,000    | 
|County Center Drive  TIC (sold during 2005)               |  |          | Temecula, CA    |            |       |  | 16.0%        |      |  |   | 432,000    | 
|                                                           |  |          |                 |            |       |  |              |      | 
|                                                           |  |          |                 |            |       |  |              |      |  | $ | 19,272,000 | 
|                                                           |  |          |                 |            |       |  |              |      | 

91



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |                    |             | 
|------------------------------ |  | ------------------ | ----------- | 
|                               |  | As of December 31, |            
|                               |  | 2004               |            
|                               |  |                    |            
|Assets (primarily real estate) |  | $                  | 348,448,000 | 
|                               |  |                    |            
|Mortgage notes payable         |  |                    | 224,750,000 | 
|Other liabilities              |  |                    | 10,165,000  | 
|Equity                         |  |                    | 113,533,000 | 
|                               |  |                    |            
|Total liabilities and equity   |  | $                  | 348,448,000 | 
|                               |  |                    |            
|Our share of equity            |  | $                  | 19,272,000  | 

|                          |  |                 |            |  |                          |   |            |      |  |   |            | 
|------------------------- |  | --------------- | ---------- |  | ------------------------ | - | ---------- | ---- |  | - | ---------- | 
|                          |  | Period from     |            |  |                         
|                          |  | January 1, 2005 |            |  | Years Ended December 31, |  
|                          |  | through         |            |  |                          |  
|                          |  | June 30, 2005   |            |  | 2004                     |   |            | 2003 | 
|                          |  |                 |            |  |                          |   |            |      | 
|Revenues                  |  | $               | 22,380,000 |  |                          | $ | 43,575,000 |      |  | $ | 25,326,000 | 
|Rental and other expenses |  |                 | 19,817,000 |  |                          |   | 41,676,000 |      |  |   | 22,775,000 | 
|                          |  |                 |            |  |                          |   |            |      | 
|Net income                |  | $               | 2,563,000  |  |                          | $ | 1,899,000  |      |  | $ | 2,551,000  | 
|                          |  |                 |            |  |                          |   |            |      | 
|Our equity in earnings    |  | $               | 787,000    |  |                          | $ | 581,000    |      |  | $ | 1,160,000  | 
|                          |  |                 |            |  |                          |   |            |      | 



| |                     
| | --------------------
| | Dispositions in 2005



| |                                                          
| | ---------------------------------------------------------
| | 25351 Commerce Centre Drive  Lake Forest,
    California





| |                                           
| | ------------------------------------------
| | County Center Drive  Temecula, California



92



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                                          
| | ---------------------------------------------------------
| | 25391 Commerce Centre Drive  Lake Forest,
    California





| |                                             
| | --------------------------------------------
| | City Center West A  Las Vegas,
    Nevada





| |                                      
| | -------------------------------------
| | Emerald Plaza  San Diego, California





| |                                                          
| | ---------------------------------------------------------
| | 25371 Commerce Centre Drive  Lake Forest,
    California



93



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                  
| | ---------------------------------
| | Properties Under Contract to Sell











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



| |                          
| | -------------------------
| | AmberOaks  Austin, Texas







| |                                           
| | ------------------------------------------
| | Gateway Mall Land  Bismarck, North Dakota





| |                                               
| | ----------------------------------------------
| | 2004 Acquisitions of Unconsolidated Properties



| |                                   
| | ----------------------------------
| | Oakey Building  Las Vegas, Nevada



94



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                      
| | -------------------------------------
| | Emerald Plaza  San Diego, California





|                                                                          |  |  |                  | 
|------------------------------------------------------------------------- |  |  | ---------------- | 
|AWT Family LP, a limited partnership 70% owned by Anthony
    W. Thompson |  |  | 1.9%             | 
|NNN Emerald Plaza, LLC                                                    |  |  | 20.5%            | 
|Unaffiliated third parties                                                |  |  | 77.6% (combined) | 



|                         |  |                        |      |   |                           |  |      |  
|------------------------ |  | ---------------------- | ---- | - | ------------------------- |  | ---- | -
|                         |  | Membership Interest in |      |   |                          
|Member                   |  | NNN Emerald Plaza, LLC |      |   | Interest in Emerald Plaza | 
|                         |  |                        |      |   |                           | 
|NNN 2003 Value Fund, LLC |  |                        | 22.2 | % |                           |  | 4.6  | %
|T REIT, L.P.             |  |                        | 13.2 | % |                           |  | 2.7  | %
|Affiliated Members       |  |                        | 0.4  | % |                           |  | 0.08 | %
|Unaffiliated Members     |  |                        | 64.2 | % |                           |  | 13.2 | %







| |                                             
| | --------------------------------------------
| | 2004 Dispositions of Consolidated Properties



| |                                      
| | -------------------------------------
| | Gateway Mall  Bismarck, North Dakota





| |                                           
| | ------------------------------------------
| | Gateway Mall Land  Bismarck, North Dakota



95



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                                
| | -----------------------------------------------
| | 2004 Dispositions of Unconsolidated Real Estate



| |                                                           
| | ----------------------------------------------------------
| | Saddleback Financial Center  Laguna Hills,
    California





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



| |                                      
| | -------------------------------------
| | Gateway Mall  Bismarck, North Dakota

45-acre 5-year




| |                                                
| | -----------------------------------------------
| | 2003 Acquisitions of Unconsolidated Real Estate



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





|                                         |  |               |                  | 
|---------------------------------------- |  | ------------- | ---------------- | 
|Tenant in Common                         |  | Interest Held |                 
|                                         |  |               |                 
|G REIT, Inc. (our affiliate)             |  |               | 30.0%            | 
|NNN Congress Center, LLC (our affiliate) |  |               | 28.9%            | 
|Unaffiliated third parties               |  |               | 41.1% (combined) | 



|                         |  |                          |                  |  |                             |  |                 | 
|------------------------ |  | ------------------------ | ---------------- |  | --------------------------- |  | --------------- | 
|                         |  | Membership Interest in   |                  |  |                            
|Member                   |  | NNN Congress Center, LLC |                  |  | Interest in Congress Center | 
|                         |  |                          |                  |  |                             | 
|NNN 2002 Value Fund, LLC |  |                          | 42.5%            |  |                             |  | 12.3%           | 
|T REIT, Inc.             |  |                          | 35.5%            |  |                             |  | 10.3%           | 
|Unaffiliated members     |  |                          | 22.0% (combined) |  |                             |  | 6.3% (combined) | 

96



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




30-day 30-day 30-year




| |                                 
| | --------------------------------
| | Enclave Parkway  Houston, Texas





| |                                             
| | --------------------------------------------
| | 2003 Dispositions of Consolidated Properties



| |                                                        
| | -------------------------------------------------------
| | Northstar Crossing Shopping Center  Garland,
    Texas





| |                                                       
| | ------------------------------------------------------
| | Thousand Oaks Shopping Center  San Antonio,
    Texas





| |                                                              
| | -------------------------------------------------------------
| | Pahrump Valley Junction Shopping Center  Pahrump,
    Nevada



97



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                    
|-- | -----------------------------------
|6. | Investment in Marketable Securities



|                  |  |            |         |  |                  |   |        |                  |  |                      |   |  |  |   |         | 
|----------------- |  | ---------- | ------- |  | ---------------- | - | ------ | ---------------- |  | -------------------- | - |  |  | - | ------- | 
|                  |  | Historical |         |  | Gross Unrealized |   |        | Gross Unrealized |  |                     
|                  |  | Cost       |         |  | Gains            |   |        | Losses           |  | Estimated Fair Value |  
|                  |  |            |         |  |                  |   |        |                  |  |                      |  
|December 31, 2004 |  | $          | 481,000 |  |                  | $ | 10,000 |                  |  | $                    |  |  |  | $ | 491,000 | 





|   |             
|-- | ------------
|7. | Other Assets



|                                                                                            |                    |                   |           |           |              |   |         |         | 
|------------------------------------------------------------------------------------------- | ------------------ | ----------------- | --------- | --------- | ------------ | - | ------- | ------- | 
|                                                                                            |                    | December 31, 2004 |          
|                                                                                            |                    |                   |          
|                                                                                            |                    | Other Assets     |           |           |             
|                                                                                            |                    | Properties        |           |           |             
|                                                                                            |                    | Held for Sale,    |           |           |             
|                                                                                            |                    | Net               |           |           | Other Assets |  
|                                                                                            |                    |                   |           |           |              |  
|In-place leases and tenant relationships, net of accumulated
    amortization of $1,279,000 |                    | $                 | 2,802,000 |           |              | $ |        |        
|Above market leases, net of accumulated amortization of $393,000                            |                    |                   | 611,000   |           |              |   |        |        
|Deferred rent receivable                                                                    |                    |                   | 147,000   |           |              |   |        |        
|Lease commissions, net of accumulated amortization of $1,000                                |                    |                   | 20,000    |           |              |   |        |        
|Loan fees, net of accumulated amortization of $133,000                                      |                    |                   | 242,000   |           |              |   |        |        
|Prepaid expenses                                                                            |                    |                   |          |           |              |   | 236,000 |        
|                                                                                            |                    |                   |           |           |              |  
|                                                                                            | Total other assets |                   | $         | 3,822,000 |              |   | $       | 236,000 | 
|                                                                                            |                    |                   |           |           |              |  





|   |                 
|-- | ----------------
|8. | Notes Receivable



98



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|   |               
|-- | --------------
|9. | Line of Credit





|    |                                 
|--- | --------------------------------
|10. | Mortgages Payable and Other Debt



|                                                                                                                                                                                                                                                                                                                                                                                                  |  |              |            |  |      |   |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- |  | ---- | - | ---------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                  |  | December 31, |           
|                                                                                                                                                                                                                                                                                                                                                                                                  |  |              |           
|                                                                                                                                                                                                                                                                                                                                                                                                  |  | 2005         |            |  | 2004 |  
|                                                                                                                                                                                                                                                                                                                                                                                                  |  |              |            |  |      |  
|Note payable to a mortgage company, secured by a deed of trust,
    rate per annum equal to an initial benchmark floor rate of 3%
    based on the 10-year Treasury note plus 2.25% and matures
    January 1, 2008. As of December 31, 2005 and 2004 the
    interest rate was 5.25%. Equal principal and interest payments
    of $24,000 are payable monthly until repaid in full              |  | $            | 4,214,000  |  |      | $ | 4,285,000  | 
|Note payable to a bank, secured by a first deed of trust,
    monthly interest-only through February 15, 2006 and
    thereafter, principal and interest payments through the maturity
    date of January 20, 2007 at the prime rate plus 1.07%,
    subject to a floor of 5.5% per annum. The interest rate as
    of December 31, 2005 and 2004 was 8.0% and 5.75% per
    annum, respectively |  |              | 15,000,000 |  |      |   | 15,000,000 | 
|                                                                                                                                                                                                                                                                                                                                                                                                  |  |              |            |  |      |  
|Total mortgages payable                                                                                                                                                                                                                                                                                                                                                                           |  |              | 19,214,000 |  |      | $ | 19,285,000 | 
|                                                                                                                                                                                                                                                                                                                                                                                                  |  |              |            |  |      |  
|Less: minority interest share of mortgages payable                                                                                                                                                                                                                                                                                                                                                |  |              | 3,750,000  |  |      |   |            | 
|                                                                                                                                                                                                                                                                                                                                                                                                  |  |              |            |  |      |  
|Mortgages payable (liquidation basis)                                                                                                                                                                                                                                                                                                                                                             |  | $            | 15,464,000 |  |      |   |            | 
|                                                                                                                                                                                                                                                                                                                                                                                                  |  |              |            |  |      |  



99



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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





|           |  |        |            | 
|---------- |  | ------ | ---------- | 
|Year       |  | Amount |           
|           |  |        |           
|2006       |  | $      | 183,000    | 
|2007       |  |        | 11,202,000 | 
|2008       |  |        | 4,079,000  | 
|2009       |  |        |           | 
|2010       |  |        |           | 
|Thereafter |  |        |           | 
|           |  |        |           
|           |  | $      | 15,464,000 | 
|           |  |        |           



|    |                     
|--- | --------------------
|11. | Shareholders Equity



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







| |         
| | --------
| | Warrants



100



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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





|                                                |                                                |           |         |          |                 |   |      |                  |   |   |      |       |  
|----------------------------------------------- | ---------------------------------------------- | --------- | ------- | -------- | --------------- | - | ---- | ---------------- | - | - | ---- | ----- | -
|                                                |                                                | Number of |         |          | Range of        |   |      | Weighted-Average |  
|Options Outstanding as of                       |                                                | Shares    |         |          | Exercise Prices |   |      | Exercise Price   |  
|                                                |                                                |           |         |          |                 |   |      |                  |  
|January 1, 2002 (30,000 options exercisable)    |                                                |           | 155,000 |          |                 | $ | 9.05 |                  |   | $ | 9.05 |      
|                                                | Granted (weighted-average fair value of $1.01) |           |         | 10,000   |                 |   |      | 9.05             |   |   |      | 9.05  |  
|                                                |                                                |           |         |          |                 |   |      |                  |  
|December 31, 2003 (90,000 options exercisable)  |                                                |           | 165,000 |          |                 |   | 9.05 |                  |   |   | 9.05 |      
|                                                | Granted (weighted-average fair value of $1.03) |           |         | 320,000  |                 |   |      | 9.05             |   |   |      | 9.05  |  
|                                                | Cancelled                                      |           |         | (60,000  | )               |   |      | 9.05             |   |   |      | 9.05  |  
|                                                |                                                |           |         |          |                 |   |      |                  |  
|December 31, 2004 (155,000 options exercisable) |                                                |           | 425,000 |          |                 |   | 9.05 |                  |   |   | 9.05 |      
|                                                | Granted                                        |           |         |         |                 |   |      |                 |   |   |      |      |  
|                                                | Cancelled                                      |           |         | (425,000 | )               |   |      | (9.05            | ) |   |      | (9.05 | )
|                                                |                                                |           |         |          |                 |   |      |                  |  
|December 31, 2005 (0 options exercisable)       |                                                |           |        |          |                 | $ |     |                  |   | $ |     |      
|                                                |                                                |           |         |          |                 |   |      |                  |  

101



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##### Table of Contents



T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                    
|--- | -------------------
|12. | Future Minimum Rent



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



|           |       |        |           |           | 
|---------- | ----- | ------ | --------- | --------- | 
|Year       |       | Amount |          
|           |       |        |          
|2006       |       | $      | 2,533,000 |          
|2007       |       |        | 1,694,000 |          
|2008       |       |        | 922,000   |          
|2009       |       |        | 700,000   |          
|2010       |       |        | 637,000   |          
|Thereafter |       |        | 3,358,000 |          
|           |       |        |          
|           | Total |        | $         | 9,844,000 | 
|           |       |        |          





|    |                                                   
|--- | --------------------------------------------------
|13. | Advisory Fees and Other Related Party Transactions



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



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

month-to day-to




102



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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





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





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





| |                                         
| | ----------------------------------------
| | Investment in Unconsolidated Real Estate





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







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





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



103



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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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





|    |                              
|--- | -----------------------------
|14. | Commitments and Contingencies



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

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


Accounting for Contingencies




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





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



104



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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                    |  |            |       |               |              |   |                |            |              |               |              |  |                |            |             |  |  |   |            | 
|----------------------------------- |  | ---------- | ----- | ------------- | ------------ | - | -------------- | ---------- | ------------ | ------------- | ------------ |  | -------------- | ---------- | ----------- |  |  | - | ---------- | 
|                                    |  |            |       | 2005          |              |   | 2004           |           
|                                    |  |            |       |               |              |   |                |           
|                                    |  |            |       | Mortgage and  |              |   |                |            | Mortgage and |               |              | 
|                                    |  |            |       | Other Debt    |              |   |                |            | Other Debt   |               |              | 
|                                    |  |            |       | Balance as of |              |   | T REIT, Inc.s |            |              | Balance as of |              |  | T REIT, Inc.s |           
|                                    |  | Ownership  |       |               | December 31, |   |                | Portion of |              |               | December 31, |  |                | Portion of |            
|Property                            |  | Percentage |       |               | 2005         |   |                | Debt       |              |               | 2004         |  |                | Debt       |            
|                                    |  |            |       |               |              |   |                |            |              |               |              |  |                |            |            
|Reno Trademark Building  TIC       |  |            | 40.0% |               |              | $ | 4,449,000      |            |              | $             | 1,780,000    |  |                | $          | 4,504,000   |  |  | $ | 1,802,000  | 
|County Center Drive                 |  |            | 16.0% |               |              |   |               |            |              |               |             |  |                |            | 3,103,000   |  |  |   | 496,000    | 
|City Center West A Building  TIC |  |            | 89.1% |               |              |   |               |            |              |               |             |  |                |            | 12,484,000  |  |  |   | 11,127,000 | 
|Titan Building & Plaza  TIC        |  |            | 48.5% |               |              |   | 5,900,000      |            |              |               | 2,861,000    |  |                |            | 5,795,000   |  |  |   | 2,811,000  | 
|Pacific Corporate Park  LLC        |  |            | 22.8% |               |              |   |               |            |              |               |             |  |                |            | 5,554,000   |  |  |   | 1,266,000  | 
|Congress Center  LLC               |  |            | 10.3% |               |              |   | 97,500,000     |            |              |               | 9,962,000    |  |                |            | 97,500,000  |  |  |   | 9,962,000  | 
|Enclave Parkway  LLC               |  |            | 3.3%  |               |              |   | 23,000,000     |            |              |               | 749,000      |  |                |            | 23,310,000  |  |  |   | 759,000    | 
|Oakey Building  LLC                |  |            | 9.8%  |               |              |   | 8,757,000      |            |              |               | 855,000      |  |                |            | 4,000,000   |  |  |   | 390,000    | 
|Emerald Plaza  LLC                 |  |            | 2.7%  |               |              |   |               |            |              |               |             |  |                |            | 68,500,000  |  |  |   | 1,850,000  | 
|                                    |  |            |       |               |              |   |                |            |              |               |              |  |                |            |            
|Total                               |  |            |       |               |              | $ | 139,606,000    |            |              | $             | 16,207,000   |  |                | $          | 224,750,000 |  |  | $ | 30,463,000 | 
|                                    |  |            |       |               |              |   |                |            |              |               |              |  |                |            |            











105



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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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









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





| |       
| | ------
| | Leases



106



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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





|    |                                                 
|--- | ------------------------------------------------
|15. | Discontinued Operations  Property Held for Sale



|                                                                          |  |                 |           |   |                          |   |           |      |  |   |           |  
|------------------------------------------------------------------------- |  | --------------- | --------- | - | ------------------------ | - | --------- | ---- |  | - | --------- | -
|                                                                          |  | Period from     |           |   |                         
|                                                                          |  | January 1, 2005 |           |   | Years Ended December 31, |  
|                                                                          |  | through         |           |   |                          |  
|                                                                          |  | June 30, 2005   |           |   | 2004                     |   |           | 2003 | 
|                                                                          |  |                 |           |   |                          |   |           |      | 
|Rental income                                                             |  | $               | 2,239,000 |   |                          | $ | 5,024,000 |      |  | $ | 5,199,000 |  
|Rental expenses                                                           |  |                 | 942,000   |   |                          |   | 1,997,000 |      |  |   | 1,853,000 |  
|Depreciation and amortization                                             |  |                 | 1,035,000 |   |                          |   | 2,011,000 |      |  |   | 627,000   |  
|Other (income)                                                            |  |                 | (17,000   | ) |                          |   | (196,000  | )    |  |   | (11,000   | )
|Interest expense (including amortization of deferred financing
    costs) |  |                 | 675,000   |   |                          |   | 1,266,000 |      |  |   | 1,654,000 |  
|Minority interest                                                         |  |                 | (124,000  | ) |                          |   | (85,000   | )    |  |   |          |  
|                                                                          |  |                 |           |   |                          |   |           |      | 
|Income from discontinued operations  property held
    for sale, net     |  | $               | (272,000  | ) |                          | $ | 31,000    |      |  | $ | 1,076,000 |  
|                                                                          |  |                 |           |   |                          |   |           |      | 



|                                                                                           |  |              |            | 
|------------------------------------------------------------------------------------------ |  | ------------ | ---------- | 
|                                                                                           |  | December 31, |           
|                                                                                           |  | 2004         |           
|                                                                                           |  |              |           
|Properties held for sale, net of accumulated depreciation of
    $880,000                  |  | $            | 23,874,000 | 
|Other assets  properties held for sale, net of
    accumulated amortization of $1,806,000 |  |              | 3,822,000  | 
|Mortgages payable secured by properties held for sale                                      |  |              | 19,285,000 | 
|Minority interests  property held for sale                                                |  |              | 1,916,000  | 

107



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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                               
|--- | ------------------------------
|16. | Tax Treatment of Distributions



|                  |  |                          |           |  |      |  |       |      |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|----------------- |  | ------------------------ | --------- |  | ---- |  | ----- | ---- |  | - | --------- |  |  |  | ----- | - |  | - | --------- |  |  |  | ----- | -
|                  |  | Years Ended December 31, |          
|                  |  |                          |          
|                  |  | 2005                     |           |  | 2004 |  |       | 2003 | 
|                  |  |                          |           |  |      |  |       |      | 
|Ordinary income   |  | $                        | 157,000   |  |      |  | 6.2   | %    |  | $ | 930,000   |  |  |  | 24.4  | % |  | $ | 332,000   |  |  |  | 8.6   | %
|Capital gain      |  |                          | 614,000   |  |      |  | 24.3  | %    |  |   | 2,877,000 |  |  |  | 75.6  | % |  |   | 1,519,000 |  |  |  | 39.5  | %
|Return of capital |  |                          | 1,759,000 |  |      |  | 69.5  | %    |  |   |          |  |  |  |      |   |  |   | 1,993,000 |  |  |  | 51.9  | %
|                  |  |                          |           |  |      |  |       |      |  |   |           |  |  |  |       |   |  |  
|                  |  | $                        | 2,530,000 |  |      |  | 100.0 | %    |  | $ | 3,807,000 |  |  |  | 100.0 | % |  | $ | 3,844,000 |  |  |  | 100.0 | %
|                  |  |                          |           |  |      |  |       |      |  |   |           |  |  |  |       |   |  |  





|    |                      
|--- | ---------------------
|17. | Business Combinations



tenant-in-common






|    |                  
|--- | -----------------
|18. | Subsequent Events



108



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T REIT, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








109



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T REIT, INC.


QUARTERLY FINANCIAL DATA (UNAUDITED)






|                                                                                 |                                          |                    |            |            |                    |   |             |            | 
|-------------------------------------------------------------------------------- | ---------------------------------------- | ------------------ | ---------- | ---------- | ------------------ | - | ----------- | ---------- | 
|                                                                                 |                                          | Liquidation Basis  |           
|                                                                                 |                                          |                    |           
|                                                                                 |                                          | Period from        |            |            | Period from        |  
|                                                                                 |                                          | September 30, 2005 |            |            | June 30, 2005      |  
|                                                                                 |                                          | through            |            |            | through            |  
|                                                                                 |                                          | December 31, 2005  |            |            | September 30, 2005 |  
|                                                                                 |                                          |                    |            |            |                    |  
|Net assets in liquidation, beginning of period                                   |                                          | $                  | 29,980,000 |            |                    | $ | 47,953,000  |           
|                                                                                 |                                          |                    |            |            |                    |  
|Change in estimated receipts in excess of estimated costs during
    liquidation |                                          |                    | (754,000   | )          |                    |   | (935,000    | )         
|Net increase in fair value                                                       |                                          |                    | 3,303,000  |            |                    |   | 962,000     |           
|Distributions to shareholders                                                    |                                          |                    |           |            |                    |   | (18,000,000 | )         
|                                                                                 |                                          |                    |            |            |                    |  
|Change in net assets in liquidation                                              |                                          |                    | 2,549,000  |            |                    |   | (17,973,000 | )         
|                                                                                 |                                          |                    |            |            |                    |  
|                                                                                 | Net assets in liquidation, end of period |                    | $          | 32,529,000 |                    |   | $           | 29,980,000 | 
|                                                                                 |                                          |                    |            |            |                    |  

|                                                                                 |                         |                     |         |      |           |   |          |       |  
|-------------------------------------------------------------------------------- | ----------------------- | ------------------- | ------- | ---- | --------- | - | -------- | ----- | -
|                                                                                 |                         | Going Concern Basis |        
|                                                                                 |                         |                     |        
|                                                                                 |                         | Quarters Ended      |        
|                                                                                 |                         |                     |        
|                                                                                 |                         | June 30,            |         |      | March 31, |  
|                                                                                 |                         | 2005                |         |      | 2005      |  
|                                                                                 |                         |                     |         |      |           |  
|Revenues                                                                         |                         | $                   |        |      |           | $ |         |      
|                                                                                 |                         |                     |         |      |           |  
|Expenses                                                                         |                         |                     | 459,000 |      |           |   | 554,000  |      
|                                                                                 |                         |                     |         |      |           |  
|Equity in earnings of unconsolidated real estate                                 |                         |                     | 407,000 |      |           |   | 380,000  |      
|                                                                                 |                         |                     |         |      |           |  
|Income (loss) from continuing operations                                         |                         |                     | 383,000 |      |           |   | (51,000  | )    
|Gain (loss) on sale of real estate investments 
    discontinued
    operations |                         |                     |        |      |           |   |         |      
|Income (loss) from discontinued operations                                       |                         |                     | 25,000  |      |           |   | (297,000 | )    
|                                                                                 |                         |                     |         |      |           |  
|Net income (loss)                                                                |                         | $                   | 408,000 |      |           | $ | (348,000 | )    
|                                                                                 |                         |                     |         |      |           |  
|Earnings (loss) per share  basic and diluted                                    |                         |                     |         |      |           |   |          |      
|                                                                                 | Continuing operations   |                     | $       | 0.08 |           |   | $        | (0.01 | )
|                                                                                 | Discontinued operations |                     |         | 0.01 |           |   |          | (0.07 | )
|                                                                                 |                         |                     |         |      |           |  
|Net income (loss) per common share                                               |                         | $                   | 0.09    |      |           | $ | (0.08    | )    
|                                                                                 |                         |                     |         |      |           |  

110



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T REIT, INC.


QUARTERLY FINANCIAL DATA
(UNAUDITED)  (Continued)


|                                                                             |                         |                     |          |       |               |   |           |          |   |   |           |       |   |   |           |      | 
|---------------------------------------------------------------------------- | ----------------------- | ------------------- | -------- | ----- | ------------- | - | --------- | -------- | - | - | --------- | ----- | - | - | --------- | ---- | 
|                                                                             |                         | Going Concern Basis |         
|                                                                             |                         |                     |         
|                                                                             |                         | Quarters Ended      |         
|                                                                             |                         |                     |         
|                                                                             |                         | December 31,        |          |       | September 30, |   |           | June 30, |   |   | March 31, |      
|                                                                             |                         | 2004                |          |       | 2004          |   |           | 2004     |   |   | 2004      |      
|                                                                             |                         |                     |          |       |               |   |           |          |   |   |           |      
|Revenues                                                                     |                         | $                   |         |       |               | $ |          |          |   | $ |          |       |   | $ |          |     
|                                                                             |                         |                     |          |       |               |   |           |          |   |   |           |      
|Expenses                                                                     |                         |                     | 433,000  |       |               |   | 434,000   |          |   |   | 256,000   |       |   |   | 90,000    |     
|                                                                             |                         |                     |          |       |               |   |           |          |   |   |           |      
|Equity in earnings (loss) of unconsolidated real estate                      |                         |                     | (102,000 | )     |               |   | 50,000    |          |   |   | 368,000   |       |   |   | 265,000   |     
|                                                                             |                         |                     |          |       |               |   |           |          |   |   |           |      
|Income (loss) from continuing operations                                     |                         |                     | (332,000 | )     |               |   | (172,000  | )        |   |   | 257,000   |       |   |   | 294,000   |     
|Gain (loss) on sale of real estate investments 
    discontinued operations |                         |                     | 832,000  |       |               |   | 821,000   |          |   |   | (9,000    | )     |   |   | 822,000   |     
|Income (loss) from discontinued operations                                   |                         |                     | (356,000 | )     |               |   | 444,000   |          |   |   | (282,000  | )     |   |   | 225,000   |     
|                                                                             |                         |                     |          |       |               |   |           |          |   |   |           |      
|Net income (loss)                                                            |                         | $                   | 144,000  |       |               | $ | 1,093,000 |          |   | $ | (34,000   | )     |   | $ | 1,341,000 |     
|                                                                             |                         |                     |          |       |               |   |           |          |   |   |           |      
|Earnings (loss) per share  basic and diluted                                |                         |                     |          |       |               |   |           |          |   |   |           |       |   |   |           |     
|                                                                             | Continuing operations   |                     | $        | (0.07 | )             |   | $         | (0.03    | ) |   | $         | 0.05  |   |   | $         | 0.06 | 
|                                                                             | Discontinued operations |                     |          | 0.10  |               |   |           | 0.27     |   |   |           | (0.06 | ) |   |           | 0.23 | 
|                                                                             |                         |                     |          |       |               |   |           |          |   |   |           |      
|Net income (loss) per common share                                           |                         | $                   | 0.03     |       |               | $ | 0.24      |          |   | $ | (0.01     | )     |   | $ | 0.29      |     
|                                                                             |                         |                     |          |       |               |   |           |          |   |   |           |      

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T REIT, INC.


SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


|                                                                                                  |  |              |        |           |            |   |        |            |  |            |   |            |        |   |         |   |  |   |        | 
|------------------------------------------------------------------------------------------------- |  | ------------ | ------ | --------- | ---------- | - | ------ | ---------- |  | ---------- | - | ---------- | ------ | - | ------- | - |  | - | ------ | 
|                                                                                                  |  |              |        | Additions |            |   |        |           
|                                                                                                  |  |              |        |           |            |   |        |           
|                                                                                                  |  | Balance at   |        |           | Charged to |   |        | Charged to |  |            |   | Balance at |       
|                                                                                                  |  | Beginning of |        |           | Costs and  |   |        | Other      |  |            |   | End of     |       
|Description                                                                                       |  | Period       |        |           | Expenses   |   |        | Accounts   |  | Deductions |   |            | Period |  
|                                                                                                  |  |              |        |           |            |   |        |            |  |            |   |            |        |  
|Period from January 1, 2005 through June 30,
    2005  Reserve deducted from accounts receivable |  | $            | 58,000 |           |            | $ |       |            |  | $          |  |            |        | $ | (58,000 | ) |  | $ |       | 
|Year ended December 31, 2004  Reserve deducted
    from accounts receivable                      |  | $            | 41,000 |           |            | $ | 58,000 |            |  | $          |  |            |        | $ | (41,000 | ) |  | $ | 58,000 | 
|Year ended December 31, 2003  Reserve deducted
    from accounts receivable                      |  | $            | 68,000 |           |            | $ | 41,000 |            |  | $          |  |            |        | $ | (68,000 | ) |  | $ | 41,000 | 

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T REIT, INC.


SCHEDULE III  REAL ESTATE OPERATING
PROPERTIES AND


ACCUMULATED DEPRECIATION


|                           |  |                          |            |               |                                                  |   |           |              |               |   |            |                 |  |              |           |  |               |   |            |       |  |   |                 |  |  |             |            |  |  |   |            |   |  |  |           | 
|-------------------------- |  | ------------------------ | ---------- | ------------- | ------------------------------------------------ | - | --------- | ------------ | ------------- | - | ---------- | --------------- |  | ------------ | --------- |  | ------------- | - | ---------- | ----- |  | - | --------------- |  |  | ----------- | ---------- |  |  | - | ---------- | - |  |  | --------- | 
|                           |  | Initial Costs to Company |            |               | Gross Amount at Which Carried at Close of Period |   |           |             
|                           |  |                          |            |               |                                                  |   |           |             
|                           |  |                          |            | Buildings and |                                                  |   |           |              | Buildings and |   |            | Net Liquidation |  |              |           |  | Accumulated   |   |            | Date  | 
|                           |  | Encumbrances             |            |               | Land                                             |   |           | Improvements |               |   | Land       |                 |  | Improvements |           |  | Adjustment(1) |   |            | Total |  |   | Depreciation(2) |  |  | Constructed |           
|                           |  |                          |            |               |                                                  |   |           |              |               |   |            |                 |  |              |           |  |               |   |            |       |  |   |                 |  |  |             |           
|University Heights, TX     |  | $                        | 4,400,000  |               |                                                  | $ | 1,011,000 |              |               | $ | 5,725,000  |                 |  | $            | 1,011,000 |  |               | $ | 5,837,000  |       |  |   |                 |  |  | $           | 6,848,000  |  |  | $ | (443,000   | ) |  |  | 2000      | 
|AmberOaks, TX              |  |                          | 11,250,000 |               |                                                  |   | 3,474,000 |              |               |   | 19,688,000 |                 |  |              | 5,306,000 |  |               |   | 12,600,000 |       |  |   |                 |  |  |             | 17,906,000 |  |  |   | (696,000   | ) |  |  | 1999-2001 | 
|Net Liquidation Adjustment |  |                          |            |               |                                                  |   |           |              |               |   |            |                 |  |              |           |  |               |   |            |       |  |   | 1,460,000       |  |  |             | 1,460,000  |  |  |   |            |   |  |  |           | 
|                           |  |                          |            |               |                                                  |   |           |              |               |   |            |                 |  |              |           |  |               |   |            |       |  |   |                 |  |  |             |           
|Total                      |  | $                        | 15,650,000 |               |                                                  | $ | 4,485,000 |              |               | $ | 25,413,000 |                 |  | $            | 6,317,000 |  |               | $ | 18,437,000 |       |  | $ | 1,460,000       |  |  | $           | 26,214,000 |  |  | $ | (1,139,000 | ) |  |  |           | 
|                           |  |                          |            |               |                                                  |   |           |              |               |   |            |                 |  |              |           |  |               |   |            |       |  |   |                 |  |  |             |           

|                       |  |               |      |                                       |                                     |  |    | 
|---------------------- |  | ------------- | ---- | ------------------------------------- | ----------------------------------- |  | -- | 
|                       |  |               |      | Maximum Life on Which Depreciation in |                                    
|Description            |  | Date Acquired |      |                                       | Latest Income Statement is Computed | 
|                       |  |               |      |                                       |                                     | 
|University Heights, TX |  |               | 2002 |                                       |                                     |  | 39 | 
|AmberOaks III, TX      |  |               | 2004 |                                       |                                     |  | 39 | 



|                                |  |      |            | 
|------------------------------- |  | ---- | ---------- | 
|                                |  | 2005 |           
|                                |  |      |           
|Balance as of December 31, 2004 |  | $    | 24,754,000 | 
|Additions and acquisitions      |  |      |           | 
|Liquidation adjustment, net     |  |      | 1,460,000  | 
|Dispositions                    |  |      |           | 
|                                |  |      |           
|Balance as of December 31, 2005 |  | $    | 26,214,000 | 
|                                |  |      |           



|                                |  |      |           | 
|------------------------------- |  | ---- | --------- | 
|                                |  | 2005 |          
|                                |  |      |          
|Balance as of December 31, 2004 |  | $    | 880,000   | 
|Additions(2)                    |  |      | 259,000   | 
|Disposals                       |  |      |          | 
|                                |  |      |          
|Balance as of December 31, 2005 |  | $    | 1,139,000 | 
|                                |  |      |          






|    |                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Under the liquidation basis of accounting, our real estate
    holdings are now carried at their estimated fair value. As a
    result, the net liquidation adjustment is the net adjustment
    that we have made to the carrying value of the property in order
    to reflect its fair value.
|   
|(2) | Depreciation expense has not been recorded since June 30,
    2005 as a result of the adoption of our plan of liquidation,
    because all assets are considered held for sale.                                                                                                                 

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SIGNATURES






| |                                      
| | -------------------------------------
| | T REIT, Inc.                         
|
| | By: /s/ Jack R. Maurer               
| |                                      
| | Jack R. Maurer                       
| | Chief Executive Officer and President





|                                           |  |                                       |  |                |  | 
|------------------------------------------ |  | ------------------------------------- |  | -------------- |  | 
|Name                                       |  | Title                                 |  | Date          
|                                           |  |                                       |  |               
|                                          
|/s/ Jack R. MaurerJack R. Maurer           |  | Chief Executive Officer and President |  | March 10, 2006
|                                          
|/s/ Scott D. PetersScott D. Peters         |  | Chief Financial Officer               |  | March 10, 2006
|                                          
|/s/ D. Fleet WallaceD. Fleet Wallace       |  | Director                              |  | March 10, 2006
|                                          
|/s/ W. Brand InlowW. Brand Inlow           |  | Director                              |  | March 10, 2006
|                                          
|/s/ Anthony W. ThompsonAnthony W. Thompson |  | Director                              |  | March 10, 2006

114



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##### Table of Contents



EXHIBIT INDEX


S-K,


10-K S-K).


|     |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|---- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |    |            
|No.  |    | Description
|     |    |            
|     | 2  | .1          |  | T REIT, Inc. Plan of Liquidation and Dissolution, as approved by
    stockholders on July 27, 2005 and as currently in effect
    (included as Exhibit A to the Companys Definitive
    Proxy Statement for the Annual Meeting of Shareholders filed on
    June 15, 2005 and incorporated herein by reference)                                                                                                               
|     | 3  | .1          |  | Articles of Incorporation of the Company (included as
    Exhibit 3.1 to the Companys Registration Statement on
    Form S-11 filed on April 28, 1999 (File
    No. 333-77229) and incorporated herein by reference)                                                                                                                                                                                                          
|     | 3  | .2          |  | Form of Amended and Restated Articles of Incorporation of the
    Company (included as Exhibit 3.2 to Amendment No. 3 to
    the Companys Registration Statement on Form S-11
    filed on November 22, 1999 (File No. 333-77229) and
    incorporated herein by reference)                                                                                                                                                   
|     | 3  | .3          |  | Form of By-Laws of the Company (included as Exhibit 3.3 to
    the Companys Registration Statement on Form S-11
    filed on April 28, 1999 (File No. 333-77229) and
    incorporated herein by reference)                                                                                                                                                                                                                    
|     | 3  | .4          |  | Form of Amended By-Laws of the Company (included as
    Exhibit 3.4 to Post-Effective Amendment No. 2 to the
    Companys Registration Statement on Form S-11 filed on
    July 17, 2001 (File No. 333-77229) and incorporated
    herein by reference.)                                                                                                                                                                      
|     | 4  | .1          |  | Form of Share Certificate (included as Exhibit 4.1 to
    Amendment No. 4 to the Companys Registration
    Statement on Form S-11 filed on February 3, 2000 (File
    No. 333-77229) and incorporated herein by reference)                                                                                                                                                                                                    
|     | 10 | .1          |  | Form of Agreement of Limited Partnership of T REIT, L.P.
    (included as Exhibit 10.1 to Amendment No. 2 to the
    Companys Registration Statement on Form S-11 filed on
    October 13, 1999 (File No. 333-77229) and incorporated
    herein by reference)                                                                                                                                                                
|     | 10 | .2          |  | Dividend Reinvestment Program (included as Exhibit C to the
    Companys Prospectus filed as part of the Companys
    Registration Statement on Form S-11 on April 28, 1999
    (File No. 333-77229) and incorporated herein by reference)                                                                                                                                                                                   
|     | 10 | .3          |  | Independent Director Stock Option Plan (included as
    Exhibit 10.3 to Amendment No. 4 to the Companys
    Registration Statement on Form S-11 filed on
    February 3, 2000 (File No. 333-77229) and incorporated
    herein by reference)                                                                                                                                                                                  
|     | 10 | .4          |  | Employee and Officer Stock Option Plan (included as
    Exhibit 10.4 to Amendment No. 4 to the Companys
    Registration Statement on Form S-11 filed on
    February 3, 2000 (File No. 333-77229) and incorporated
    herein by reference).                                                                                                                                                                                 
|     | 10 | .5          |  | Advisory Agreement between the Company and our Advisor (included
    as Exhibit 10.5 to Amendment No. 2 to the
    Companys Registration Statement on Form S-11 filed on
    October 13, 1999 (File No. 333-77229) and incorporated
    herein by reference)                                                                                                                                                                  
|     | 10 | .6          |  | First Amendment to Advisory Agreement between the Company and
    our Advisor (included as Exhibit 10.10 to Post-Effective
    Amendment No. 1 to the Companys Registration
    Statement filed on Form S-11 on July 17, 2001 (File
    No. 333-772229) and incorporated herein by reference).                                                                                                                                
|     | 10 | .7          |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions dated January 24, 2005 by and between
    TREIT-City Center West A, LLC, NNN City Center West A1, LLC, NNN
    City Center West A3, LLC, NNN City Center West A4, LLC and
    United Insurance Company of America. (included as
    Exhibit 99 to the Form 8-K filed by the Company on
    January 26, 2005 and incorporated herein by reference).



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##### Table of Contents



|     |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|---- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |    |            
|No.  |    | Description
|     |    |            
|     | 10 | .8          |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions dated July 15, 2005 by and between TREIT-City
    Center West A, LLC, NNN City Center West A1, LLC, NNN City
    Center West A3, LLC and NNN City Center West A4, LLC and
    Pacifica Real Estate Group, LLC. (included as Exhibit 99 to
    the Form 8-K filed by the Company on July 20, 2005 and
    incorporated herein by reference).                                                                                                                                                         
|     | 10 | .9          |  | First Amendment to Agreement for Purchase and Sale of Real
    Property and Escrow Instructions dated as of March 9, 2004
    by and between T REIT  Gateway Mall ND Fee, LLC and
    VP Investments, L.L.C. (included as Exhibit 10.02 to the
    Form 8-K filed by the Company on March 29, 2004 and
    incorporated herein by reference).                                                                                                                                                                                                                                   
|     | 10 | .10         |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions dated August 19, 2005 by and between
    TREIT-Reno Trademark, LLC, NNN Reno Trademark 1, LLC, NNN
    Reno Trademark 2, LLC, NNN Reno Trademark 3, LLC, NNN
    Reno Trademark 4, LLC, NNN Reno Trademark 5, LLC, NNN
    Reno Trademark 6, LLC, NNN Reno Trademark 7, LLC, NNN
    Reno Trademark 8, LLC, NNN Reno Trademark 9, LLC and
    Skyline, LP. (included as Exhibit 99 to the Form 8-K
    filed by the Company on September 1, 2005 and incorporated
    herein by reference).         
|     | 10 | .11         |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions dated November 4, 2005 by and between
    TREIT-University Heights, LP and Adler Realty Investments, Inc.
    (included as Exhibit 99 to the Form 8-K filed by the
    Company on November 8, 2005 and incorporated herein by
    reference).                                                                                                                                                                                                                                                       
|     | 10 | .12         |  | First Amendment to Agreement for Purchase and Sale of Real
    Property and Escrow Instructions dated July 27, 2005 by and
    between TREIT-City Center West A, LLC, NNN City Center West A1,
    LLC, NNN City Center West A3, LLC and NNN City Center West A4,
    LLC and Pacifica Real Estate Group, LLC. (included as
    Exhibit 10.2 to the Form 10-Q filed by the Company on
    November 14, 2005 and incorporated herein by reference).                                                                                                                               
|     | 10 | .13         |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions dated November 3, 2005, by and between NNN
    Oakey Building 2003, LLC and Trans-Aero Land &
    Development Corporation. (included as Exhibit 10.3 to the
    Form 10-Q filed by the Company on November 14, 2005
    and incorporated herein by reference).                                                                                                                                                                                                                                      
|     | 10 | .14         |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions dated November 11, 2005, by and between NNN
    Pacific Corporate Park 1, LLC, NNN Pacific Corporate Park
    VF, LLC and Makoil Inc. (included as Exhibit 10.4 to the
    Form 10-Q filed by the Company on November 14, 2005
    and incorporated herein by reference).                                                                                                                                                                                                                           
|     | 10 | .15         |  | Amendment to Agreement for Purchase and Sale dated
    September 8, 2005 by and between TREIT-Reno Trademark, LLC,
    NNN Reno Trademark 1, LLC, NNN Reno Trademark 2, LLC,
    NNN Reno Trademark 3, LLC, NNN Reno Trademark 4, LLC,
    NNN Reno Trademark 5, LLC, NNN Reno Trademark 6, LC,
    NNN Reno Trademark 7, LLC, NNN Reno Trademark 8, LLC,
    NNN Reno Trademark 9, LLC and Skyline, LP. (included as
    Exhibit 10.1 to the Form 8-K filed by the Company on
    January 27, 2006 and incorporated herein by reference).                                       
|     | 10 | .16         |  | Second Amendment to Agreement for Purchase and Sale dated
    November 30, 2005 by and between Triple Net Properties,
    LLC, TREIT-Reno Trademark, LLC, NNN Reno Trademark 1, LLC,
    NNN Reno Trademark 2, LLC, NNN Reno Trademark 3, LLC,
    NNN Reno Trademark 4, LLC, NNN Reno Trademark 5, LLC,
    NNN Reno Trademark 6, LC, NNN Reno Trademark 7, LLC,
    NNN Reno Trademark 8, LLC, NNN Reno Trademark 9, LLC
    and Skyline, LP. (included as Exhibit 10.2 to the
    Form 8-K filed by the Company on January 27, 2006 and
    incorporated herein by reference).



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##### Table of Contents



|     |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |    |            
|No.  |    | Description
|     |    |            
|     | 10 | .17         |  | Third Amendment to Agreement for Purchase and Sale of Real
    Property and Escrow Instructions, dated January 18, 2006 by
    and between TREIT-Reno Trademark, LLC, NNN Reno
    Trademark 1, LLC, NNN Reno Trademark 2, LLC, NNN Reno
    Trademark 3, LLC, NNN Reno Trademark 4, LLC, NNN Reno
    Trademark 5, LLC, NNN Reno Trademark 6, LC, NNN Reno
    Trademark 7, LLC, NNN Reno Trademark 8, LLC, NNN Reno
    Trademark 9, LLC and Skyline, LP. (included as
    Exhibit 10.3 to the Form 8-K filed by the Company on
    January 27, 2006 and incorporated herein by reference).
|     | 10 | .18         |  | First Amendment to Agreement for Purchase and Sale of Real
    Property and Escrow Instructions, dated November 5, 2005,
    entered into by and between NNN Oakey Building 2003, LLC and
    Trans-Aero Land and Development Company. (included as
    Exhibit 10.1 to the Form 8-K filed by the Company on
    January 30, 2006 and incorporated herein by reference).                                                                                                                                                                                                                     
|     | 10 | .19         |  | Amendment No. 1, Agreement for Purchase and Sale of Real
    Property and Escrow Instructions, effective December 14,
    2005, by and between TREIT-University Heights, LP and Adler
    Realty Investments, Inc. (included as Exhibit 10.1 to the
    Form 8-K filed by the Company on January 30, 2006 and
    incorporated herein by reference).                                                                                                                                                                                                                                         
|     | 10 | .20         |  | Amendment No. 2, Agreement for Purchase and Sale of Real
    Property and Escrow Instructions, effective December 15,
    2005, by and between TREIT-University Heights, LP and Adler
    Realty Investments, Inc. (included as Exhibit 10.2 to the
    Form 8-K filed by the Company on January 30, 2006 and
    incorporated herein by reference).                                                                                                                                                                                                                                         
|     | 10 | .21         |  | Acknowledgement of Extended Closing Date, effective
    January 13, 2006, by and between Adler Realty Investments,
    Inc. and TREIT-University Heights, LP. (included as
    Exhibit 10.3 to the Form 8-K filed by the Company on
    January 30, 2006 and incorporated herein by reference).                                                                                                                                                                                                                                                                                              
|     | 10 | .22         |  | Third Amendment to Agreement for Purchase and Sale of Real
    Property and Escrow Instructions entered into January 27,
    2006 by and between TREIT-University Heights, LP and ARI
    University Heights, LP, University Heights Held, LLC, University
    Heights Lukens, LLC, and University Heights Vandever, LLC.
    (included as Exhibit 10.4 to the Form 8-K filed by the
    Company on January 30, 2006 and incorporated herein by
    reference).                                                                                                                              
|     | 14 | .1          |  | T REIT Code of Business Conduct and Ethics dated May 14,
    2004 (included as Exhibit 14.1 to the Form 10-K filed
    by the Company on April 1, 2005 and incorporated herein by
    reference).                                                                                                                                                                                                                                                                                                                                                                                            
|     | 31 | .1*         |  | Certification of Chief Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     | 31 | .2*         |  | Certification of Chief Financial Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     | 32 | .1*         |  | Certification of Chief Executive Officer, pursuant to
    18 U.S.C. Section 1350, as created by Section 906
    of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     | 32 | .2*         |  | Certification of Chief Financial Officer, pursuant to
    18 U.S.C. Section 1350, as created by Section 906
    of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                            






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