AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 2003

                                                 REGISTRATION NO. 333-104652

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                AMENDMEND NO. 1
                                      TO
                                   FORM S-11
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                                     AMREIT
      (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENT)

                          8 GREENWAY PLAZA, SUITE 824
                              HOUSTON, TEXAS 77046
                                 (713) 850-1400
    (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                 OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

                                 H. KERR TAYLOR
                            CHIEF EXECUTIVE OFFICER
                                     AMREIT
                          8 GREENWAY PLAZA, SUITE 824
                              HOUSTON, TEXAS 77046
                                 (713) 850-1400
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                  INCLUDING AREA CODE, OF AGENT FOR SERVICE)

                                   COPIES TO:

                                BRYAN L. GOOLSBY
                                KENNETH L. BETTS
                            LOCKE LIDDELL & SAPP LLP
                          2200 ROSS AVENUE, SUITE 2200
                            DALLAS, TEXAS 75201-6776
                                 (214) 740-8000

         APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.

      If this form is filed to register additional Securities for offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| ___________________

      If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
|_| ____________________

      If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
|_| _____________________

      If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. |_|

                               ------------------

                        CALCULATION OF REGISTRATION FEE


================================================ ================= ========================= ======================= ==============
                                                                       PROPOSED MAXIMUM         PROPOSED MAXIMUM       AMOUNT OF
       TITLE OF EACH CLASS OF SECURITIES           AMOUNT TO BE         OFFERING PRICE             AGGREGATE         REGISTRATION
               TO BE REGISTERED                     REGISTERED            PER SHARE            OFFERING PRICE(1)          FEE
------------------------------------------------ ----------------- ------------------------- ----------------------- --------------
------------------------------------------------ ----------------- ------------------------- ----------------------- --------------
                                                                                                         
 Class C Common Shares of Beneficial Interest,      4,400,000               $10.00                $44,000,000           $4,048
                $.01 par value
================================================ ================= ========================= ======================= ==============


(1)  Estimated solely for the purposes of calculating the registration fee
     pursuant to Rule 457(o), promulgated under the Securities Act of 1933, as
     amended.
                               ------------------

      THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.




                 SUBJECT TO COMPLETION, DATED AUGUST ___, 2003

                                     AMREIT

          UP TO 4,400,000 CLASS C COMMON SHARES OFFERED TO THE PUBLIC


         AmREIT is a fully integrated real estate company that operates as a
real estate investment trust (REIT) under the federal income tax laws. AmREIT
acquires, owns and manages a diversified portfolio of single-tenant
freestanding and multi-tenant commercial frontage properties leased to
national, regional and local tenants with a focus on general retail, banking and
financial institutions, restaurant and medical sectors. As of the date of this
prospectus, AmREIT owned directly, or through joint ventures, interests in 50
properties located in 20 states that are leased to a total of 27 different
tenants and that contain an aggregate of approximately 380 thousand square
feet of gross leaseable area. The proceeds from the sale of the class C common
shares being offered by us pursuant to this prospectus will be invested in
these types of real estate properties. We are offering and selling to the
public up to 4,000,000 class C common shares of beneficial interest for $10.00
per share and up to 400,000 shares to be issued pursuant to our dividend
reinvestment plan at a purchase price of $10.00 per share.


         This prospectus gives you detailed information about the class C
common shares. You are encouraged to read this document carefully. IN
PARTICULAR, YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE ___
FOR A DESCRIPTION OF VARIOUS RISKS YOU SHOULD CONSIDER IN EVALUATING AN
INVESTMENT IN THE SHARES, INCLUDING THE FOLLOWING:

o    the lack of a public trading market for the class C common shares,

o    the speculative nature of an investment in the class C common shares,

o    the shareholders cannot evaluate property acquisitions ahead of time,

o    the potential dilution of your interest should we issue additional shares,


o    the ability of AmREIT to increase its current debt levels,

o    the subordination of distributions on the class C common shares to
     payments of our debt.


o    the ability of AmREIT to maintain its REIT status, and

o    the fact that AmREIT depends on few major tenants.



                                 The Offering:

o    The shares will be offered on a best efforts basis to investors at $10.00
     per share.


o    We will pay selling commissions to broker-dealers of 7.5% and a dealer
     manager fee of 2.5% out of the offering proceeds raised.


o    We will invest approximately 88% of the offering proceeds raised in real
     estate properties or to pay down existing debt, and the balance will be
     used to pay fees and expenses.


o    This offering will terminate on or before August __, 2004 unless we
     decide to extend the offering until not later than August __, 2005, in any
     state that allows us to extend the offering.


         NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE ATTORNEY GENERAL
OF THE STATE OF NEW YORK NOR ANY OTHER STATE SECURITIES REGULATOR HAS APPROVED
OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL
OR COMPLETE. IT IS A CRIMINAL OFFENSE IF SOMEONE TELLS YOU OTHERWISE. THE USE
OF PROJECTIONS OR FORECASTS, OTHER THAN THOSE PRESENTED HEREIN, OR
SPECIFICALLY AUTHORIZED BY THE COMPANY, IS PROHIBITED. NO ONE IS PERMITTED
TO MAKE ANY ORAL OR WRITTEN PREDICTIONS ABOUT THE CASH BENEFITS OR TAX
CONSEQUENCES YOU WILL RECEIVE FROM YOUR INVESTMENT.

         NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS IN CONNECTION WITH THE OFFERING OF THE CLASS C COMMON SHARES
MADE HEREBY AND, IF GIVEN OR MADE, THAT INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY
SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER.

                              August ______, 2003






                               TABLE OF CONTENTS


                                                                                                    PAGE
                                                                                              
 Questions and Answers About The Offering.......................................................       2
 Summary of the Offering........................................................................       8
 Risk Factors...................................................................................      12
      Risks Associated with an Investment in AmREIT.............................................      12
      Risks Associated with an Investment in Real Estate........................................      16
      Risks Associated with Federal Income Taxation of AmREIT...................................      21
 Suitability Standards..........................................................................      23
 Business and Properties........................................................................      28
 Management.....................................................................................      34
      Executive Compensation....................................................................      37
      Security Ownership of Certain Beneficial Owners and Management............................      38
      Certain Relationships and Related Transactions............................................      38
      Legal Proceedings.........................................................................      39
 Estimated Use of Proceeds......................................................................      40
 Prior Performance..............................................................................      42
 Conflicts of Interest..........................................................................
 Price Range of Class A Common Shares...........................................................
 Repurchase of Shares...........................................................................
 Selected Historical Financial Data.............................................................      52
 Management's Discussion and Analysis of Financial Condition and Results of Operations..........      54
 Investment Objectives and Criteria.............................................................      60
 AmREIT's Declaration of Trust and Bylaws.......................................................      69
 Certain Anti-Takeover Provisions of AmREIT's Declaration of Trust and Bylaws and Texas Law.....      72
 Description of AmREIT's Capital Shares.........................................................      76
      General...................................................................................
      Class A Common Shares.....................................................................
      Class B Common Shares.....................................................................
      Class C Common Shares.....................................................................
      Preferred Shares..........................................................................
      Ownership Limitations and Restrictions or Transfer........................................
      Dividend Reinvestment Plan................................................................
 Federal Income Tax Consequences................................................................      88
      General...................................................................................      88
      REIT Qualification........................................................................      89
      Taxation as a REIT........................................................................      94
      Failure to Qualify as a REIT..............................................................      96
      Taxation of Taxable U.S. Shareholders.....................................................      96
      Backup Withholding........................................................................      98
      Taxation of Tax-Exempt Entities...........................................................      98
      Taxation of Foreign Investors.............................................................      99
      State and Local Taxes.....................................................................     100
 Certain ERISA Considerations...................................................................     101
      General Fiduciary Rules...................................................................     101
      Plan Assets...............................................................................     101
      Plan Asset Regulations - Publicly Offered Securities Exemption............................     102
      Prohibited Transactions...................................................................     102
      Governmental Plans........................................................................     103
      Special Considerations for Insurance Companies............................................     103
 Plan of Distribution...........................................................................     104
      General...................................................................................
      Compensation and Terms....................................................................
      Subscription Procedures...................................................................
 Supplemental Sales Material....................................................................     107
 Experts........................................................................................
 Legal Opinions.................................................................................     108
 Additional Information.........................................................................     108
 Glossary.......................................................................................     109
 Financial Statements...........................................................................



                                 i






                    QUESTIONS AND ANSWERS ABOUT THE OFFERING


     BELOW WE HAVE PROVIDED  SOME OF THE MORE  FREQUENTLY  ASKED  QUESTIONS AND
ANSWERS  RELATING  TO AN  OFFERING  OF THIS TYPE.  PLEASE SEE  "SUMMARY  OF THE
OFFERING" AND THE REMAINDER OF THIS  PROSPECTUS  FOR MORE DETAILED  INFORMATION
ABOUT THIS OFFERING.  THESE  QUESTIONS AND ANSWERS DO NOT, AND ARE NOT INTENDED
TO,  ADDRESS  ALL THE  QUESTIONS  THAT  MAY BE  IMPORTANT  TO YOU.  PROSPECTIVE
INVESTORS SHOULD  CAREFULLY READ THE "SUMMARY OF THE OFFERING"  SECTION AND THE
REMAINDER OF THIS PROSPECTUS FOR MORE INFORMATION REGARDING THE OFFERING.


Q.   WHAT IS A REIT?

A.   In general, a REIT is a company that:

     o    combines the capital of many investors to acquire or provide
          financing for real estate properties;

     o    pays dividends to investors of at least 90% of its taxable income;

     o    avoids the "double taxation" treatment of income that may
          result from investments in a corporation because a REIT is not
          generally subject to federal corporate income taxes on its net
          income, provided certain income and distribution requirements are
          satisfied; and

     o    allows individual investors to invest in a large-scale diversified
          real estate portfolio through the purchase of interests, typically
          shares, in the REIT.

Q.   WHAT IS AMREIT?


A.   AmREIT is a fully integrated real estate company dedicated to the
     ownership, development and acquisition of commercial real estate
     specializing in general retail, financial services and banking, medical
     and restaurant sectors.  In addition, AmREIT is a sponsor of real estate
     investment opportunities, available through the financial planning
     community.  AmREIT, a Texas real estate investment trust, became the
     successor to AmREIT, Inc., a Maryland corporation (the "Predecessor
     Corporation"), in December, 2002, through the merger of the Predecessor
     Corporation with AmREIT. AmREIT has outstanding approximately 2.9 million
     class A common shares which are listed on the American Stock Exchange
     (AMEX)under the trading symbol "AMY", and approximately 2.4 million class
     B common shares that are not listed on an exchange, which may be converted
     into class A common shares, on a one-for-one basis at any time, at the
     holder's option.


Q.   HOW MANY REAL ESTATE PROPERTIES DO YOU CURRENTLY OWN?


A.   As of the date of this prospectus, AmREIT owns, directly or through joint
     venture, 50 real estate properties. These properties are located in 20
     different states and include both single tenant free standing properties
     as well as multi-tenant shopping centers. Some of our tenants include
     Washington Mutual, Eckerd's, Radio Shack, IHOP, TGI Friday's, Sketchers,
     Texas Children's Pediatric Association, and Memorial Herman Hospital.


                                       1






Q.   WHAT ARE THE TERMS OF THE CLASS C COMMON SHARES?

A.   The AmREIT class C common shares will have the following terms:


     o    dividends, which are preferred to the class A common shares and rank
          equally to the class B common shares, will be in an amount per share
          equal to 7% of the issue price ($10.00 per share) per annum, payable
          monthly in advance of any dividends paid on the AmREIT class A common
          shares;

     o    can be converted into AmREIT class A common shares (which are
          currently publicly traded on the AMEX) with a 10% premium
          on original capital(i.e., $1,000 of class C common shares will
          convert to $1,100 of class A common shares), at any time following
          the seventh anniversary of the date of issuance of the shares; and

     o    can be called by AmREIT after three years following the date of
          issuance of the shares for either one class A common share or for
          cash at a price of $11.00 (representing a 10% premium over the issue
          price), at the holder's option.

     The 10% premium  that  shareholders  will receive  upon  conversion  will,
     together with the dividends  paid through the conversion  date,  provide a
     total  return  of  approximately  8.5%  per  annum  as of  the  end of the
     seven-year lock out period assuming all dividends to such date are paid in
     full.  The total return would be higher if AmREIT redeems the shares prior
     to the end of the lock-out period. Although the class C common shares will
     not be listed on an  exchange,  they  will be freely  transferable  by the
     holders and will be  convertible  into the class A common shares after the
     seven-year lock out period.


Q.   IF I BUY SHARES, WILL I RECEIVE DIVIDENDS AND HOW OFTEN?


A.   We have been making and intend to continue to make dividend distributions
     to our shareholders; however, the declaration of dividends is at the sole
     discretion of our board of trust managers and there can be no assurance
     that AmREIT will in fact declare and pay dividends.  As a holder of class
     C common shares, you will be entitled to receive annual dividends in the
     amount of $0.70 per share, paid to shareholders of record on a monthly
     basis.

     The amount of each dividend distribution to be paid to holders of
     class C common shares is determined by our board of trust managers and
     typically depends on the amount of distributable funds, current and
     projected cash requirements, tax considerations and other factors. Class C
     common share dividends will be payable prior to dividends payable to class
     A shareholders and concurrently with the dividends paid to class B shares.
     However, in order to remain qualified as a REIT, we must make
     distributions of at least 90% of our REIT taxable income.

Q.   HOW DO YOU CALCULATE THE PAYMENT OF DIVIDENDS TO CLASS C SHAREHOLDERS?


A.   We calculate our monthly dividends on a daily basis from the date the
     class C common shares are issued through the end of the fiscal month in
     which they were issued so your dividend benefits will begin to accrue
     immediately upon becoming a shareholder. Thereafter, dividends are
     determined on a monthly basis.

                                       2




Q.   How did you determine the price of the class C common shares?

A.   The  purchase  price of the class C common  shares was  established  on an
     arbitrary  basis  by  our  board  of  trust  managers  for  administrative
     convenience,  and the price bears no relationship to the underlying  value
     of our assets or the trading price of our class A common shares.


Q.   WILL THE DIVIDENDS I RECEIVE BE TAXABLE AS ORDINARY INCOME?

A.   Yes and No. Generally, dividends that you receive will be taxed as
     ordinary income to the extent they are from current or accumulated
     earnings and profits. We expect that some portion of your dividends will
     not be subject to tax in the year in which they are received because
     depreciation and other non-cash expenses reduce the amount of taxable
    income but do not reduce cash  available for  distribution.  The portion of
     your  distribution  which is not subject to tax immediately is considered a
     return of capital  for tax  purposes  and will reduce the tax basis of your
     investment.  This,  in  effect,  defers a portion  of your tax  until  your
     investment is sold or AmREIT is liquidated, at which time you will be taxed
     at capital gains rates. However, because each investor's tax considerations
     are  different,  we  strongly  recommend  that you  consult  with  your tax
     advisor.  You should  also review the  section of the  prospectus  entitled
     "Federal Income Tax Consequences."

Q.   WHAT WILL YOU DO WITH THE MONEY RAISED IN THIS OFFERING?


A.   We will use the net proceeds of this offering to acquire properties
     similar to those currently owned by AmREIT or to pay down existing debt,
     which should provide increased liquidity to acquire additional properties
     as opportunities are available. We intend to invest a minimum of 88% of
     the proceeds from this offering to acquire real estate properties or to
     pay down debt, and the remaining proceeds will be used to pay fees and
     expenses of this offering and acquisition-related expenses. The payment
     of these fees and expenses will not reduce your invested capital. Your
     initial invested capital amount will remain $10.00 per share, and your
     dividend yield will be based on your $10.00 per share investment.


     Until we invest the  proceeds  of this  offering in real estate or pay down
     existing  debt,  we may  invest  in  short-term,  highly  liquid  or  other
     authorized investments such as money market funds or commercial paper. Such
     short-term  investments  will not earn as high of a return  as we expect to
     earn on our real estate  investments,  and we cannot  guarantee how long it
     will take to fully invest the proceeds in real estate.

Q.   WILL THE CLASS C COMMON SHARES BE LISTED ON A STOCK EXCHANGE?

A.   No. We have no plans to list the class C common shares on a stock
     exchange. The AmREIT class A common shares into which the class C common
     shares will be convertible, are currently listed on the American Stock
     Exchange.

Q.   DOES AMREIT USE ANY SPECIFIC CRITERIA WHEN SELECTING A POTENTIAL PROPERTY
     FOR ACQUISITION?

A.   Yes. AmREIT and its predecessors have developed over their 18-year
     operating history a proprietary  "AmREIT Decision Logic" system of analysis
     for  projects  that it  reviews.  There are 25  specific  factors  that are
     contained  within  this  decision  logic,  including  demographic  studies,
     traffic flow review,  environmental  review,  site  planning and  financial
     analysis.  AmREIT  will apply this model to each  property  it  proposes to
     acquire.  AmREIT  focuses  on  buying,   developing,  and  joint  venturing
     commercial  net  lease  properties  located  out in front of large  traffic
     generators. The projects may be either single or multi tenant credit tenant
     properties leased primarily to credit quality parent companies.

                                       3




Q.   WHAT KIND OF OFFERING IS THIS?

A.   We are offering the public up to 4,000,000 class C common shares on a
     "best efforts" basis.  In addition, we are offering up to 400,000 class
     C common shares to investors who want to participate in our reinvestment
     plan.

Q.   WHAT IS A "BEST EFFORTS" OFFERING?

A.   When common shares are offered to the public on a "best efforts" basis,
     the brokers participating in the offering are only required to use their
     best efforts to sell the shares and have no firm commitment or obligation
     to purchase any of the shares.


Q.   HOW LONG WILL THIS OFFERING LAST?


A.   The offering will not last beyond August __, 2004, unless we decide
     to extend the offering until not later than August __, 2005, in any
     state that allows us to extend the offering.


Q.   WHO CAN BUY CLASS C COMMON SHARES?


A.   If you receive a copy of this prospectus, you may buy class C common
     shares  provided  that you have either (1) a net worth of at least  $45,000
     (excluding home, furnishings, and automobiles) and an annual gross income
     of at least $45,000,  or (2) a net worth of at least $150,000 (excluding
     home, furnishings, and automobiles). These minimum levels may be higher in
     certain  states,  so you should carefully read the more detailed
     information set forth under the caption "Suitability Standards" in this
     prospectus.


Q.   IS THERE ANY MINIMUM INVESTMENT REQUIRED?

A.   Yes. You must invest at least $5,000 in a non-qualified account,
     or $3,000 in a qualified account. These minimum investment levels may be
     higher in certain states, so you should carefully read the more detailed
     description of the minimum investment requirements appearing later in the
     "Suitability Standards" section of this prospectus.

Q.   HOW DO I SUBSCRIBE FOR SHARES?

A.   If you choose to purchase shares in this offering, you will need to fill
     out a Subscription Agreement, like the one contained in this prospectus as
     Exhibit [__], for a specific number of shares and pay for the shares at
     the time you subscribe.

Q.   IF I BUY SHARES IN THIS OFFERING, HOW MAY I LATER SELL THEM?

A.   At the time you purchase the shares, they will not be listed for trading
     on any national securities exchange or over-the-counter market. In fact,
     we expect that there will not be any public market for the shares when you
     purchase them, and we cannot be sure if one will ever develop. As a
     result, you may find it difficult to find a buyer for your shares and
     realize a return on your investment. You may sell your shares to any buyer
     unless such sale would cause the buyer to own more than 9.0% of the
     outstanding shares. See "Description of AmREIT's Capital Shares-Ownership
     Limits and Restriction on Transfer."


                                       4



     The class C common shares are convertible into class A common shares at any
     time after the seventh  anniversary of the acquisition of the shares.  Upon
     conversion,  you will be able to sell the class A common shares on the open
     market. The class A common shares are listed on the AMEX.

Q.   WILL I BE NOTIFIED OF HOW MY INVESTMENT IS DOING?

A.   Yes. You will receive periodic updates on the performance of your
     investment with us, including:

     o    Twelve monthly dividend statements;

     o    A mid-year update report;

     o    An annual report;

     o    SEC filed 10-KSBs and 10-QSBs;

     o    An annual IRS Form 1099;

     o    Supplements to the prospectus, as necessary; and

     o    Regular acquisition reports detailing our latest property
          acquisitions.


Q.   DOES AMREIT USE LEVERAGE?


A.   Yes. AmREIT believes the conservative use of debt is very advantageous to
     maximizing the monthly income to its shareholders. Our bylaws require
     AmREIT to limit the level of recourse debt to less than 55% of its gross
     asset value as determined by our board of trust managers.

Q.   WHAT ARE THE ECONOMIC TERMS OF YOUR TYPICAL LEASES?

A.   We seek to secure leases with creditworthy tenants prior to or at the time
     of the  acquisition  of a property. Our single tenant leases are primarily
     economically   "triple-net"   leases,   which  means  that  the  tenant  is
     responsible  for  the  cost  of  repairs,   maintenance,   property  taxes,
     utilities, insurance and other operating costs.  Our mutli-tenant leases
     are generally "net leases", but generally require AmREIT to be responsible
     for certain capital improvements as well as the operating and common area
     costs for the tenants, which are reimbursable by the tenants on a monthly
     and annual basis.


Q.   MAY I REINVEST MY DIVIDENDS IN ADDITIONAL CLASS C COMMON SHARES?


A.   Yes. Holders of class C common shares will have the option of participating
     in our dividend reinvestment plan by checking the appropriate box on the
     subscription agreement or by filling out an enrollment form we will
     provide to you at your request. The purchase price for shares purchased
     under the dividend reinvestment plan is currently $10.00 per share.



                                       5




Q.   WHAT HAPPENS TO THE VALUE OF MY INVESTMENT IF THE VALUE OF AMREIT CLASS A
     COMMON SHARES DECLINES?


A.   The  value of the class C shares will not be affected by fluctuations in
     the value of the class A common  shares.  The  conversion of class C shares
     into class A common  shares is based  upon the amount of capital  invested.
     Class C  investors  will  receive  $1.10 of class A common  shares for each
     $1.00 of invested  capital  regardless  of the market  price of the class A
     common shares.  The  calculation on the conversion date can be expressed as
     (capital  invested x 1.10) / (stock price of class A). For  example,  after
     the seven  year  lock out  period  expires,  if class A common  shares  are
     trading at $6.50 then class C investors  will receive, upon conversion,
     169.23 class A common shares for each $1,000  invested.  If, after the
     seven year lock out period expires,  class A shares  are  trading  at
     $11.00  per share  then  class C investors  will  receive, upon conversion,
     100.00  class A common  shares  for  each  $1,000 invested.



Q.   WHAT KIND OF TAX INFORMATION WILL I RECEIVE?

A    A Form 1099 will be placed in the mail by January 31st of each year.

Q.   WHO CAN HELP ANSWER MY QUESTIONS?

A.   If you have more questions about the offering or if you would like
     additional copies of this prospectus, you should contact your registered
     representative or contact:

                          Investor Services Department
                                     AmREIT
                          8 Greenway Plaza, Suite 824
                              Houston, Texas 77046
                                  800-888-4400

              FOR CHANGE OF ADDRESS AND LOST CHECKS: EXTENSION 110

          FOR OTHER QUESTIONS REGARDING YOUR INVESTMENT: EXTENSION 124


                                      6




                            SUMMARY OF THE OFFERING

         This prospectus summary highlights selected information contained
elsewhere in this prospectus. It is not complete and does not contain all of
the information that is important to your decision whether to invest in AmREIT.
To understand this offering fully, you should read the entire prospectus
carefully, including the "Risk Factors" section and the financial statements.

AMREIT


         AmREIT is a fully integrated real estate company that operates as a
real estate investment trust under the federal income tax laws. AmREIT, a Texas
real estate investment trust, became the successor to AmREIT, Inc., a Maryland
corporation (the "Predecessor Corporation"), on December 22, 2002, through the
merger of the Predecessor Corporation and AmREIT. As of the date of this
prospectus, AmREIT owned directly, or through joint ventures, interests in 50
properties. These properties are leased to a total of 27 different tenants and
are located in 20 states and contain an aggregate of approximately 380 thousand
square feet of gross leaseable area. AmREIT's principal executive offices are
located at 8 Greenway Plaza, Suite 824, Houston, Texas, 77046, and its
telephone number is (713) 850-1400.


SUMMARY RISK FACTORS

         Following are the most significant risks relating to an investment in
the class C shares:


     o    There is limited liquidity for the class C common shares. There is no
          public  trading  market  for the class C shares.  After a  seven-year
          lock-out  period,  the class C shares  are  convertible  into class A
          shares  which are  publicly  traded on the AMEX.  Tender  offers  and
          certain  other  changes  of  control  may be  discouraged  due to the
          limitations on share  ownership  required to maintain our status as a
          REIT and provisions of Texas law. If you are able to sell your shares
          at all,  you may have to sell  them for  substantially  less than the
          price you paid for them in the offering.

     o    The acquisition of the class C shares is a speculative investment, as
          AmREIT's  ability  to make  distributions  on its  shares  depends on
          AmREIT's  future  business  operations.  The dividends on the class C
          common shares are  non-cumulative,  and there can be no guaranty that
          we will continue to make monthly dividend payments on such shares.

     o    Although AmREIT has an existing portfolio of 50 operating properties,
          shareholders will not be able to evaluate future properties prior to
          making an investment in AmREIT.


     o    There is no limitation on AmREIT's ability to issue additional common
          shares and such issuance could potentially dilute your interest in
          AmREIT.


     o    Although AmREIT has paid regular distributions since its
          organization, distribution payments are subordinate to payments on
          debt, so any future distributions to shareholders will be subject
          to this restriction.  We may increase our leverage without
          shareholder approval, but our bylaws limit the amount of recourse
          indebtedness we may incur to not more than 55% of gross asset
          value as determined by our board of trust managers.


     o    AmREIT has elected to be taxed as a REIT, assuming that it meets
          certain financial and structural criteria.  If AmREIT does not meet
          this criteria, or cannot maintain its REIT status, it may not qualify
          as a REIT under the Internal Revenue Code.

     o    AmREIT depends on few major tenants.

     o    We established the offering price on an arbitrary basis.


                                       7




     o    Real estate investments are relatively illiquid and subject to
          general operating risks relating to economic conditions, changes in
          zoning or tax laws and the availability of financing.

     o    AmREIT's property leases may not be renewed and the cost of any
          improvements constructed on certain properties by AmREIT may not be
          recoverable.


     o    Single tenant leases account for 87% of AmREIT's total revenue and
          the failure of such a tenant could impact the viability of the
          property.  Additionally, IHOP accounted for approximately 32% of
          AmREIT's rental income for 2002 and the first quarter of 2003.  The
          bankruptcy of IHOP or of another significant tenant could have a
          material adverse affect on AmREIT's operations.

     o    Net leases accounted for 100% of AmREIT's total rental income during
          the year ended December 31, 2002 and the first quarter of 2003.
          These leases frequently provide the tenant greater flexibility in
          using the leased property and provide for early termination under
          specified circumstances. In the event of a termination, AmREIT may
          not be able to lease the property for the same rent amount and may
          not be able to sell it without incurring a loss. Consequently, these
          leases may not result in fair market lease rates over time.


     o    Our involvement in joint ventures involve risks which may not
          otherwise be present, such as the failure of a partner to perform,
          the existence of conflicting business goals with a partner, or the
          possibility that it may not be able to agree with a partner as to a
          particular issue.


     o    Our properties may not be profitable, perform, or appreciate in value.


     o    AmREIT may provide purchaser financing which would delay receipt of
          the proceeds from a property sale. AmREIT may provide this financing
          where lenders are not willing to make loans secured by commercial
          real estate or may find it desirable where a purchaser is willing to
          pay a higher price for the property than it would without this
          financing. As a consequence, AmREIT will be subject to risks inherent
          in the business of lending.

     o    We may on occasion lease an investment property back to the seller. A
          default or any premature termination of the leaseback agreement could
          have an adverse effect on AmREIT's financial position. In the event
          of a default, AmREIT may not be able to find new tenants without
          incurring a loss.

     o    Our operating results will depend upon the availability of suitable
          investment opportunities, which in turn depends on the type of
          investment involved, the condition of the money market, the nature
          and geographical location of the property, competition and other
          factors, none of which can be predicted with certainty.

                                       8




PROPERTIES TO BE ACQUIRED


     We  are  authorized  to  purchase  all  types  of  commercial  properties,
including, without limitation, office buildings, shopping centers, business and
industrial  parks,   manufacturing  facilities,   warehouses  and  distribution
facilities  and other  similar real estate  properties.  Although no properties
have been  specifically  identified  for  purchase  with the  proceeds  of this
offering,  we are currently  reviewing and analyzing  opportunities  whereby we
will purchase  properties which are newly  constructed,  under  construction or
have been constructed and have operating histories. Properties may be acquired,
developed  and operated by us either alone or jointly  with another  party.  We
anticipate that most of our properties  will be leased to creditworthy  tenants
on a "net lease" basis. In other words,  the tenant will pay as additional rent
substantially  all costs  associated  with the  repair and  maintenance  of the
building,  real estate taxes, insurance and other similar costs associated with
a building.  Whenever possible,  we intend to execute leases for our properties
at or prior to the closing of the acquisition of such properties.


POSSIBLE LEVERAGE OF PROPERTIES


     Our bylaws provide that we will not incur recourse  indebtedness if, after
giving  effect to the  incurrence  thereof,  aggregate  recourse  indebtedness,
secured and unsecured, would exceed fifty-five percent (55%) of our gross asset
value on a consolidated  basis. For this purpose,  the term "Gross Asset Value"
means  the  value of our  total  assets  (less  intangibles)  based  on  market
capitalization rates and current year rental income, as determined by our board
of trust managers, before deducting depreciation or other non-cash reserves, as
calculated at the end of each quarter on a basis consistently applied.


ESTIMATED USE OF PROCEEDS OF OFFERING

     We anticipate that we will invest approximately 88% of the proceeds of this
offering in real estate or to pay down existing  debt. We will use the remainder
of offering  proceeds to pay selling  commissions and fees and expenses relating
to the selection and acquisition of properties and the costs of the offering.

INVESTMENT OBJECTIVES

     Our  investment objectives are:

     o    to create dependable, monthly dividends to our investors;

     o    to preserve and protect your capital contribution; and

     o    to realize growth in the value of our properties and our publicly
          traded class A common shares.

PRIOR OFFERING SUMMARY


     AmREIT's affiliates have previously sponsored three publicly offered and 11
privately  placed  real  estate  limited  partnerships,  all of which were on an
unspecified  property or "blind pool" basis. As of March 31, 2003, AmREIT and
its affiliates have raised  approximately $75 million from  approximately  3,100
investors.  The  "Prior  Performance  Summary"  on page ____ of this  prospectus
contains a discussion of the AmREIT programs sponsored to date.




                                       9


COMPENSATION TO AMREIT AND AFFILIATES

         AmREIT's affiliates will receive compensation and fees for services
relating to this offering and the investment and management of our assets. The
most significant items of compensation are included in the following table:



                                                                                       Estimated Dollar Amount
           Type of Compensation                   Form of Compensation            for Maximum Offering ($40,000,000)
                                                                                       
           Dealer Manager Fee                2.5% of gross offering proceeds                    $1,000,000
           Offering Expenses                 1.5% of gross offering proceeds                    $  600,000




         Nonetheless, AmREIT or its affiliates may not receive compensation in
excess of the maximum amount permitted under the Statement of Policy Regarding
Real Estate Programs of the North American Securities Administrators Association
(NASAA Guidelines).

ERISA CONSIDERATIONS

         The section of this prospectus entitled "Certain ERISA Considerations"
describes the effect the purchase of shares will have on individual retirement
accounts (IRAs) and retirement plans subject to the Employee Retirement Income
Security Act of 1974, as amended (ERISA), and/or the Internal Revenue Code.
ERISA is a federal law that regulates the operation of certain tax-advantaged
retirement plans. Any retirement plan trustee or individual considering
purchasing shares for a retirement plan or an IRA should read this section of
the prospectus very carefully.

DESCRIPTION OF CLASS C COMMON SHARES

         General

         Your investment will be recorded on our books only. We will not issue
stock certificates. If you wish to transfer your shares, you are required to
send us an executed transfer form. We will provide you the required form upon
request.


         The AmREIT class C common shares will have the following terms:

        o     dividends, which are preferred to the class A common shares and
              rank equally with the class B common shares, will be in an amount
              per share equal to 7% of the issue price ($10.00 per share) per
              annum, payable monthly in advance of any dividends paid on the
              AmREIT class A common shares;

        o     can be converted into AmREIT class A common shares (which are
              currently publicly traded on the AMEX) with a 10% premium on
              original capital (i.e., $1,000 of class C common shares will
              convert to $1,100 of class A common shares), at any time
              following the seventh anniversary of the date of issuance of the
              shares; and

        o     can be called by AmREIT after three years following the date of
              issuance of the shares for either one class A common
              share or for cash at a price of $11.00 (representing a 10%
              premium over the issue price), at the holder's option.



                                      10




        Shareholder Voting Rights and Limitations


         Holders of class C common shares will be entitled to vote on all
matters submitted to shareholders of AmREIT for approval. In any matter on
which the class C common shares vote, you will be entitled to one vote for each
share you own and you will vote as a single class with the class A and class B
common shares.


         Restriction on Share Ownership

         Our declaration of trust contains restrictions on ownership of the
shares that prevents one person from owning more than 9.0% of the outstanding
shares. These restrictions are designed to enable us to comply with share
accumulation restrictions imposed on REITs by the Internal Revenue Code. See
"Description of AmREIT's Capital Shares-Restriction on Ownership of Shares."

         For a more complete description of the shares, including restrictions
on the ownership of shares, please see the "Description of AmREIT's Capital
Shares" section of this prospectus on page ____.

DIVIDEND REINVESTMENT PLAN

         You may participate in our dividend reinvestment plan pursuant to
which you may have the dividends you receive on your class C common shares
reinvested in additional class C shares. If you participate, you will be taxed
on your share of our taxable income even though you will not receive the cash
from your dividends. As a result, you may have a tax liability without
receiving cash dividends to pay such liability. We may terminate the dividend
reinvestment plan at our discretion at any time upon 10 days' prior notice to
you. See "Description of AmREIT's Capital Shares--Dividend Reinvestment Plan."

GLOSSARY

         We have defined certain terms which have initial capital letters in
the "Glossary" on page ______ of this prospectus.


                                       11



                                  RISK FACTORS

         Before you decide to invest in AmREIT, you should be aware that your
purchase of class C common shares involves a number of risks. In addition to
the other information included in this prospectus, you should specifically
consider the following risks before purchasing shares. The following
information summarizes all material risks related to the acquisition of the
class C common shares.

RISKS ASSOCIATED WITH AN INVESTMENT IN AMREIT

THERE IS NO PUBLIC TRADING MARKET FOR THE CLASS C COMMON SHARES.


        There is no current public market for the class C common shares, nor
do we expect a public market to develop for the class C common shares. It will,
therefore, be difficult for you to sell your shares promptly. In addition, the
price received for any shares sold is likely to be less than the proportionate
value of the real estate we own. Therefore, you should purchase the shares only
as a long-term investment. However, the shares are convertible, after a seven
year lock out period into our class A common shares, which are listed on the
AMEX.


THE ACQUISITION OF THE CLASS C COMMON SHARES IS A SPECULATIVE INVESTMENT.


     The class C common shares are  speculative  investments  because  AmREIT's
ability to make  distributions on its class C common shares depends on AmREIT's
future business operations. While management believes AmREIT's future operating
results  should  be  sufficient  to be  able to make  these  distributions  and
payments, AmREIT may not be able to do so. The dividends payable on the class C
common shares are not cumulative,  which means if we fail to pay you a dividend
in any particular  monthly dividend period,  we will have no obligation to make
payment on such dividend in the future and it is lost forever.  Further,  while
we cannot  presently make any monthly  dividend  payments on the class A common
shares  unless and until  dividends on the class C common shares have been paid
with  respect to that  monthly  dividend  period,  we could alter the  dividend
policy on our class A common shares to make dividend payments quarterly, rather
than monthly as is our present policy. While we have no present intention to do
so, in such event,  the class A common  shares  could  receive  full  quarterly
dividend  payments  provided that we make all dividend  payments on the class C
common shares for the current month only. AmREIT's future operating budgets are
based  on  assumptions   about  the  general  economy  and  AmREIT's   business
operations. In general, budgets project inflation, interest rates and revenues,
all of which depend substantially on factors beyond AmREIT's control.  Interest
rates and levels of economic activity have been particularly volatile in recent
years, and any significant  increase in interest rates or downturn in the level
of  economic  activity,   particularly  in  the  real  estate  industry,  would
materially  impair  AmREIT's  ability to achieve  budgeted  levels of operating
income.


YOU CAN NOT EVALUATE PROPERTIES THAT WE HAVE NOT YET ACQUIRED OR IDENTIFIED
FOR ACQUISITION.


     We have established certain criteria for evaluating  potential  properties
and tenants in which we may  invest.  We have not set fixed  minimum  standards
relating  to  creditworthiness  of  tenants  and  therefore  our board of trust
managers and management have flexibility in assessing potential  properties and
tenants.  As of July 31, 2003, we owned 50 properties,  leased to 27 different
tenants in 20 different states.


YOUR INTEREST IN AMREIT MAY BE DILUTED IF WE ISSUE ADDITIONAL SHARES.

     Existing shareholders and potential investors in this offering do not have
preemptive  rights to any  shares  issued by AmREIT in the  future.  Therefore,
existing  shareholders  and  investors  purchasing  shares in this offering may
experience dilution of their equity investment in the event that we:


     o    sell shares in this offering or sell additional common shares in the
          future, whether publicly or privately;

     o    sell securities that are convertible into common shares; or

     o    issue common shares upon the exercise of the options.



                                       12





THE DEALER MANAGER HAS NOT MADE AN INDEPENDENT REVIEW OF THE COMPANY OR THE
PROSPECTUS.

     The dealer manager, AmREIT Securities Corp., is an affiliate of AmREIT and
will not make an independent  review of AmREIT or this  offering.  Accordingly,
you do not have the  benefit  of an  independent  review  of the  terms of this
offering.

THERE MAY BE DELAYS IN INVESTING THE PROCEEDS OF THIS OFFERING.

     We may delay  investing the proceeds  from this  offering and,  therefore,
delay the receipt of any returns from such investments, due to our inability to
find suitable  properties for  investment.  Until we invest in properties,  our
investment  returns on offering proceeds will be limited to the rates of return
available on short-term,  highly liquid  investments  that provide  appropriate
safety of principal.  We expect these rates of return,  which affect the amount
of cash available to make  distributions to  shareholders,  to be lower than we
would receive for property investments.



DISTRIBUTION PAYMENTS ARE SUBORDINATE TO PAYMENTS ON DEBT.


     AmREIT   has  paid   regular   distributions   since   its   organization.
Distributions  to  shareholders  of AmREIT  are,  however,  subordinate  to the
payment of AmREIT's current debts and  obligations.  If AmREIT has insufficient
funds to pay its debts and  obligations,  future  distributions to shareholders
will be suspended pending the payment of such debts and obligations.


AMREIT MAY INCREASE ITS LEVERAGE WITHOUT SHAREHOLDER APPROVAL.


     Our bylaws provide that we will not incur recourse  indebtedness if, after
giving  effect to the  incurrence  thereof,  aggregate  recourse  indebtedness,
secured and unsecured, would exceed fifty-five percent (55%) of our gross asset
value on a consolidated  basis.  This additional  debt could  adversely  affect
AmREIT's  ability  to make  shareholder  distributions  and would  result in an
increased risk of default on its  obligations.  AmREIT intends to borrow future
funds through secured and/or  unsecured  credit  facilities to finance property
investments.  These  borrowings  may require lump sum payments of principal and
interest at maturity. Because of the significant cash requirements necessary to
make those large payments,  AmREIT's  ability to make these payments may depend
upon its ability to sell or  refinance  properties  for amounts  sufficient  to
repay such loans. In addition, increased debt service may adversely affect cash
flow and share value.



     At March 31, 2003,  AmREIT had outstanding  debt totaling $35.8 million
of which $14.1 million was unsecured.  This debt represented  approximately 47%
of AmREIT's total assets.

THERE MAY BE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS.

     Our  quarterly  operating  results  will  fluctuate  based on a number  of
factors, including, among others:

        o        Interest rate changes;

        o        The volume and timing of our property acquisitions;

        o        The recognitions of gains or losses on property sales;

        o        The level of competition in our market; and



                                      13





        o       General economic conditions, especially those which effect the
                retail industries.

As a result of these factors, results for any quarter should not be relied upon
as being indicative of performance in future quarters.


AMREIT DEPENDS ON A FEW MAJOR TENANTS.


     There is no limit on the number of  properties  leased to a single  tenant
which we may acquire.  However,  under investment guidelines established by our
board of trust  managers,  no  single  tenant  may  represent  more than 15% of
AmREIT's  total  annual  rental  income  unless  approved by our board of trust
managers.  The board of trust managers will review our properties and potential
investments in terms of geographic and tenant diversification.  IHOP, Corp. and
Footstar,  Inc.  accounted  for 32% and 13%,  respectively,  of AmREIT's  total
rental revenues for the year ended December 31, 2002 and the three months ended
March 31, 2003. Because of this concentration, there is a risk that any adverse
developments  affecting  these  tenants  or IHOP or  Footstar  generally  could
materially adversely affect our revenues (thereby affecting our ability to make
distributions to  shareholders).  In addition,  if in the future we concentrate
our acquisitions on another single tenant, or in certain geographic areas or on
certain product types,  it will increase the risk that our financial  condition
will be  adversely  affected  by the poor  judgment  of a  particular  tenant's
management  group, by poor performance of our tenants' brands, by a downturn in
a particular  market  sub-segment or by market  disfavor with a certain product
type.

     Our  profitability  and our ability to  diversify  our  investments,  both
geographically  and by type of  properties  purchased,  will be  limited by the
amount of further  funds at our disposal.  If our assets become  geographically
concentrated,  an  economic  downturn in one or more of the markets in which we
have invested could have an adverse  effect on our financial  condition and our
ability to make  distributions.  We do not know whether we will sell all of the
shares being offered by this  Prospectus.  If we do not, it is possible that we
will not have the money  necessary  to further  diversify  our  investments  or
achieve the highest possible return on our investments. See "Prior Performance"
on page __.

BANKRUPTCY OF A SIGNIFICANT TENANT WOULD ADVERSELY AFFECT AMREIT'S OPERATIONS.

     The bankruptcy of a tenant could adversely  affect AmREIT in the following
ways:

     o    reduction or loss of lease payments related to the termination of the
          tenant's leases;

     o    reduction of revenue  resulting from the  restructuring  the original
          tenant's leases;

     o    interruptions in the receipt of lease revenues from the tenant;

     o    increase in the costs  associated  with the maintenance and financing
          of vacant properties;

     o    increase in costs  associated  with  litigation and the protection of
          the properties;

     o    increase  in  costs  associated  with  improving  and  reletting  the
          properties;

     o    reduction in the value of AmREIT's shares; and

     o    decrease in distributions to shareholders.



                                      14



WE ESTABLISHED THE OFFERING PRICE ON AN ARBITRARY BASIS.


     Our board of trust managers has  arbitrarily  determined the selling price
of the  class C common  shares  and such  price  bears no  relationship  to any
established  criteria  for valuing  issued or  outstanding  shares and does not
relate in any way to the current trading price of the class A common shares.


THE CLASS A COMMON SHARES HAVE LIMITED LIQUIDITY.

     The class A common  shares,  into  which the class C common  shares  being
offered by this prospectus are convertible on and after the seventh anniversary
of the date of issuance of the shares,  are currently  traded on the AMEX.  The
class A common shares have only been traded since July 2002, and the historical
average  weekly  trading volume is extremely  small.  As a result,  the class A
common shares currently have limited  liquidity,  and there can be no assurance
that the market for the class A common  shares  will have  improved or that the
shares  will  be  more  liquid  at the  time  the  class C  common  shares  are
convertible.


AMREIT'S PLAN TO GROW THROUGH THE ACQUISITION AND DEVELOPMENT OF NEW PROPERTIES
COULD BE ADVERSELY AFFECTED BY TRENDS IN THE REAL ESTATE AND FINANCING
BUSINESSES, MAY NOT GENERATE INCOME OR MAY GENERATE INSUFFICIENT INCOME FROM
OPERATIONS.

     AmREIT's  growth  strategy is  substantially  based on the acquisition and
development of additional properties.  We cannot assure you that AmREIT will be
able to do so  successfully  because  AmREIT may have  difficulty  finding  new
properties,  negotiating  with new or existing  tenants or securing  acceptable
financing.  In addition,  investing in additional properties is subject to many
risks. If AmREIT does not generate enough income from future  operations to pay
distributions  to  shareholders,  AmREIT  may,  as it  has in  the  past,  make
distributions to its shareholders in amounts exceeding its net income.

IF AMREIT CANNOT MEET ITS REIT DISTRIBUTION REQUIREMENTS, IT MAY HAVE TO BORROW
FUNDS OR LIQUIDATE ASSETS TO MAINTAIN ITS REIT STATUS.


     REITs generally must distribute 90% of their taxable income  annually.  In
the event that AmREIT  does not have  sufficient  available  cash to make these
distributions,  AmREIT's  ability  to  acquire  additional  properties  may  be
limited.  Also, for the purposes of determining  taxable income,  AmREIT may be
required  to include  interest  payments,  rent and other  items it has not yet
received and exclude payments attributable to expenses that are deductible in a
different taxable year. As a result, AmREIT could have taxable income in excess
of cash  available for  distribution.  If this  occurred,  AmREIT would have to
borrow  funds or  liquidate  some of its  assets  in  order to make  sufficient
distributions and maintain its status as a REIT.


LIMITATIONS ON SHARE OWNERSHIP REQUIRED TO MAINTAIN AMREIT'S REIT STATUS MAY
DETER ATTRACTIVE TENDER OFFERS FOR AMREIT COMMON SHARES.


     For the purposes of protecting  its REIT status,  AmREIT's  declaration of
trust limits the ownership by any single  shareholder of AmREIT's common shares
to 9.0% of the issued and  outstanding  common shares,  unless the AmREIT board
determines otherwise.  These restrictions may discourage a change in control of
AmREIT,  deter any  attractive  tender offers for AmREIT common shares or limit
the  opportunity  for you or other  shareholders  to receive a premium for your
AmREIT common shares.



                                      15




AMREIT'S CHARTER CONTAINS ANTI-TAKEOVER PROVISIONS

     AmREIT's charter  contains  provisions which may make it more difficult to
remove current management or delay or discourage an unsolicited takeover, which
could have the effect of inhibiting a  non-negotiated  merger or other business
combination involving AmREIT. These provisions include:

     o    The  prohibition on any person owning,  directly or indirectly,  more
          than 9.0% of the outstanding common shares; and

     o    The provisions  authorizing the issuance of preferred shares on terms
          that board members  determine make it more difficult for an aggressor
          to obtain a controlling number of shares.


     For AmREIT to  continue  to qualify as a REIT under the  Internal  Revenue
Code, not more than 50% of its outstanding shares may be owned by five or fewer
individuals  during  the last half of each  year and  outstanding  shares  must
generally be owned by 100 or more persons during at least 335 days of a taxable
year of 12 months.  AmREIT's charter  restricts the accumulation or transfer of
common  shares if any  accumulation  or  transfer  could  result in any  person
beneficially owning in excess of 9.0% of the then outstanding common shares.


PROVISIONS OF OUR CHARTER, BYLAWS AND TEXAS LAW COULD RESTRICT CHANGE IN
CONTROL.


     AmREIT's  declaration  of trust and  bylaws  contain  provisions  that may
inhibit or impede acquisition or attempted  acquisition of control of AmREIT by
means of a tender offer,  a proxy contest or otherwise.  These  provisions  are
expected  to  discourage  certain  types of  coercive  takeover  practices  and
inadequate  bids and to encourage  persons seeking to acquire control of AmREIT
to  negotiate  first  with the  trust  managers.  AmREIT  believes  that  these
provisions  increase the likelihood  that  proposals  initially will be on more
attractive  terms  than would be the case in their  absence  and  increase  the
likelihood of negotiations, which might outweigh the potential disadvantages of
discouraging such proposals  because,  among other things,  negotiation of such
proposals  might result in  improvement  of terms.  See "Certain  Anti-Takeover
Provisions of AmREIT's Declaration of Trust and Bylaws and Texas Law."


PROPERTY ACQUISITIONS MAY FAIL TO PERFORM IN ACCORDANCE WITH EXPECTATIONS AND
ESTIMATES OF THE COSTS OF IMPROVEMENTS TO BRING AN ACQUIRED PROPERTY UP TO
STANDARD MAY PROVE INACCURATE.

     AmREIT  anticipates that its new  developments  and  acquisitions  will be
financed  under lines of credit or other  interim forms of secured or unsecured
financing.  Permanent  financing for those newly developed or acquired projects
may not be available  or may be available  only on  disadvantageous  terms.  In
addition,  AmREIT's  distribution  requirements  limit its ability to rely upon
income from operations or cash flow from operations to finance new developments
or  acquisitions.  As a result,  if  permanent  financing  is not  available on
acceptable  terms,  further  development  activities or  acquisitions  might be
curtailed. In the case of an unsuccessful development or acquisition,  AmREIT's
loss could exceed its project investment.


                                      16




WE WILL BE SUBJECT TO CONFLICTS OF INTEREST.

     We  will  be  subject  to  conflicts  of  interest   arising  out  of  our
relationship with our affiliated  investment funds,  including certain material
conflicts discussed below.






     We will  experience  competition for  properties.  In evaluating  property
acquisitions,  certain  properties may be appropriate for AmREIT as well as its
affiliated  investment funds. You will not have the opportunity to evaluate the
manner in which these  conflicts of interest are  resolved  before  making your
investment.   Generally,  we  will  evaluate  each  property,  considering  the
investment  objectives,  creditworthy  nature of the tenant,  expected  holding
period  of  the  property,   available   capital  and   geographic  and  tenant
concentration  issues when  determining  the  allocation  of  properties  among
AmREITand its affiliated funds.






     There will be competing demands on our management and trust managers.  Our
management  team and trust managers are not only  responsible  for AmREIT,  but
also for our  affiliated  investment  funds,  which  include  entities that may
invest in the same types of assets in which AmREIT may invest. For this reason,
the  management  team and trust managers will share their  management  time and
services  among  those  companies  and  AmREIT,  will not  devote  all of their
attention to AmREIT and could take actions that are more favorable to the other
entities than to AmREIT.


     We may invest along side our affiliated investment funds. We may invest in
joint ventures,  partnerships or limited liability companies for the purpose of
owning or  developing  retail real estate  projects.  Therefore,  the interest,
investment  objectives and timing of disposition  may be different than that of
our shareholders,  and there are no assurances that your investment  objectives
will take priority.




THE BOARD OF TRUST MANAGERS CAN TAKE MANY ACTIONS WITHOUT SHAREHOLDER APPROVAL.



     Our  board  of  trust  managers  has  overall  authority  to  conduct  our
operations.  This authority includes significant flexibility.  For example, our
board  of  trust  managers  can (1)  prevent  the  ownership,  transfer  and/or
accumulation  of shares  in order to  protect  our  status as a REIT or for any
other reason deemed to be in the best interests of the shareholders;  (2) issue
additional shares without obtaining  shareholder  approval,  which could dilute
your ownership;  (3) direct our investments  toward  investments  that will not
appreciate over time, such as building only properties,  with the land owned by
a third party,  and mortgage  loans;  and (4) change  minimum  creditworthiness
standards with respect to tenants.  Any of these actions could reduce the value
of our assets without giving you, as a shareholder, the right to vote.


OUR OFFICERS AND TRUST MANAGERS HAVE LIMITED LIABILITY.

     Our  declaration  of trust and  bylaws  provide  that an  officer or trust
manager's  liability  for  monetary  damages to us, our  shareholders  or third
parties may be limited.  Generally,  we are obligated  under our declaration of
trust and bylaws to indemnify our officers and trust managers  against  certain
liabilities incurred in connection with their services.  These provisions could
limit our ability  and the  ability of our  shareholders  to  effectively  take
action  against our trust  managers and officers  arising from their service to
us.



RISKS ASSOCIATED WITH AN INVESTMENT IN REAL ESTATE

REAL ESTATE INVESTMENTS ARE RELATIVELY ILLIQUID.

     Real estate  investments are relatively  illiquid.  Illiquidity limits the
owner's  ability  to vary its  portfolio  promptly  in  response  to changes in
economic  or other  conditions.  In  addition,  federal  income tax  provisions
applicable  to REITs may limit  AmREIT's  ability to sell  properties at a time
which would be in the best interest of its shareholders.


                                      17




PROPERTIES ARE SUBJECT TO GENERAL REAL ESTATE OPERATING RISKS.

     If you become a shareholder of AmREIT your  investment  will be subject to
the risks of investing in real property. In general, a downturn in the national
or  local  economy,  changes  in  zoning  or tax  laws or the  availability  of
financing  could  adversely  affect  occupancy  or rental  rates.  In addition,
increases in  operating  costs due to  inflation  and other  factors may not be
offset by increased  rents. If operating  expenses  increase,  the local rental
market for  properties  similar to AmREIT's may limit the extent to which rents
may be increased to meet increased expenses without decreasing occupancy rates.
If  any  of  the  above  occur,  AmREIT's  ability  to  make  distributions  to
shareholders could be adversely affected.

AMREIT MAY CONSTRUCT IMPROVEMENTS, THE COST OF WHICH MAY NOT BE RECOVERABLE.

     AmREIT may on occasion  acquire  properties and construct  improvements or
acquire properties under contract for development.  Investment in properties to
be developed or  constructed is more risky than  investment in fully  developed
and  constructed  properties with operating  histories.  In connection with the
acquisition of these properties,  AmREIT may advance,  on an unsecured basis, a
portion of the purchase price, either in the form of cash, a conditional letter
of credit and/or  promissory note.  AmREIT will be dependent upon the seller or
lessee of the property under construction to fulfill its obligations, including
the return of advances and the completion of construction. This party's ability
to carry out its obligations may be affected by financial and other  conditions
which are beyond the control of AmREIT.

     If AmREIT acquires  construction  properties,  the general contractors and
the  subcontractors  may not be able to control the construction costs or build
in  conformity  with plans,  specifications  and  timetables.  The failure of a
contractor  to perform may  necessitate  legal  action by AmREIT to rescind its
construction  contract,  to  compel  performance  or to  rescind  its  purchase
contract.  These  legal  actions  may  result  in  increased  costs to  AmREIT.
Performance  may  also  be  affected  or  delayed  by  conditions   beyond  the
contractor's   control,   such  as  building   restrictions,   clearances   and
environmental  impact studies imposed or caused by governmental  bodies,  labor
strikes,  adverse weather,  unavailability of materials or skilled labor and by
financial  insolvency of the general contractor or any subcontractors  prior to
completion of construction. These factors can result in increased project costs
project and  corresponding  depletion of AmREIT's working capital and reserves,
and in the loss of permanent  mortgage  loan  commitments  relied upon as a
primary source for repayment of construction costs.

     AmREIT may make periodic progress  payments to the general  contractors of
properties prior to construction completion.  By making these payments,  AmREIT
may incur  substantial  additional  risks,  including the possibility  that the
developer or  contractor  receiving  these  payments may not fully  perform the
construction  obligations  in accordance  with the terms of his agreement  with
AmREIT and that AmREIT may be unable to enforce the  contract or to recover the
progress payments.

AMREIT LEASES TO SINGLE TENANTS WHO CAN FAIL.


     Single tenant leases  accounted for 87% of AmREIT's  total revenue for the
year ended  December 31, 2002 and the three  months  ended March 31,  2003.  In
single tenant leases, the continued viability of the lease will depend directly
on the continued financial viability of one tenant. If the tenant fails and the
lease is  terminated,  AmREIT  would  incur a  reduction  in cash flow from the
property and the value of the property would be decreased.  Also,  where two or
more  properties  have the same  tenant,  or  related  tenants,  the  continued
viability of each property would depend directly on the financial  viability of
a single tenant.


NET LEASES MAY NOT RESULT IN FAIR MARKET LEASE RATES OVER TIME.


     Net leases  accounted for 87% of AmREIT's total rental income for the year
ended  December 31, 2002 and the three months ended March 31, 2003.  Net leases
frequently  provide the tenant greater  discretion in using the leased property
than  ordinary  property  leases,  such as the  right to  freely  sublease  the
property,  to make alterations in the leased premises and to early  termination
of the lease under specified  circumstances.  Further, net leases are typically
for longer lease terms and,  thus,  there is an increased  risk that any rental
increase  clauses  in future  years will fail to result in fair  market  rental
rates during those years. The original leases on AmREIT's  existing  properties
are for original terms ranging from 10 to 20 years.



                                      18




     In the event a lease is  terminated,  AmREIT  may not be able to lease the
property for the previous rent and may not be able to sell the property without
incurring a loss.  AmREIT could also experience  delays in enforcing its rights
against defaulting  tenants. If a tenant does not pay rent, AmREIT may not only
lose the net cash  flow  from the  property  but may also need to use cash flow
generated  by other  properties  to meet  mortgage  payments  on the  defaulted
property.

AMREIT MAY INVEST IN JOINT VENTURES, WHICH ADDS ANOTHER LAYER OF RISK TO ITS
BUSINESS.

     Investments in joint ventures may involve risks which may not otherwise be
present where investments are made directly by AmREIT in real property such as:

     o    the potential ability in AmREIT's joint venture partner to perform;

     o    the joint venture partner may have economic or business interests or
          goals which are inconsistent with or adverse to those of AmREIT;

     o    the joint venture partner may take actions contrary to the requests
          or instructions of AmREIT or contrary to AmREIT's objectives or
          policies; and

     o    the joint venturers may not be able to agree on matters relating to
          the property they jointly own. Although each joint owner will have a
          right of first refusal to purchase the other owner's interest, in the
          event a sale is desired, the joint owner may not have sufficient
          resources to exercise such right of first refusal.

     AmREIT also may  participate  with other  investors,  including,  possibly
investment   programs  or  other  entities   affiliated  with  management,   in
investments as  tenants-in-common  or in some other joint venture  arrangement.
The risks of such joint  ownership may be similar to those  mentioned above for
joint ventures and, in the case of a tenancy-in-common, each co-tenant normally
has the right,  if an  unresolvable  dispute  arises,  to seek partition of the
property,  which  partition  might  decrease  the value of each  portion of the
divided property.

OUR PROPERTIES MAY BE SUBJECT TO ENVIRONMENTAL LIABILITIES.



     Under various federal and state environmental laws and regulations,  as an
owner or operator of real estate,  we may be required to investigate  and clean
up certain hazardous or toxic  substances,  asbestos-containing  materials,  or
petroleum  product releases at our properties.  We may also be held liable to a
governmental   entity  or  to  third  parties  for  property   damage  and  for
investigation  and cleanup costs  incurred by those parties in connection  with
the  contamination.  In addition,  some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs in
connection with the contamination. The presence of contamination or the failure
to remediate  contaminations  at any of our properties may adversely affect our
ability to sell or lease the  properties  or to borrow using the  properties as
collateral.  We could  also be liable  under  common law to third  parties  for
damages and injuries resulting from environmental contamination coming from our
properties.



                                      19




     All of our properties  will be acquired  subject to  satisfactory  Phase I
environmental  assessments,  which  generally  involve the  inspection  of site
conditions  without  invasive  testing  such as  sampling  or analysis of soil,
groundwater  or  other  media  or   conditions;   or   satisfactory   Phase  II
environmental  assessments,  which  generally  involve  the  testing  of  soil,
groundwater  or other media and  conditions.  Our board of trust  managers  may
determine  that we will  acquire  a  property  in  which a Phase I or  Phase II
environmental  assessment  indicates  that a  problem  exists  and has not been
resolved at the time the property is acquired, provided that (A) the seller has
(1) agreed in writing to  indemnify  us and/or (2)  established  in escrow case
funds equal to a  predetermined  amount  greater  than the  estimated  costs to
remediate the problem; or (B) we have negotiated other comparable arrangements,
including,  without limitation, a reduction in the purchase price. We cannot be
sure, however, that any seller will be able to pay under an indemnity we obtain
or that the amount in escrow will be sufficient to pay all  remediation  costs.
Further,  we  cannot  be sure  that all  environmental  liabilities  have  been
identified or that no prior owner,  operator or current occupant has created an
environmental  condition not known to us. Moreover,  we cannot be sure that (1)
future  laws,   ordinances  or   regulations   will  not  impose  any  material
environmental  liability  or (2) the  current  environmental  condition  of our
properties will not be affected by tenants and occupants of the properties,  by
the condition of land or operations in the vicinity of the properties  (such as
the presence of underground  storage tanks),  or by third parties  unrelated to
us. Environmental liabilities that we may incur could have an adverse effect on
our financial condition or results of operations.



ANTICIPATED BORROWING CREATES RISKS.



     We may borrow money to acquire assets, to preserve our status as a REIT or
for other corporate  purposes.  We may mortgage or put a lien on one or more of
our assets in connection with any borrowing. We currently have a revolving line
of credit in an aggregate amount of up to $20 million to provide  financing for
the acquisition of assets, of which approximately $14.1 million was outstanding
as of March 31, 2003.  We may repay the line of credit  using  equity  offering
proceeds,  including  proceeds from this offering,  working capital,  permanent
financings or proceeds from the sale of assets.  We may also obtain  additional
long-term,  permanent  financing.  We  anticipate  that  our  debt  obligations
generally will not exceed 55% of our gross asset value.  Borrowing may be risky
if the cash flow from our real estate and other  investments is insufficient to
meet our  debt  obligations.  In  addition,  our  lenders  may  seek to  impose
restrictions on future borrowings,  distributions and operating policies. If we
mortgage  or  pledge  assets  as  collateral   and  we  cannot  meet  our  debt
obligations,  the lender could take the collateral,  and we would lose both the
asset and the income we were deriving from it.



WE MAY NOT HAVE ADEQUATE INSURANCE


     An  uninsured  loss or a loss in excess of  insured  limits  could  have a
material adverse impact on our operating  results and cash flows and returns to
the  shareholders  could be  reduced.  Certain  types of  losses,  such as from
terrorist attacks, however, may be either uninsurable,  too difficult to obtain
or too  expensive  to  justify  insuring  against.  Furthermore,  an  insurance
provider  could  elect  to deny or limit  coverage  under a  claim.  Should  an
uninsured loss or a loss in excess of insured  limits occur,  we could lose all
or a portion of the  capital we have  invested  in a  property,  as well as the
anticipated  future revenue from the property.  Therefore,  if we, as landlord,
incur any liability which is not fully covered by insurance, we would be liable
for the uninsured amounts, cash available for distributions to shareholders may
be reduced and the value of our assets may decrease significantly. In addition,
in such an event, we might nevertheless  remain obligated for any mortgage debt
or other financial obligations related to the property.



AMREIT'S PROPERTIES MAY NOT BE PROFITABLE, MAY NOT RESULT IN DISTRIBUTIONS
AND/OR MAY DEPRECIATE.

     While AmREIT will attempt to buy leased,  income-producing properties at a
price at or below the appraised value of such properties,  properties  acquired
by AmREIT:

     o    may not operate at a profit,


                                      20





     o    may not perform to AmREIT's expectations,


     o    may not appreciate in value,

     o    may depreciate in value,


     o    may not ever be sold at a profit and

     o    may result in the loss of a portion of AmREIT's investment.


The  marketability  and value of any  properties  will depend upon many factors
beyond AmREIT's control.  A ready market for AmREIT's  properties may not exist
or develop.


AMREIT MAY PROVIDE FINANCING TO PURCHASERS OF PROPERTIES.

     AmREIT may provide  purchaser  financing  which would delay receipt of the
proceeds  from the  property  sale.  AmREIT may provide  this  financing  where
lenders  are not  willing to make loans  secured by  commercial  real estate or
where a  purchaser  is willing to pay a higher  price for  the property  than it
would without this financing.


     In those  circumstances,  AmREIT will be subject to risks  inherent in the
business of lending,  such as the risk of default of the borrower or bankruptcy
of the borrower.  Upon a default by a borrower,  AmREIT may not be able to sell
the  property  securing  a mortgage  loan at a price  that  would  enable it to
recover the balance of a defaulted  mortgage  loan.  In addition,  the mortgage
loans could be subject to  regulation by federal,  state and local  authorities
which could  interfere with AmREIT's  administration  of the mortgage loans and
any  collections  upon a  borrower's  default.  AmREIT  will also be subject to
interest  rate risk that is  associated  with the  business of making  mortgage
loans.  Since  AmREIT's  primary  source of  financing  its  mortgage  loans is
expected to be through variable rate loans, any increase in interest rates will
also  increase  AmREIT's  borrowing  costs.  In  addition,  any  interest  rate
increases after a loan's  origination  could also adversely affect the value of
the loans when securitized.


AMREIT MAY ENGAGE IN SALE-LEASEBACK TRANSACTIONS.


     AmREIT, on occasion,  may lease an investment property back to the seller.
When the seller/lessee leases space to tenants, the seller/lessee may be unable
to meet its  rental  obligations  to AmREIT if the  tenants  are unable to meet
their lease payments to the  seller/lessee.  A default by the  seller/lessee or
other  premature  termination of the leaseback  agreement could have an adverse
effect  on  AmREIT's  financial  position.   In  the  event  of  a  default  or
termination,  AmREIT may not be able to find new  tenants  without  incurring a
loss.



     Additionally, a seller may attempt to include in the acquisition price all
or some portion of the lease payments. If the seller is successful,  AmREIT may
pay a premium upon acquisition where a leaseback is involved.



AMREIT MUST COMPETE FOR ACCEPTABLE INVESTMENTS.


     AmREIT's  operating  results will depend upon the availability of suitable
investment  opportunities,  which in turn  depends  on the  type of  investment
involved,  the  condition  of the money  markets,  the nature and  geographical
location of the property,  competition and other factors,  none of which can be
predicted  with  certainty.  AmREIT will  continue  to compete  for  acceptable
investments with other financial  institutions,  including insurance companies,
pension funds and other institutions, real estate investment trusts and limited
partnerships which have investment  objectives similar to those of AmREIT. Many
of these competitors may have greater resources than AmREIT.



                                      21




AMREIT MAY BE UNABLE TO RENEW LEASES OR RELET SPACES.

     AmREIT's  property  leases  might not be  renewed,  the space might not be
relet or the terms of renewal or reletting may be less  favorable  than current
lease terms.  AmREIT's cash flow and ability to make expected  distributions to
its  shareholders  may be  adversely  affected if: (1) it is unable to promptly
relet or renew the leases,  (2) the rental rate upon  renewal or  reletting  is
significantly lower than expected or (3) its reserves proved inadequate.

AMREIT'S PROPERTIES FACE COMPETING PROPERTIES.

     All of AmREIT's  properties  are located in areas that  include  competing
properties.  The number of competitive properties could have a material adverse
effect on both AmREIT's  ability to lease space and the rents  charged.  AmREIT
may be competing with other property owners that have greater resources.  There
is no dominant competitor in any of AmREIT's markets.


THE INABILITY OF A TENANT TO MAKE LEASE AND MORTGAGE PAYMENTS COULD HAVE AN
ADVERSE EFFECT ON AMREIT.

     AmREIT's business depends on the tenants' ability to pay their obligations
to AmREIT  with  respect to  AmREIT's  real  estate  leases.The  ability of the
tenants to pay their  obligations to AmREIT in a timely manner will depend on a
number of factors,  including  the  successful  operation of their  businesses.
Various  factors,  many of which are beyond the  control of any  business,  may
adversely affect the economic viability of AmREIT's tenants,  including but not
limited to:


     o    national, regional and local economic conditions (which may be
          adversely affected by industry slowdowns, employer relocations,
          prevailing employment conditions and other factors), which may reduce
          consumer demand for the products offered by AmREIT's tenants;


     o    local real estate conditions;

     o    changes or weaknesses in specific industry segments;


     o    perceptions by prospective customers of the safety, convenience,
          services and attractiveness of AmREIT's tenants;


     o    changes in demographics, consumer tastes and traffic patterns;

     o    the ability to obtain and retain capable management;

     o    changes in laws, building codes, similar ordinances and other legal
          requirements, including laws increasing the potential liability for
          environmental conditions existing on properties;

     o    increases in operating expenses; and

     o    increases in minimum wages, taxes (including income, service, real
          estate and other taxes) or mandatory employee benefits.

                                      22




AMREIT HAS PROPERTIES SPECIFICALLY SUITED TO FEW TENANTS.

     AmREIT may acquire  properties  specifically  suited to particular  tenant
needs, including retail or commercial facilities. The value of these properties
would be adversely  affected by the specific tenant's failure to renew or honor
its lease.  These properties would typically require  extensive  renovations to
adapt them for new uses by new tenants.  Also, AmREIT may experience difficulty
selling special purpose properties to persons other than the tenant.

WE DO NOT HAVE CONTROL OVER MARKET AND BUSINESS CONDITIONS.

     Changes  in  general  or local  economic  or  market  conditions,  such as
increased  costs  of  operations,  cost  of  development,  increased  costs  of
insurance,  increased costs of shortage in labor,  competitive factors, quality
of  management,  turnover in management,  changing  consumer  habits,  changing
demographics,  changing traffic  patterns,  environmental  changes,  regulatory
changes and other factors beyond our control may reduce the value of properties
that we  currently  own or those that we acquire in the future,  the ability of
tenants to pay rent on a timely basis,  and therefore,  the amount of dividends
that we are able to pay to shareholders.


WE WILL HAVE NO ECONOMIC INTEREST IN GROUND LEASED PROPERTIES.


     We currently own properties,  and may acquire  additional  properties,  in
which  we own  only  the  leasehold  interest,  and do not own or  control  the
underlying  land. With respect to these ground leased  properties,  AmREIT will
have no  economic  interest  in the land at the  expiration  of the lease,  and
therefore  may lose the  right to the use of the  properties  at the end of the
ground lease.



RISKS ASSOCIATED WITH FEDERAL INCOME TAXATION OF AMREIT

AMREIT'S FAILURE TO QUALIFY AS A REIT FOR TAX PURPOSES WOULD RESULT IN AMREIT'S
TAXATION AS A CORPORATION  AND THE REDUCTION OF FUNDS AVAILABLE FOR SHAREHOLDER
DISTRIBUTION.

     Although  AmREIT's  management  believes  that  it  is  organized  and  is
operating  so as to qualify as a REIT,  AmREIT may not be able to  continue  to
remain so qualified. In addition REIT qualification tax laws may change. AmREIT
is not aware,  however,  of any currently  pending tax  legislation  that would
adversely affect its ability to continue to qualify as a REIT.

     For any taxable  year that AmREIT  fails to qualify as a REIT,  it will be
subject to federal  income tax on its taxable  income at  corporate  rates.  In
addition, unless entitled to relief under certain statutory provisions,  AmREIT
also will be  disqualified  from treatment as a REIT for the four taxable years
following the year during which  qualification  is lost.  This treatment  would
reduce  the  net  earnings   available  for  investment  or   distribution   to
shareholders  because of the additional tax liability to AmREIT for the year or
years  involved.  In addition,  distributions  no longer would  qualify for the
dividends  paid  deduction  nor  would  there  be  any  requirement  that  such
distributions be made. To the extent that  distributions to shareholders  would
have been made in anticipation of AmREIT  qualifying as a REIT, AmREIT might be
required to borrow funds or to liquidate  certain of its investments to pay the
applicable tax.


                                      23




AMREIT MAY BE LIABLE FOR PROHIBITED TRANSACTION TAX AND/OR PENALTIES.

         A violation of the REIT provisions, even where it does not cause
failure to qualify as a REIT, may result in the imposition on AmREIT of
substantial taxes, such as the 100% tax that applies to net income from a
prohibited transaction if AmREIT is determined to be a dealer in real property.
Because the question of whether that type of violation occurs may depend on the
facts and circumstances underlying a given transaction, these violations could
inadvertently occur. To reduce the possibility of an inadvertent violation, the
trust managers intend to rely on the advice of legal counsel in situations
where they perceive REIT provisions to be inconclusive or ambiguous.


CHANGES IN THE TAX LAW MAY ADVERSELY AFFECT AMREIT'S REIT STATUS.

         The discussions of the federal income tax considerations are based on
current tax laws.  Changes in the tax laws, such as the proposed legislation
under review by congress which may or may not have an impact on the taxability
of corporate dividends, could result in tax treatment that differs materially
and adversely from that described in this proxy statement.

INVESTMENT IN AMREIT MAY NOT BE SUITABLE UNDER ERISA AND IRA REQUIREMENTS.

         Fiduciaries of a pension, profit sharing or other employee benefit
plan subject to ERISA should consider whether the investment in AmREIT
securities satisfies the ERISA diversification requirements of ERISA, whether
the investment is prudent, whether the investment would be an improper
delegation of responsibility for plan assets and whether such fiduciaries have
authority to acquire such securities under the appropriate governing instrument
and Title I of ERISA. Also, fiduciaries of an individual retirement account
should consider that an IRA may only make investments that are authorized by
the appropriate governing instrument.


                                       24


                             SUITABILITY STANDARDS


     An  investment  in AmREIT's  class C common  shares  involves  significant
risks.  Although the class C common shares are convertible  into AmREIT class A
common shares,  subject to certain  restrictions  discussed  herein,  it may be
difficult to resell the class C shares  because no public market for the shares
currently exists nor is one ever expected to develop. Investors who are able to
sell their  class C shares at all will  likely be able to sell such shares only
at a discount.


     If the  investor in AmREIT class C shares is an  individual,  including an
individual  beneficiary of a purchasing IRA, or if the investor is a fiduciary,
such as a trustee of a trust or corporate  pension or profit  sharing  plan, or
other tax-exempt  organization,  or a custodian under a Uniform Gifts to Minors
Act, that  individual or fiduciary,  as the case may be, must represent that he
meets specific  investment  requirements.  The  requirements are set out in the
Subscription  Agreement attached as Exhibit __ to this prospectus,  and include
the following:

     o    that the individual, or, in the case of a fiduciary, that the
          fiduciary account or the donor who directly or indirectly supplies
          the funds to purchase the shares, has a minimum annual gross income
          of $45,000 and a net worth excluding home, furnishings and
          automobiles of not less than $45,000; or

     o    that the individual, or, in the case of a fiduciary, that the
          fiduciary account or the donor who directly or indirectly supplies
          the funds to purchase the shares, has a net worth excluding home,
          furnishings and automobiles of not less than $150,000.

     Transferees  will also be required to comply  with  applicable  standards,
except for transfers to family members and transfers made by gift,  inheritance
or  divorce.  In the case of  purchases  of shares  by  fiduciary  accounts  in
California,  the  suitability  standards must be met by the  beneficiary of the
account or, in those  instances  where the  fiduciary  directly  or  indirectly
supplies the funds for the purchase of shares, by such fiduciary.

     The minimum purchase is 500 shares ($5,000) for non-qualified accounts and
300  shares  ($3,000)  for  qualified  accounts,  except in  certain  states as
described below.  You may not transfer less than the minimum required  purchase
or, except in very limited circumstances,  transfer, fractionalize or subdivide
the shares so as to retain less than such minimum number thereof.  For purposes
of satisfying the minimum investment  requirement for retirement plans,  unless
otherwise  prohibited  by state law, a husband and wife may jointly  contribute
funds from their separate IRAs,  provided that they contribute in increments of
at least $3,000.  You should note,  however,  that an investment in AmREIT will
not, in itself,  create a retirement  plan as defined in Section  401(a) of the
Internal  Revenue  Code or an IRA as defined in Section  408(a) of the Internal
Revenue Code for any investor and that, in order to create a retirement plan or
an IRA, an investor must comply with all applicable  provisions of the Internal
Revenue Code.


                                       25




         We have listed the suitability standards in the following table for
those states that have any requirements different from those set by AmREIT:


------------------------------- ---------------------------- ---------------------------- ----------------------------
                                     INCOME/NET WORTH                  MINIMUM
            STATE                      REQUIREMENTS                   PURCHASE                 OTHER LIMITATIONS
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                 
Arizona                         (1) Current annual gross     500 shares ($ 5,000)         N/A
                                income of $60,000 and net
                                worth of $60,000, or (2)
                                net worth of $225,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
California                      (1) Current annual gross     500 shares ($ 5,000)         The following legend must
                                income of $60,000, or (2)                                 be placed on each
                                net worth of $225,000                                     certificate: "It is
                                                                                          unlawful to consummate a
                                                                                          sale or transfer of this
                                                                                          security, or any
                                                                                          interest therein, or to
                                                                                          receive any consideration
                                                                                          therefore, without the
                                                                                          prior written consent of
                                                                                          the Commissioner of
                                                                                          Corporations of the State
                                                                                          of the State of
                                                                                          of California, except as
                                                                                          permitted in the
                                                                                          Commissioner's rules."
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Florida                         (1) Current annual gross     500 shares ($ 5,000)         Shares of subsequent
                                income of $45,000 and net                                 reinvestment plan must be
                                worth of $45,000, or (2)                                  registered or exempt from
                                net worth of $150,000                                     registration in Florida,
                                                                                          and such shares must be
                                                                                          purchased from a Florida
                                                                                          broker.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Iowa                            (1) Current annual gross     500 shares ($ 5,000)         Husband and wife may not
                                income of $45,000 and net                                 jointly contribute from
                                worth of $45,000, or (2)                                  separate IRAs to satisfy
                                net worth of $200,000                                     minimum purchase.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Maine                           (1) Current annual gross     500 shares ($ 5,000)         Husband and wife may not
                                income of $50,000 and net                                 jointly contribute from
                                worth of $50,000, or (2)                                  separate IRAs to satisfy
                                net worth of $200,000                                     minimum purchase.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Massachusetts                   (1) Current annual gross     500 shares ($ 5,000)         N/A
                                income of $60,000 and net
                                worth of $60,000, or (2)
                                net worth of $225,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Michigan                        (1) Current annual gross     500 shares ($ 5,000)         Investor may not invest
                                income of $45,000 and net                                 more than 10% of net worth.
                                worth of $45,000, or (2)
                                net worth of $150,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------



                                       26





------------------------------- ---------------------------- ---------------------------- ----------------------------
                                     INCOME/NET WORTH                  MINIMUM
            STATE                      REQUIREMENTS                   PURCHASE                 OTHER LIMITATIONS
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                 
Minnesota                       (1) Current annual gross     500 shares ($ 5,000);        N/A
                                income of $45,000 and net    250 shares ($ 2,500) for
                                worth of $45,000, or (2)     IRAs and qualified
                                net worth of $150,000        retirement plans
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Mississippi                     (1) Current annual gross     500 shares ($ 5,000)         N/A
                                income of $60,000 and net
                                worth of $60,000, or (2)
                                net worth of $225,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Missouri                        (1) Current annual gross     500 shares ($ 5,000)         Husband and wife may not
                                income of $60,000 and net                                 jointly contribute from
                                worth of $60,000, or (2)                                  separate IRAs to satisfy
                                net worth of $225,000                                     minimum purchase.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Nebraska                        (1) Current annual gross     500 shares ($ 5,000)         Investments in additional
                                income of $60,000 and net    except for IRAs and          shares pursuant to
                                worth of $60,000, or (2)     qualified retirement plans   reinvestment plan must be
                                net worth of $225,000                                     at least $50 per year and
                                                                                          made through a Nebraska
                                                                                          broker.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
New Hampshire                   (1) Current annual gross     500 shares ($ 5,000)         N/A
                                income of $50,000 and net
                                worth of $125,000, or (2)
                                net worth of $250,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
New York                        (1) Current annual gross     500 shares ($ 5,000)         No proceeds from New York
                                income of $50,000 and net    except for IRAs              investors released from
                                worth of $50,000, or (2)                                  escrow until $2,500,000
                                net worth of $150,000                                     raised in offering.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
North Carolina                  (1) Current annual gross     500 shares ($ 5,000)         N/A
                                income of $45,000 and net    except for IRAs
                                worth of $45,000, or (2)
                                net worth of $150,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Ohio                            (1) Current annual gross     500 shares ($ 5,000)         Investor may not invest
                                income of $45,000 and net    except for IRAs              more than 10% of net worth.
                                worth of $45,000, or (2)
                                net worth of $150,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Oklahoma                        (1) Current annual gross     500 shares ($ 5,000)         Husband and wife may not
                                income of $45,000 and net                                 jointly contribute from
                                worth of $45,000, or (2)                                  separate IRAs to satisfy
                                net worth of $150,000                                     minimum purchase.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Oregon                          (1) Current annual gross     500 shares ($ 5,000)         N/A
                                income of $60,000 and net
                                worth of $60,000, or (2)
                                net worth of $225,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------



                                       27





------------------------------- ---------------------------- ---------------------------- ----------------------------
                                     INCOME/NET WORTH                  MINIMUM
            STATE                      REQUIREMENTS                   PURCHASE                 OTHER LIMITATIONS
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                 
Pennsylvania                    (1) Current annual gross     500 shares ($ 5,000)         Investor must have a net
                                income of $45,000 and net                                 worth of at least ten
                                worth of $45,000, or (2)                                  times amount of
                                net worth of $150,000                                     investment.  Subscription
                                                                                          proceeds from Pennsylvania
                                                                                          proceeds
                                                                                          investors held in escrow
                                                                                          until $2,500,000 raised
                                                                                          from all investors.  If
                                                                                          proceeds held in escrow
                                                                                          more than 120 days, funds
                                                                                          returned to investors
                                                                                          unless they choose to
                                                                                          $2,500,000
                                                                                          reinvest.

------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
South Carolina                  (1) Net worth of $150,000,   250 shares ($2,500) except   N/A
                                or (2) State and federal     IRAs and qualified
                                income subject to maximum    retirement plans
                                rate of income tax
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
South Dakota                    (1) Current annual gross     100 shares ($1,000)          N/A
                                income of $60,000 and net
                                worth of $60,000, or (2)
                                net worth of $225,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Tennessee                       (1) Current annual gross     100 shares ($1,000)          N/A
                                income of $60,000 and net
                                worth of $60,000, or (2)
                                net worth of $225,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Texas                           (1) Current annual gross     100 shares ($1,000)          Investments through
                                income of $45,000 and net                                 reinvestment plan must be
                                worth of $45,000, or (2)                                  made through Texas
                                net worth of $150,000                                     registered broker.
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Wisconsin                       (1) Current annual gross     100 shares ($1,000)          Husband and wife may not
                                income of $45,000 and net                                 jointly contribute from
                                worth of $45,000, or (2)                                  separate IRAs to satisfy
                                net worth of $150,000                                     minimum purchase.
------------------------------- ---------------------------- ---------------------------- ----------------------------


         Net worth in all cases excludes home, furnishings and automobiles.

                                      28





     By  executing  the  Subscription   Agreement  and  Subscription  Agreement
Signature  Page,  which is  attached  as  Exhibit  __ to this  prospectus,  you
represent that you meet the foregoing applicable  suitability standards for the
state in which you reside. We will not accept  subscriptions from any person or
entity  that  does not  represent  that it meets  such  standards.  We have the
unconditional right to accept or reject any subscription in whole or in part.


     AmREIT and each  person  selling  class C common  shares on our behalf are
required to:

     o    make reasonable efforts to assure that each person purchasing class C
          common shares is suitable in light of such person's age, educational
          level, knowledge of investments, financial means and other pertinent
          factors; and

     o    maintain records for at least six years of the information used to
          determine that an investment in class C common shares is suitable and
          appropriate for each investor.

     The agreements with the selling broker-dealers require such broker-dealers
to (1)  make  inquiries  diligently  as  required  by  law  of all  prospective
investors  in  order to  ascertain  whether  a  purchase  of class C shares  is
suitable  for the  investor,  and (2)  transmit  promptly  to AmREIT  all fully
completed and duly executed Subscription Agreements.


                                       29



                            BUSINESS AND PROPERTIES

GENERAL


     AmREIT  is a  fully  integrated  real  estate  company  dedicated  to  the
ownership,  development and acquisition of commercial real estate  specializing
in general  retail,  financial  services  and banking,  medical and  restaurant
sectors, and is a sponsor of high quality real estate investment  opportunities
to the financial  planning  community.  AmREIT, a Texas real estate  investment
trust,  became the  successor to  Predecessor  Corporation,  in December  2002,
through the merger of the Predecessor  Corporation with AmREIT.  The merger was
structured to preserve  unchanged the existing business,  purpose,  tax status,
management,  capitalization  and assets,  liabilities and net worth (other than
due to the costs of the  transaction) of the Predecessor  Corporation,  and the
economic  interests and voting rights of the  shareholders  of the  Predecessor
Corporation  (who became the shareholders of AmREIT as a result of the merger).
The board of trust managers and the executive  officers of AmREIT are identical
to, and have the same terms of office as, the board of directors  and executive
officers of the Predecessor  Corporation.  The term "AmREIT"  includes,  as the
context  requires,  the Predecessor  Corporation and the other  subsidiaries of
"AmREIT."  AmREIT has  outstanding  approximately  2.9  million  class A common
shares, listed on the American Stock Exchange (AMEX:AMY), and approximately 2.4
million class B common shares, that are not listed on an exchange, which may be
converted into class A common shares on a one-for-one  basis at any time at the
holder's option.


     On July 23, 2002, the  Predecessor  Corporation  successfully  completed a
merger with three of its affiliated partnerships,  AAA Net Realty Fund IX, Ltd,
AAA Net Realty  Fund X, Ltd,  and AAA Net Realty Fund XI, Ltd ("Funds IX, X and
XI") and listed its class A common stock on the American  Stock  Exchange.  The
limited  partners  in Funds IX, X and XI received  class B common  stock of the
Predecessor Corporation,  which was not listed, had a preferred 8% distribution
and was  convertible  one for one into the Class A common stock at the holder's
option.  Each share of the Predecessor  Corporation's  class A common stock and
class B common  stock was  converted  into one class A common share and class B
common share, respectively, in the merger with AmREIT.

     AmREIT and its  predecessors  have a proven  track record over the past 18
years  of  completing  over 200  transactions,  including  acquisitions,  joint
ventures,  ground-up  developments,  sale/leaseback  transactions  and numerous
dispositions.  AmREIT  and its  management  team have  been  active in the real
estate markets and understand the dynamics of real estate transactions in these
markets.



     The Predecessor  Corporation was formed in 1993 to continue and expand the
business of its predecessor  company,  American Asset Advisers Trust, which was
founded  in  1985.  We  actively  acquire,   develop  and  manage  high-quality
commercial properties leased to creditworthy tenants under net-leases.  Through
a wholly owned subsidiary,  we also provide advisory services to 14 real estate
limited  partnerships.  As  of  July  31,  2003,  AmREIT  and  its  affiliated
investment funds owned 63 properties (50 properties owned directly by AmREIT or
a majority  controlled  subsidiary and 13 properties  owned through  affiliated
investment  funds).  AmREIT currently has approximately  2,500 shareholders and
600 partners in the limited partnerships.




     AmREIT  is  a  synergistic  combination  of  two  complementary  lines  of
business.   For  18  years   AmREIT   (and  its   predecessors)   has  been  an
entrepreneurial  real estate  company and a sponsor of high quality real estate
investment products.  AmREIT's first line of business consists of the ownership
of a quality  portfolio of single  tenant free  standing  credit  tenant leased
projects ("CTL") and multi-tenant  frontage commercial projects ("FCP") located
contiguous to major  thoroughfares and traffic  generators (real estate line of



                                      30




business).  Supporting  this line of business is a  wholly-owned  subsidiary of
AmREIT which is a full service  operating company that provides a full range of
real estate services, including development,  construction management, property
management,  brokerage and leasing. AmREIT's real estate customer list includes
some of the finest  companies in the U.S.:  Goodyear Tire,  Washington  Mutual,
IHOP, McDonalds,  Hermann Hospital,  Radio Shack, Sprint, Coldwell Banker, Jack
in the Box, Guaranty Federal,  Bennigan's,  Chili's, Texas Children's Hospital,
Eckerd's and Discount Tire.  AmREIT's  second line of business  consists of the
sponsorship of high quality real estate investment  products  (sponsorship line
of business) and is built upon an  established  track record and an outstanding
group of selected  financial  planning and broker/dealer  firms operating under
licenses  issued  by the  National  Association  of  Securities  Dealers,  Inc.
("NASD").



     AmREIT's real estate line of business includes a portfolio of freestanding
CTL  properties  and FCP projects,  primarily  located at major  intersections,
lighted  corners,  primary  interstates  and  roadways,  and  out in  front  of
significant  traffic  generators such as a regional mall, super center or power
center.  This  portfolio  provides a stable base of rental  income  because the
leases are normally  guaranteed by creditworthy  companies such as Radio Shack,
Washington  Mutual and IHOP which  means that the  monthly  rent  payments  are
supported by the financial  strength and stability of the parent  company,  not
just the individual location.  It is our experience that CTL and FCP properties
are among the most liquid type of  commercial  real estate  because  there is a
deep and financially viable group of investors who desire this type of property
and can  afford to buy them.  AmREIT  has  extensive  experience  in buying and
selling these types of projects.  This means AmREIT can  frequently  generate a
substantial  profit  through the sale of the  project  which,  in turn,  can be
reinvested in building AmREIT's lines of business or investing in new portfolio
projects. In the sponsorship line of business, AmREIT sponsors investment funds
that take advantage of the company's core competency. Capital is raised through
the AmREIT's select group of financial  planning and broker/dealer  firms on an
ongoing basis.  These  investment  funds are the foundation of AmREIT's  second
line of business.  As AmREIT  invests this capital into its various real estate
projects,   it  creates  fees  and  "carried  interests"  for  AmREIT  and  its
shareholders. This line of business provides the proverbial "win-win" situation
for the investors of these funds and for AmREIT. For the investors, they invest
along side a stable,  strong company that serves as the investment sponsor. The
"win" for  AmREIT is that it is able to  leverage  its  relationships  and core
competency  to generate fees and profits  after  certain  investor  performance
hurdles to its investors have been met. AmREIT has raised capital  consistently
by  sponsoring   investment   partnerships   through  the  financial   planning
broker-dealer  community  since 1985.  During this time period,  AmREIT and its
affiliates have raised  approximately $70 million in equity to build,  develop,
or buy its real estate projects.


     AmREIT's  principal  executive  offices are  located at 8 Greenway  Plaza,
Suite 824, Houston, Texas 77046, and its telephone number is (713) 850-1400.

PROPERTIES


     DESCRIPTION.  AmREIT  currently  own 50  properties  consisting  of single
structure,   single  and  multi-tenant  retail  properties.  Each  of  AmREIT's
properties is initially leased under a full-credit,  long-term net lease, under
which the  tenant  is  responsible  for the  operating  costs of the  property,
including  taxes,  insurance and  maintenance  costs.  These 50 properties  are
leased  to a total  of 27  different  tenants  and are  located  in 20  states.
AmREIT's  properties  contain an aggregate of approximately 380 thousand square
feet of gross  leaseable  area.  Information  concerning the  properties  owned
solely by AmREIT as of March 31, 2003, is presented in the following tables:



                                      31





                          AMREIT WHOLLY-OWNED PROPERTY INFORMATION


                                                                                      CURRENT      LEASE
                                    DATE        PURCHASE               LEASEABLE       ANNUAL    EXPIRATION
  PROPERTY (LOCATION)             ACQUIRED        PRICE                   AREA          RENT        DATE
  -------------------             --------      --------               ---------      -------    ----------
                                                                                      

Radio Shack
   (Dallas, Texas).........       06/15/94     $1,062,000                5,200        $108,900    11/30/06
Wherehouse Entertainment
   (Independence, MO) .....       11/14/94      1,550,000               14,047         187,655    04/30/04
Copperfield Medical Plaza
   (Houston, TX) ..........       07/01/95      1,680,000               14,000         201,072    04/30/07
Wherehouse Entertainment
   (Wichita, KS) ..........       09/12/95      1,700,000               15,158         206,833    12/31/04
FootStar, Inc.
   (Tucson, AZ) ...........       09/11/96      3,351,000               19,550         419,026    09/30/16
Washington Mutual
   (The Woodlands, TX) ....       09/23/96        500,000                3,685          59,461    09/30/11
Washington Mutual
   (Houston, TX) ..........       12/11/96        828,000                3,685          97,861    12/31/11
FootStar, Inc.
   (Baton Rouge, LA) ......       06/09/97      2,806,000               20,575         300,539    05/15/12
Hollywood Video
   (Lafayette, LA) ........       10/31/97      1,124,000                7,488         134,709    09/24/12
Hollywood Video
   (Ridgeland, MS) ........       12/30/97      1,208,000                7,488         138,453    12/22/12
OfficeMax
   (Dover, DE) ............       04/14/98      2,548,000               23,500         264,679    04/30/13
Woodlands Plaza
   (The Woodlands, TX).....       06/03/98      3,542,000               16,922              (1)        (1)
Sugar Land Plaza
   (Sugar Land, TX) .......       07/01/98      3,635,000               16,922         330,875    07/01/13
Dardin
   (Peachtree City, GA) ...       12/18/98        738,000           Land Lease          75,000    12/17/08
IHOP, Corp.
   (Sugarland, TX) ........        9/30/99      1,608,000                4,020         165,180     9/30/24
IHOP, Corp.
   (St. Peters, MO) .......       11/14/01      1,565,000                4,020         189,223    11/15/26
IHOP, Corp.
  (Topeka, KS) ............        9/30/99      1,335,000                4,020         137,340     9/30/24
Foodmaker
  (Dallas, TX) ............        7/23/02 (2)    715,100                2,238          68,998     7/11/09
Baptist Memorial Health
  (Memphis, TN)............        7/23/02 (2)  2,079,200               15,000         204,375     8/31/07
Payless Shoes
  (Austin, TX).............        7/23/02 (2)    698,300                4,000          82,000     1/30/08
Golden Corral
  (Houston, TX)............        7/23/02 (2)  1,811,800               12,000         182,994    11/30/07
Golden Corral
  (Houston, TX)............        7/23/02 (2)  1,843,400               12,000         181,688     3/14/08
TGI Friday's
  (Houston, TX)............        7/23/02 (2)  2,036,900                8,500         180,500     1/30/08
Goodyear Tire
  (Houston, TX)............        7/23/02 (2)    535,900                5,209          51,756     3/31/09
Guitar Center
  (Minneapolis, MN)........        7/23/02 (2)  2,541,700               15,000         246,750     8/31/09
AFC, Inc. (Popeye's
  Chicken) (Atlanta, GA)...        7/23/02 (2)  1,113,900                2,583         105,563     7/19/14
Memorial Herman Hospital
  (Houston, TX)............        7/23/02 (2)  1,816,800               15,000         171,360     1/31/09
Blockbuster Video
  (Oklahoma City, OK)......        7/23/02 (2)    973,800               15,000          92,610     8/31/05
Pier One
  (Longmont, CO)...........        7/23/02 (2)  1,423,600                8,014         135,560     2/29/08


                                              -----------              -------      ----------
TOTAL .....................                   $48,370,400              294,824      $4,720,960



                                      32





(1)  Due to the bankruptcy of Just For Feet, this property is being remodeled
     to accommodate multiple tenants with approximately 70% of the property
     currently leased.
(2)  These properties were acquired as part of the merger of the affiliated
     partnerships (Funds IX, X and XI) on July 23, 2002.  The
     purchase price reflects the pro-rata portion of the negotiated price
     allocated to the properties that AmREIT paid the partnerships, in
     common shares.

     In  addition  to the above  wholly  owned  properties,  AmREIT is the sole
shareholder of the corporate  general partner and an 80% limited partner in AAA
CTL  Notes,  Ltd.,  a  partnership  created  to  purchase,  hold,  and manage a
portfolio  of 17 IHOP  leasehold  estate  and  fee  simple  properties  located
throughout the United States. Through its sponsorship of real estate investment
programs to the independent  financial planning  community,  AmREIT is also the
sole  shareholder of the corporate  general  partner and a 10.5%,  3.9% and 19%
limited partner,  respectively,  in AmREIT  Opportunity  Fund,  AmREIT Income &
Growth Fund and AmREIT Monthly Income & Growth Fund, Ltd. at March 31, 2003.

     RENOVATION AND IMPROVEMENTS.  AmREIT manages each of its properties and is
constantly  evaluating  the  need  for  renovation  and  capital  improvements.
Currently, The Woodlands Plaza is undergoing renovation and redevelopment.  The
property was  originally  designed and built as a Just For Feet.  Following the
bankruptcy of Just For Feet in November 1999,  AmREIT began a redevelopment  of
this property that involved converting this property to a multi-tenant shopping
center.  AmREIT's  development and  construction  management team evaluated the
local market,  worked with the adjacent land and property owners as well as the
local  municipalities  in order to  redevelop  this  single  purpose box into a
traditional multi-tenant shopping center. The redevelopment included converting
exterior walls into a multi-tenant  store front,  building out the second story
mezzanine  space,  which  increased the total  leaseable area by  approximately
4,000  square  feet,  working  with  various  tenants to lease the property and
facilitating the tenant improvements and build out of tenant spaces. The budget
called for approximately $1 million in total renovation  costs,  including hard
and soft costs.  Through March 31, 2003,  approximately  $632 thousand had been
spent  on  the  renovation.  Other  than  The  Woodlands  Plaza,  there  are no
significant  renovations or improvements scheduled or anticipated for any other
project.


                                      33




     LEASES.  A majority  of our  properties  are under  lease to a regional or
national tenant.  When entered into, each lease was long-term.  Most leases are
net  leases,  requiring  the tenant to pay all or  substantially  all  expenses
related to operation of the  property.  The  following  table sets forth rental
information concerning AmREIT's tenants for the year ended December 31,




                      (IN THOUSANDS)
                                                       2002             2001


                                                                  
International House of Pancakes                       $ 1,784            $ 510
Footstar, Inc.                                            735              713
OfficeMax, Inc                                            509              518
Wherehouse Entertainment                                  381              378
Hollywood Entertainment Corp.                             273              273
Sugar Land Imaging Affiliates Ltd.                        264              217
Mattress Giant, Inc                                       168              106
Golden Corral                                             167               (0)
Washington Mutual                                         158              158
Texas Children's Pediatrics                               137                0
Comp USA                                                  123                0
Radio Shack                                               109              109
Baptist Memorial Hospital                                 102                0
Dr. Pucillo                                                87                0
TGI Friday's                                               83                0
Don Pablos                                                 78               79
Pier 1                                                     62                0
One Care Health Industries, Inc.                           57              204
America's Favorite Chicken Co.                             55               21
Blockbuster                                                42                0
Waldenbooks                                                38                0
Jack in the Box                                            34                0
Goodyear                                                   25                0
Skewers                                                    18                0
Hope Rehabilitation                                         5                0
                                                  ---------------- ----------------
                     Total                             $5,494           $3,286
                                                  ================ ================




         The following table summarizes the minimum future rentals, exclusive
of any renewals, under AmREIT's operating and direct financing leases in
existence at December 31, 2002.


                                                


                           2003..................         6,787,594
                           2004..................         6,714,025
                           2005..................         6,478,355
                           2006..................         6,465,798
                           2007..................         6,359,957
                           2008-2027.............        64,152,589
                                                       ------------
                               Total                   $ 96,958,318
                                                       ============




                                       34





     SIGNIFICANT TENANTS. IHOP Corp. and Footstar,  Inc. individually accounted
for 32% and 13%, respectively, of rental income for the year ended December 31,
2002. These tenants represented  approximately 33%, 14% and 10%,  respectively,
of rental  income for the nine-  months  ended  September  30, 2002 AND FOR THE
FIRST QUARTER OF 2003..


International  House of  Pancakes  was founded in July 1958 and  operates  over
1,100  restaurants in three countries and forty-five  states.  IHOP is a family
restaurant,  serving  breakfast,  lunch and  dinner.  IHOP is a New York  Stock
Exchange,  publicly-held company with a current market capitalization over $460
million,  based on reports  filed with the SEC.  For the  twelve  months  ended
December 31, 2002,  system-wide sales were up 9.9% to $1.5 billion,  same store
sales  increased  0.7% over 2001 and reported net income of $40.8 million which
is a 1.4% increase over 2001. For more information on IHOP,  please see the SEC
web site at www.sec.gov.

Footstar, Inc. was founded in October 1996 and operates three distinct business
lines:  Just For Feet,  Footaction and Meldisco.  The Just For Feet Superstores
division operate 95 locations,  primarily in the southern portion of the United
States and is headquartered in Birmingham,  AL.  Footaction is headquartered in
Irving, Texas and operates 459 primarily mall based stores in 41 states, Puerto
Rico, and the U.S. Virgin Islands.  The Company's Meldisco division is a leader
in the discount footwear segment,  operating 5,532 leased footwear departments,
located in various discount stores,  superstores and malls, including Wal-Mart.
Footstar  had  consolidated  store  sales of $1,146  million for the six months
ended June 29, 2002, compared to $1,166 million for the previous year. Footstar
reported total assets of $893 million and total liabilities of $610 million for
the six months  ended June 29,  2002,  compared to total assets of $955 million
and total  liabilities of $614 million for the previous year,  based on reports
filed with the SEC. Footstar has not reported  financial  statements or results
of operations  beyond June 29, 2002. For more  information on Footstar,  please
see the SEC web site at www.sec.gov.



COMPETITION


     AmREIT's properties are located in 20 different states, with approximately
50% of its properties located in the Texas metropolitan  areas. All of AmREIT's
properties are located in areas that include competing  properties.  The number
of competitive  properties in a particular  area could have a material  adverse
effect on both AmREIT's  ability to lease space at any of its  properties or at
any newly developed or acquired properties and the rents charged. AmREIT may be
competing with owners,  including,  but not limited to, other REITs,  insurance
companies and pension funds that have greater  resources than AmREIT.  There is
no dominant competitor in any of AmREIT's markets.



EMPLOYEES


     AmREIT currently has 18 full-time employees and retains the services of
three real estate brokers and three managerial consultants on an as-needed
basis.



                                       35



                                   MANAGEMENT

The trust managers and executive officers of AmREIT are as follows:


              NAME                AGE                       POSITION HELD              TRUST MANAGER
                                                                                     OR OFFICER SINCE
                                                                            
H. Kerr Taylor...............      52     Chairman of the Board,                           1993
                                          Chief Executive Officer and President
Robert S.  Cartwright, Jr.....     51     Trust Manager                                    1993
G.  Steven Dawson............      45     Trust Manager                                    2000
Bryan L. Goolsby.............      52     Trust Manager                                    2000
Philip Taggart...............      73     Trust Manager                                    2000
Charles C. Braun.............      31     Executive Vice President,                        1999
                                          Chief Financial Officer and
                                          Secretary


          H.  Kerr  Taylor - Mr.  Taylor is the  chairman  of the board of trust
     managers, chief executive officer and president of AmREIT and was, prior to
     the Merger,  the chairman of the board of trust  managers,  chief executive
     officer and president of the Predecessor  Corporation from August 1993. Mr.
     Taylor was  president,  director  and sole  shareholder  of American  Asset
     Advisers  Realty Corp.  from 1989 to June 1998.  Additionally,  Mr.  Taylor
     serves as the general  partner for seven  private  partnerships  managed by
     AmREIT.  Mr.  Taylor has a  bachelor's  degree from Trinity  University,  a
     Masters of Business Degree from Southern Methodist  University and a Doctor
     of  Jurisprudence  from South  Texas  College of Law.  Mr.  Taylor has over
     twenty  years  experience  and has  participated  in over 300  real  estate
     transactions.  Mr. Taylor has served on a board and  governing  bodies of a
     bank, numerous private and public corporations and charitable institutions,
     and is currently on the board of  Millennium  Relief and  Development.  Mr.
     Taylor is a member of the National Board of Realtors, the Texas Association
     of  Realtors,  the Texas Bar  Association,  the  International  Counsel  of
     Shopping  Centers,  the  Financial  Planners   Association,   the  National
     Association of Real Estate Investment Trusts and the Urban Land Institute.


          Robert S. Cartwright,  Jr. - Mr.  Cartwright has been a trust manager
     or  director of AmREIT or the  Predecessor  Corporation  since  1993.  Mr.
     Cartwright  is a Professor  of Computer  Science at Rice  University.  Mr.
     Cartwright   earned  a  bachelor's  degree  magna  cum  laude  in  Applied
     Mathematics from Harvard College in 1971 and a doctoral degree in Computer
     Science from Stanford University in 1977. Mr. Cartwright has been a member
     of the Rice faculty since 1980 and twice served as department  Chair.  Mr.
     Cartwright has compiled an extensive record of professional service. He is
     a Fellow of the Association for Computing Machinery (ACM), a member of the
     ACM  Education  Board  and a  member  of the  Sun  Microsystems  Developer
     Advisory Council. He recently served as a member of the Board of Directors
     of  the  Computing   Research   Association,   an  umbrella   organization
     representing academic and industrial computing researchers. Mr. Cartwright
     has served as a charter member of the editorial boards of two professional
     journals  and  has  also  chaired  several  major  ACM  conferences.  From
     1991-1996,  he was a  member  of the ACM  Turing  Award  Committee,  which
     selects the annual recipient of the most prestigious  international  prize
     for computer science research.


          G.Steven  Dawson - Mr. Dawson has been a trust manager or director of
     AmREIT or the Predecessor  Corporation  since 2000. Since 1990, Mr. Dawson
     has served as senior vice president and chief financial  officer of Camden
     Property Trust (NYSE:CPT),  a public real estate company which specializes
     in the  acquisition,  development,  and  management  of over 159 apartment
     communities  throughout the United States,  with major  concentrations  in
     Dallas,   Houston,  Las  Vegas,   Denver,   Southern  California  and  the
     Tampa/Orlando  areas.  Prior to 1990, Mr. Dawson served in various related
     capacities  with companies  involved in commercial  real estate  including
     land and  office  building  development  as well as the  construction  and
     management of industrial  facilities  located on airports  throughout  the
     country.  Mr.  Dawson  currently  serves on the boards of U.S.  Restaurant
     Properties, Inc. (NYSE:USV) and His Grace Foundation.


                                       36




          Bryan L. Goolsby - Mr.  Goolsby has been a trust  manager or director
     of AmREIT or the  Predecessor  Corporation  since 2000. Mr. Goolsby is the
     Managing  Partner of Locke  Liddell & Sapp LLP,  and has  practiced in the
     area of corporate and  securities  since 1977.  Mr. Goolsby is a member of
     the  Board  of  Governors  of the  National  Association  of  Real  Estate
     Investment  Trusts and is a member of the  National  Multi-Family  Housing
     Association  and the  Pension  Real  Estate  Association.  Mr.  Goolsby is
     currently a member of the Associate Board of Directors of the Edwin L. Cox
     School of Business at Southern Methodist University and is a member of the
     board of the Junior  Achievement  of Dallas.  Mr. Goolsby has a bachelor's
     degree from Texas Tech University and a Doctor of  Jurisprudence  from the
     University of Texas.


          Philip  Taggart - Mr.  Taggart has been a trust manager or director of
     AmREIT  or  the  Predecessor   Corporation  since  2000.  Mr.  Taggart  has
     specialized  in  investor  relations  activities  since  1964  and  is  the
     president and chief executive  officer of Taggart  Financial Group, Inc. He
     is the co-author of the book Taking Your Company  Public,  and has provided
     communications  services  for 58 initial  public  offerings,  more than 200
     other new issues, 210 mergers and acquisitions,  3,500 analyst meetings and
     annual and quarterly  reports for over 25 years.  Mr. Taggart serves on the
     boards of International Expert Systems,  Inc. and Salon Group International
     and served on the board of the Foundation of Texas State Technical  College
     for 10 years. A  distinguished  alumnus of the University of Tulsa, he also
     has been a university instructor in investor relations at the University of
     Houston.


          Charles C. Braun - Mr. Braun serves as  Executive  Vice  President of
     Finance,  Treasurer  and  Secretary.  Mr.  Braun  oversees  the  financial
     accounting  and  reporting  and  is  responsible   for  AmREIT's   capital
     formation, debt placement and joint venture initiatives.  Mr. Braun joined
     the Predecessor  Corporation in 1999 and has over nine years of accounting
     and real estate experience,  including five years with Ernst & Young, LLP.
     At Ernst & Young,  LLP,  Mr.  Braun served as a manager in the real estate
     advisory  services group and has provided  extensive  consulting and audit
     services to a number of Real  Estate  Investment  Trusts and private  real
     estate  companies.  These services  included  financial  statement audits,
     portfolio  acquisition and disposition,  real estate portfolio management,
     merger  integration and process  improvement,  financial  analysis and due
     diligence.  Mr. Braun  received a B.B.A degree in  accounting  and finance
     from Hardin Simmons University and subsequently earned the CPA designation
     and his Series 63, 7, 24 and 27 securities licenses.


          AmREIT's other officers and senior management include:

          JIM O'NEILL  CPA.  Mr.  O'Neill  serves as  Corporate  Controller  and
     oversees  the daily  accounting  activities  of AmREIT  and its  affiliated
     partnerships,   debt  placement,  and  project  financials.  Mr.  O'Neill's
     responsibilities  also  include  coordinating   financial  activities  with
     auditors,  banks, lenders,  transfer agents, and attorneys to assure timely
     and accurately financial reporting.  Mr. O'Neill is a graduate of Texas A &
     M  University,  where he received his BBA in  Accounting  and  subsequently
     earned the distinction of CPA certification. Prior to joining AmREIT, Inc.,
     Mr.  O'Neill  served  in a  controller  capacity  at  Continental  Emsco in
     Houston,  Texas,  Wedge Energy  Group in Houston,  Texas,  and  Markborough
     Development Company located in Denver, Colorado.


          Max  Shilstone.  Mr.  Shilstone  services as Vice  President of Asset
     Management and oversees  divestitures  for existing  retail  properties as
     well as property  management  functions for AmREIT. Mr. Shilstone received
     his BBA in Management  from the University of Texas and his MBA in Finance
     from St. Thomas University.  Prior to joining AmREIT, Mr. Shilstone gained
     experience  in  property  management  having  worked  for many  years with
     Barshop & Oles Company in Austin, Texas as well as asset development for a
     division of Duke Energy.


                                      37





          David M.  Thailing  MBA,  Series 63,  65. As the East Coast  Regional
     Sales Manager,  Mr. Thailing is responsible for raising capital for AmREIT
     sponsored  investment programs through the NASD marketplace.  Mr. Thailing
     received  his  B.B.A.   degree  in  management  from  Southern   Methodist
     University and earned a Masters of Business from the Jones Graduate School
     at Rice University. Prior to joining AmREIT, Mr. Thailing gained financial
     consulting  experience as an associate with Andersen's  Corporate  Finance
     and  Restructuring  practice.  He also has five years of  experience  as a
     financial advisor and public speaker with PaineWebber.


          Jason  Lax.  Mr.  Lax  serves  as Vice  President  and  oversees  all
     development and construction  projects.  Mr. Lax has nationwide experience
     in the commercial  construction industry obtained from previous employment
     with ExxonMobil Corporation and Trammell Crow Company.  During his career,
     he has  managed  over a hundred  projects  valued over $150  million  from
     grassroots  development projects to minor remodeling projects and has been
     involved  in  all  phases  of  development   from   conceptual  site  plan
     preparation to project turnover after completion of construction.  Mr. Lax
     received a B.S. in Mechanical  Engineering  from Texas Tech University and
     has received his Engineer In Training  certification  from the Texas Board
     of  Professional  Engineers.  He is  also a  Texas  licensed  Real  Estate
     Salesperson.


          Todd McDonald. Mr. McDonald serves as Vice President and oversees the
     analysis,  marketing,  and sales process  related to properties  currently
     being marketed by the Company.  Mr. McDonald received his B.S. in Business
     Economics from Wofford College. Mr. McDonald has real estate experience in
     which he reviewed  property level financial  statements,  produced project
     proformas, and provided analysis on acquisition and disposition prospects.

          Preston  Cunningham,  JD. Mr. Cunningham serves as our Vice President
     and oversees our credit tenant  build-to-suit  operations.  Mr. Cunningham
     received a B.B.A.  degree in Financial  Planning and Services  from Baylor
     University  and Doctor of  Jurisprudence  from South Texas College of Law.
     Mr.  Cunningham has  significant  real estate  experience  with The Howard
     Smith Company,  Albritton  Properties  and Community  Bank and Trust.  Mr.
     Cunningham is a member of the American Bar Association.



          Tenel  Tayar.  Mr. Tayar  serves as Vice  President  and oversees new
     development and dispositions.  He has 10 years of experience in commercial
     real estate development and investment. Mr. Tayar has directed all aspects
     of real estate  capitalization  and  investment  for over $225  million of
     transactions and  participated in over $500 million.  He received a BBA in
     Finance from the  University  of Texas at Austin and an MBA from  Southern
     Methodist University. He is also a Texas licensed Real Estate Salesperson.

          Horst  Hendrecks.  Mr. Hendrecks  represents  investors from overseas
     purchasing  primarily single tenant  properties,  such as T.G.I.  Fridays,
     Circuit City,  Landry's,  Chili's and others.  Mr. Hendrecks has been with
     AmREIT  for  eight  years  and has over 18 years  experience  representing
     private  investors  in  the  acquisition  of  quality   triple-net  retail
     facilities.

          Phil Moss.  Mr.  Moss  oversees  leasing of AmREIT's  properties  and
     credit tenant lease expansion.  Mr. Moss has been with AmREIT for 15 years
     and  has   extensive   experience,   participating   in  over  100   lease
     transactions,  including  an  exclusive  four-state  Credit  Tenant  Lease
     rollout.

          Wade Greene.  Mr. Greene  facilitates  the business  development  and
     growth of the company's third party brokerage.  Mr. Greene has 20 years of
     experience in the real estate investment banking/services industry and has
     successfully  developed and implemented  investment strategies and capital
     market transactions.  He has managed over a billion dollars of real estate
     investment, lease and development transactions. Mr. Greene received a B.S.
     in Economics  from the  University of South Alabama and is a licensed Real
     Estate Broker, a Certified Commercial  Investment Member and holds an NASD
     Series 7 license.



                                       38




EXECUTIVE COMPENSATION

     The below table represents the compensation  paid to Mr. Taylor,  Chairman
of the  Board,  Chief  Executive  Officer  and  President  and  Chad C.  Braun,
Executive Vice President, Chief Financial Officer and Secretary. The table sets
forth all compensation,  cash and restricted stock,  received during the fiscal
years 2002, 2001 and 2000.





                                                 Annual Compensation                     Long-Term Compensation
                                                                                                 Awards
                                                                                    
                                                                                       Securities
                                                                      Other Annual     Underlying       All Other
Name and Principal Position     Year       Salary      Cash Bonus     Compensation      Options       Compensation
---------------------------     ----       ------      ----------     ------------      -------       ------------
 H. Kerr Taylor                 2002      $175,000      $122,500       $52,914(1)          ---            (4)
 Chief Executive Officer and    2001      $175,000     $  61,250       $28,878(1)          ---            ---
 President                      2000      $102,500           ---          ---              ---            ---
 Chad C. Braun                  2002      $115,000       $49,750       $21,488(2)          ---        $99,996(3),(4)
 Executive Vice President and   2001      $ 85,000       $17,500       $ 8,251(2)          ---            ---
 Chief Financial Officer        2000      $ 82,500        $7,125          ---              ---            ---


---------

(1)      Mr. Taylor was granted 8,333 and 3,122 common shares as part of his
         bonus for 2002 and 2001, respectively. The restrictions on these
         shares lapse equally over a four year period beginning on February 15,
         2003 and equally over a three year period beginning February 15, 2002.

(2)      Mr. Braun was granted 3,384 and 892 common shares as part of his bonus
         for 2002 and 2001, respectively. The restrictions on these shares
         lapse equally over a four year period beginning on February 15, 2003
         and equally over a three year period beginning on February 15, 2002.

(3)      Mr. Braun was granted 14,388 common shares as a bonus related to the
         completion of the merger of three affiliated investment funds with the
         Company, completed in 2002. The restrictions on these shares lapse
         equally over a four year period beginning on February 15, 2003.

(4)      Mr. Taylor and Mr. Braun were assigned 45% and 5%, respectively, in
         the income and cash flow of the general partner of AAA CTL Notes,
         Ltd., which is comprised of a portfolio of seventeen IHOP properties.
         Mr. Taylor's interest is 100% vested immediately. Mr. Braun's interest
         vests 100% on February 15, 2008. The value of the assigned interest
         can not be determined or estimated at this time.


                                       39




SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth,  as of December 31, 2002,  the beneficial
ownership interest of the executive officers and trust managers of AmREIT:



                             NAME                                    AMOUNT AND NATURE OF       PERCENT OF CLASS(1)
                                                                     BENEFICIAL OWNERSHIP
                                                                                          
H. Kerr Taylor - Chairman, President & CEO                                  580,096                     21.43%
Robert S. Cartwright - Trust Manager                                          8,166                      *
G. Steven Dawson - Trust Manager                                              6,000                      *
Bryan L. Goolsby - Trust Manager                                              6,000                      *
Philip Taggart - Trust Manager                                                6,800                      *
Chad C. Braun - Secretary, CFO and Executive VP                              18,664                      *
                                                                             ------
All trust managers and executive officers as a group                        625,726                     23.12%
All other employees combined                                                 12,381                      *
                                                                             ------
All trust managers, executive officers, and employees as a group            638,107                     23.58%

-----------------
* Less than 1%.

     As of December  31,  2002,  no other  person was known by AmREIT to be the
beneficial owner of more than 5% of the shares of AmREIT.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


     On July  23,  2002,  the  Company  completed  a merger  with  three of its
affiliated partnerships,  Funds IX, X, and XI. AmREIT accounted for this merger
as a purchase,  whereby the assets of the  partnerships  have been  recorded at
fair market value.  AmREIT  increased itsw real estate assets by  approximately
$24.3 million and issued approximately 2.6 million class B common shares to the
limited  partners  in the  affiliated  partnerships  as a result of the merger.
Approximately $760 thousand in 8 year, 5.47% interest only,  subordinated notes
were issued to limited partners of the affiliated partnerships who dissented to
the merger.  The acquired  properties are  unencumbered,  single  tenant,  free
standing properties on lease to national and regional tenants,  where the lease
is the direct  obligation  of the parent  company.  A deferred  merger  expense
stemmed  from stock  issued to H. Kerr Taylor,  President  and Chief  Executive
Officer,   based  on  a  deferred   consideration  that  was  approved  by  the
shareholders in 1998.

     On June 5, 1998, our  shareholders  voted to approve an agreement and plan
of  merger  (the  "Merger  Agreement")  with  American  Asset  Advisers  Realty
Corporation (the "Former Adviser"), whereby Mr. Taylor, the sole shareholder of
the Former Adviser,  agreed to exchange 100% of the outstanding common stock of
the Former Adviser for up to 900,000 of our common  shares.  As a result of the
merger, we became a fully integrated,  self-administered real estate investment
trust.  Effective  June 5, 1998, we issued Mr. Taylor  213,260 shares of common
stock and he deferred the right to receive the remaining  686,740 common shares
until certain goals were  achieved  following the merger.  See "Proposal Two --
Amendment  of the Merger  Agreement."  As a result of the merger of Funds IX, X
and XI into AmREIT,  completed on July 23, 2002, AmREIT issued to Mr. Taylor an
additional  302,281 class A common shares on September 19, 2002. Since July 23,
2002,  Mr.  Taylor has not earned any of the  remaining  384,459 class A common
shares payable to him pursuant to the terms of the Merger Agreement. The Merger
Agreement as amended currently requires those goals to be met by June 2006.



                                       40



     AmREIT  provides  property   acquisition,   leasing,   administrative  and
management  services for ten affiliated real estate limited  partnerships  that
are under common management (the  "Partnerships").  Mr. Taylor owns between 45%
and 100% of the stock of the companies that serve as the general partner of the
Partnerships.  Service fees of $245 thousand and $335 thousand were paid by the
Partnerships to AmREIT for 2002 and 2001 respectively.

     On May 20, 1999, AmREIT entered into a partnership  agreement with various
individual  investors to form AmREIT Opportunity Fund, Ltd. The partnership was
formed to develop,  own, manage, hold for investment and/or resell property and
to make and/or invest in loans for the development or construction of property.
AmREIT  invested  $250,000 as a limited  partner and $1,000 as the sole general
partner.  Subject to certain restrictions in the limited partnership  agreement
which require  limited partner  approval (such as liquidating the  partnership,
withdrawing as general partner or assigning its general partner interest),  the
general partner manages and operates the daily  activities of the  partnership.
The  general  partner  can  however be  removed,  with or without  cause,  by a
majority vote of the outstanding limited partner units.


     On January 26, 2001,  AmREIT  entered into a  partnership  agreement  with
various  individual  investors to form AmREIT  Income & Growth  Fund,  Ltd. The
partnership  was formed to develop,  own,  manage,  hold for investment  and/or
resell  property  and to make  and/or  invest in loans for the  development  or
construction  of property.  AmREIT  invested  $200,000 as a limited partner and
$1,000 as the sole  general  partner.  Subject to certain  restrictions  in the
limited  partnership  agreement which require limited partner approval (such as
liquidating  the  partnership,  withdrawing as general partner or assigning its
general partner  interest),  the general partner manages and operates the daily
activities of the  partnership.  The general  partner can however,  be removed,
with or without cause,  by a majority vote of the  outstanding  limited partner
units.

     On November 7, 2002,  AmREIT  entered into a  partnership  agreement  with
various individual  investors to form AmREIT Monthly Income & Growth Fund, Ltd.
The partnership was formed to develop,  own, manage, hold for investment and or
resell  property  and to make and or  invest in loans  for the  development  or
construction  of property.  AmREIT  invested  $200,000 as a limited partner and
$1,000 as the sole  general  partner.  Subject to certain  restrictions  in the
limited  partnership  agreement which require limited partner approval (such as
liquidating  the  partnership,  withdrawing as general partner or assigning its
general partner  interest),  the general partner manages and operates the daily
activities of the partnership.  The general partner can,  however,  be removed,
with or without cause,  by a majority vote of the  outstanding  limited partner
units.


     As a sponsor of real estate investment opportunities to the NASD financial
planning broker dealer  community,  the Company  maintains a 1% general partner
interest in the  investment  funds that it  sponsors.  The funds are  typically
structured  such that the limited  partners  receive 99% of the available  cash
flow until 100% of their  original  investment  capital has been returned and a
preferred return has been met. Once this has happened, then the general partner
begins  sharing in the  available  cash flow at various  promoted  levels.  The
Company  also  assigns a portion  of this  general  partner  interest  in those
investment funds to its employees as long term, contingent compensation.  In so
doing,  the Company believes that it will align the interest of management with
that of the  shareholders,  while at the same time  allowing for a  competitive
compensation  structure in order to attract and retain key management positions
without increasing the overhead burden.

                                      41





     Locke Liddell & Sapp LLP acts as the Company's  corporate  counsel.  Bryan
Goolsby is the managing  partner of Locke Liddell & Sapp LLP and is a member of
the Company's board of trust managers.



LEGAL PROCEEDINGS

         Neither AmREIT nor any of its properties is subject to any material
claim or legal proceeding, nor to management's best knowledge, is any such
claim or legal proceeding threatened which could have a material adverse effect
on AmREIT or its properties.


                                       42




                           ESTIMATED USE OF PROCEEDS


     The following tables set forth  information about how we intend to use the
proceeds  raised in this offering  assuming that we sell  2,000,000  shares and
4,000,000  shares,  respectively,  pursuant  to this  offering.  The use of the
2,000,000 share number was an arbitrary selection by AmREIT because there is no
minimum  offering.Many  of the figures set forth below  represent  management's
best estimate since they cannot be precisely  calculated at this time. Although
there can be no assurances, we expect that at least 88% of the money you invest
will be used to buy real estate or pay down existing debt,  while the remaining
up to 12%  will be used for  working  capital  and to pay  expenses  and  fees,
including the payment of fees to AmREIT Securities,  a wholly-owned  subsidiary
of AmREIT and our Dealer Manager.




                                                                   2,000,000 Shares            4,000,000 Shares
                                                                 Amount(1)    Percent       Amount(2)      Percent
                                                                                               
Gross Offering Proceeds                                        $20,000,000     100.0%     $40,000,000      100.0%
Less Public Offering Expenses:
     Selling Commissions and Dealer Manager Fee(s) (3)           2,100,000      10.5%       4,200,000       10.5%
     Organization and Offering Expenses(4)                         300,000       1.5%         600,000        1.5%
                                                                __________      _____     ___________       _____
                                                                $2,400,000      12.0%     $ 4,800,000       12.0%

Amount Available for Investment(5)                             $17,600,000      88.0%      35,200,000       88.0%
                                                               ===========      =====      ==========       =====
                                                                                (6)                         (6)

-----------------


     1.   Assumes  that an  aggregate  of  $20,000,000  will be  raised in this
          offering for purposes of  illustrating  the  percentage  of estimated
          organization and offering expenses at two different sales levels. See
          Note 4 below.

     2.   Assumes the maximum offering is sold which includes 4,000,000 shares
          offered to the public at $10.00 per share.


     3.   Includes  selling  commissions  equal  to  7.5%  of  aggregate  gross
          offering  proceeds,  which  commissions  may be reduced under certain
          circumstances,  a  0.5%  due  diligence  reimbursement  and a  dealer
          manager fee equal to 2.5% of aggregate gross offering proceeds,  both
          of which are payable to the Dealer Manager, an affiliate of ours. The
          Dealer  Manager,   in  its  sole  discretion,   may  reallow  selling
          commissions  of up to  7.5%  of  gross  offering  proceeds  to  other
          broker-dealers  participating  in this offering  attributable  to the
          amount of shares sold by them.  In addition,  the Dealer  Manager may
          reallow a portion of its dealer manager fee to Participating  Dealers
          in the aggregate amount of up to 1% of gross offering  proceeds to be
          paid to such Participating Dealers as marketing fees, or to reimburse
          representatives of such Participating  Dealers the costs and expenses
          of attending our educational conferences and seminars.

     4.   Organization and offering expenses consist of reimbursement of actual
          legal, accounting, printing and other accountable offering expenses,
          other than selling commissions and the dealer manager fee, including
          amounts to reimburse us for all marketing related costs and expenses,
          including, but not limited to, salaries and direct expenses of our
          employees while engaged in registering and marketing the shares and
          other marketing and organization costs, technology costs and expenses
          attributable to the offering, costs and expenses of conducting our



                                      43



          educational conferences and seminars, payment or reimbursement of
          bona fide due diligence expenses, and costs and expenses we incur for
          attending retail seminars conducted by broker-dealers. AmREIT will be
          responsible for the payment of organization and offering expenses,
          other than selling commissions and the dealer manager fee, to the
          extent they exceed 1.5% of aggregate gross offering proceeds from
          this offering. Notwithstanding the above, we do not expect
          organization and offering expenses, including selling commissions,
          the dealer manager fee and all other underwriting compensation,
          to exceed 12% of gross offering proceeds.

     5.   Until required in connection  with the acquisition and development of
          properties,  substantially  all of the net proceeds of this  offering
          and,  thereafter,  the working capital  reserves,  may be invested in
          short-term,    highly-liquid    investments    including   government
          obligations,   bank   certificates   of  deposit,   short-term   debt
          obligations  and   investor-bearing   accounts  or  other  authorized
          investments as determined by our board of trust managers.

     6.   Includes amounts anticipated to be invested in properties net of fees
          and expenses.  We estimate that at least 88% of the proceeds received
          from the sale of shares  will be used to  acquire  properties  or pay
          down existing debt.



                                       44



                               PRIOR PERFORMANCE

     The following  information  summarizes the  historical  experience of real
estate programs previously sponsored by AmREIT's  affiliates.  INVESTORS IN THE
OFFERING  SHOULD  NOT  ASSUME  THAT  THEY  WILL  EXPERIENCE  RETURNS,  IF  ANY,
COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN THESE PRIOR INVESTMENTS.


     Affiliates of AmREIT have sponsored a total of eleven non-public  programs
and four public  programs since 1985. As of March 31, 2003,  approximately  $75
million had been raised from over 3,100  investors  through all  programs.  The
properties  acquired in the prior  programs are located  throughout  the United
States.

     In November 1999,  Just For Feet,  Inc., a significant  tenant in AmREIT's
portfolio,  declared bankruptcy.  This resulted in four stores leased by AmREIT
to Just For Feet closing.  Footstar,  Inc., a New York Stock  Exchange  company
with a market  capitalization  of over $200 million,  assumed two of the leases
for stores that AmREIT owned,  one which is located in Baton Rouge,  Louisiana,
and the other is located in Tucson,  Arizona.  These stores will continue to be
operated  under the terms and  conditions  for the original Just For Feet lease.
The third  store,  located in  Sugarland,  Texas,  has been 100%  re-leased  as
AmREIT's leasing team secured long term,  guaranteed leases with Mattress Giant
and River Oaks Imaging and Diagnostics.  AmREIT's construction  management team
re-designed the building to accommodate these two tenants. The fourth property,
located in The Woodlands, Texas, has been re-designed into a multi-tenant store
front and has been  substantially  re-leased,  with all remaining space under a
letter of intent.


     The  following  table sets  forth a summary  information  on all  programs
previously sponsored by AmREIT's affiliates. A more detail description of these
programs is contained in the prior  performance  tables continued  elsewhere in
this prospectus.



-------------------------------------------- ----------------------------------------------- ----------------- ---------------
                                                                TYPE OF                                          METHOD OF
               NAME OF FUND                               REAL ESTATE ACTIVITY               TYPE OF PROGRAM     FINANCING
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
                                                                                                      
Taylor Income Investors III, Ltd.            Investment in Commercial Real Estate               Non-Public        All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
Taylor Income Investors IV, Ltd.             Investment in Commercial Real Estate               Non-Public        All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
Taylor Income Investors V, Ltd.              Investment in Commercial Real Estate               Non-Public        All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
Taylor Income Investors VI, Ltd.             Investment in Commercial Real Estate               Non-Public        All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AAA Net Realty Fund VII, Ltd.                Investment in Commercial Real Estate               Non-Public        All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AAA Net Realty Fund VIII, Ltd.               Investment in Commercial Real Estate               Non-Public        All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AAA Net Realty Fund Goodyear, Ltd.           Investment in Commercial Real Estate               Non-Public        All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AAA Net Realty Fund IX, Ltd.                 Investment in Commercial Real Estate                 Public          All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AAA Net Realty Fund X, Ltd.                  Investment in Commercial Real Estate                 Public          All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AAA Net Realty Fund XI, Ltd.                 Investment in Commercial Real Estate                 Public          All-Cash
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AmREIT, Inc.                                 Investment in Commercial Real Estate                 Public         Up to 50%
                                                                                                                 financing
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AAA Net Developers, Ltd.                     Acquisition, development and construction of       Non-Public       Up to 80%
                                             commercial real estate                                              financing
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AmREIT Opportunity Fund, Ltd.                Acquisition, development and construction of       Non-Public       Up to 80%
                                             commercial real estate                                              financing
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AmREIT Income & Growth Fund, Ltd.            Acquisition, development and construction of       Non Public       Up to 75%
                                             commercial real estate                                              financing
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
-------------------------------------------- ----------------------------------------------- ----------------- ---------------
AmREIT Monthly Income & Growth Fund, Ltd.    Acquisition, development and construction of       Non Public      Targeted at
                                             commercial real estate.                                           50% financing
-------------------------------------------- ----------------------------------------------- ----------------- ---------------


                                     45




PUBLICLY OFFERED UNSPECIFIED REAL ESTATE PROGRAMS

     AAA NET REALTY  FUND IX,  LTD.  terminated  its  offering  in May 1992 and
received  aggregate gross proceeds of $ 5,390,500,  representing  subscriptions
from 326 limited  partners.  Fund IX wholly owns four  properties  and owns one
property in joint venture with an affiliate of the general partner:

     o   Foodmaker (Jack-in-the-Box) in Dallas, Texas;

     o   Baptist Memorial Health System in Memphis, Tennessee;

     o   Payless Shoe/Walden Books in Austin, Texas;

     o   Golden Corral in Houston, Texas; and

     o   4.08% interest in Golden Corral in Houston, Texas


     The prospectus of Fund IX provided that the properties would be held for a
period of eight to twelve years,  but that the general  partner,  in their sole
discretion,  could increase or decrease this  timeframe.  On July 23, 2002, the
limited  partners in Fund IX and the  shareholders of AmREIT approved a plan of
merger  whereby the limited  partners  of Fund IX would  become  class B common
stock  shareholders  in AmREIT.  The class B common  shares  were  valued by an
independent  third party firm at $9.25 per share,  receive an 8% cumulative and
preferred  dividend  quarterly and are  convertible  into AmREIT class A common
shares at any time, at the holders option,  one for one. Per $1,000 of original
invested capital, the limited partners received a total of approximately $1,868
through  quarterly  distributions  and class B common  shares.  As of July 31,
2003, the class A common shares were trading at $6.32 per share.


     AAA NET REALTY  FUND X, LTD.  terminated  its  offering in August 1994 and
received  aggregate gross proceeds of $11,453,600,  representing  subscriptions
from 727 limited  partners.  Fund X wholly owns five  properties and owns three
properties in joint venture with certain affiliates of the general partner:

     o   95.92% interest in Golden Corral in Houston, Texas;

     o   TGI Friday's in Houston, Texas;

     o   Goodyear Tire in Houston, Texas;

     o   Comp USA in Minneapolis, Minnesota;

     o   AFC, Inc. (Popeye's Favorite Chicken) in Atlanta, Georgia;

     o   45.16% interest in Wherehouse Entertainment in Independence, Missouri;

     o   Memorial Herman Hospital System (suburban  doctors clinic) in
         Sugarland, Texas; and

     o   18.25% interest in Footstar, Inc. in Tucson, Arizona

                                      46





     The prospectus of Fund X provided that the properties  would be held for a
period of eight to twelve years,  but that the general  partner,  in their sole
discretion,  could increase or decrease this  timeframe.  On July 23, 2002, the
limited  partners in Fund X and the  shareholders  of AmREIT approved a plan of
merger  whereby the  limited  partners  of Fund X would  become  class B common
shareholders in AmREIT. The class B common shares were valued by an independent
third party firm at $9.25 per share,  receive an 8%  cumulative  and  preferred
dividend quarterly and are convertible into AmREIT class A common shares at any
time,  at the holders  option,  one for one.  Per $1,000 of  original  invested
capital,  the limited partners received a total of approximately $1,638 through
quarterly  distributions  and class B common stock.  As of July 31, 2003,  the
class A common shares were trading at $6.32 per share.


     AAA NET REALTY FUND XI, LTD.  terminated  its offering in January 1996 and
received  aggregate  gross proceeds of $7,061,200,  representing  subscriptions
from 269 limited  partners.  Fund XI wholly owns two  properties  and owns five
properties in joint venture with certain affiliates of the general partner:

     o   49% interest in Wherehouse Entertainment in Wichita, Kansas;

     o   Blockbuster Video in Oklahoma City, Oklahoma;

     o   29.85% interest in Footstar, Inc. in Tucson, Arizona;

     o   49% interest in Washington Mutual in The Woodlands, Texas;

     o   Pier One in Longmont, Colorado; and

     o   25.42% interest in Hollywood Video in Lafayette, Louisiana


     The prospectus of Fund XI provided that the properties would be held for a
period of eight to twelve years,  but that the general  partner,  in their sole
discretion,  could increase or decrease this  timeframe.  On July 23, 2002, the
limited  partners in Fund XI and the  shareholders of AmREIT approved a plan of
merger  whereby the limited  partners  of Fund XI would  become  class B common
shareholders in AmREIT. The class B common shares were valued by an independent
third party firm at $9.25 per share,  receive an 8%  cumulative  and  preferred
dividend quarterly and are convertible into AmREIT class A common shares at any
time,  at the holders  option,  one for one.  Per $1,000 of  original  invested
capital,  the limited partners received a total of approximately $1,473 through
quarterly  distributions  and class B common  shares.  As of July 31, 2003,  the
class A common shares were trading at $6.32 per share.


PRIVATELY OFFERED UNSPECIFIED REAL ESTATE PROGRAMS


     TAYLOR INCOME INVESTORS III, Ltd. terminated its offering in December 1985
and received aggregate gross proceeds of $945,000,  representing  subscriptions
from  43  limited  partners.  Fund  III  owns a 44%  interest  in a  Bennigan's
restaurant  located in Houston,  Texas.  The property was purchased all cash in
December 1986.  Additionally,  in 2000, the partnership sold a Guaranty Federal
(acquired  as a Bank of America)  branch  location  in Houston,  Texas that was
purchased in February 1986. The private placement  memorandum provided that the
properties  purchased by Fund III would typically be held for a period of 12 to
15  years,  but that the  general  partner,  in their  sole  discretion,  could
increase or decrease this  timeframe.  The general  partners have evaluated the
local real estate market and the Bennigan's  lease and determined that the best
course of liquidation is to sell this property as part of a larger portfolio of
all properties  currently owned by the AAA Funds described in this section. The
general  partners are currently  interviewing  third-party  brokers to list the
property for sale.  The exact timing of the  disposition  will depend on market
conditions which are outside the control of the general partners.



                                      47





     Taylor Income Investors IV, Ltd.  terminated its offering in June 1986 and
received aggregate gross proceeds of $615,000,  representing subscriptions from
31 limited  partners.  Fund IV owns a 56% interest in a  Bennigan's  restaurant
located in Houston, Texas. Additionally, Fund IV owns a promissory note secured
by an Atlas Transmission located in Houston, Texas and matures in October 2006.
Fund IV purchased the Atlas  Transmission in October 1986 and subsequently sold
the property in November 1997; however, Fund IV had to provide owner financing.
The private placement memorandum provided that the properties purchased by Fund
IV would typically be held for a period of 12 to 15 years, but that the general
partners, in their sole discretion,  could increase or decrease this timeframe.
The  general  partners  have  evaluated  the local real  estate  market and the
Bennigan's  lease and determined that the best course of liquidation is to sell
this property as part of a larger  portfolio of all properties  currently owned
by the AAA Funds described in this section.  The general partners are currently
interviewing  third-party  brokers  to list the  property  for sale.  The exact
timing of the disposition  will depend on market  conditions  which are outside
the control of the general partners.

     Taylor Income  Investors V, Ltd.  terminated its offering in December 1986
and received aggregate gross proceeds of $480,000,  representing  subscriptions
from 21 limited  partners.  Fund V owns a 6.02% interest in a La Petite Academy
in Houston,  Texas.  Additionally,  Fund V owns a promissory note secured by an
Atlas Transmission located in Houston,  Texas and matures in October 2006. Fund
V purchased the Atlas  Transmission in October 1986 and  subsequently  sold the
property in November  1997;  however,  Fund IV had to provide owner  financing.
During 2001, the partnership sold a Pizza Inn and a Whataburger both located in
Clute,  Texas that were  purchased in March 1988. All of the net sales proceeds
from the sale of Pizza Inn and Whataburger allocable to Fund V were distributed
to the  limited  partners  as a capital  distribution.  The  private  placement
memorandum provided that the properties  purchased by Fund V would typically be
held for a period of 12 to 15 years,  but that the general  partners,  in their
sole  discretion,  could  increase  or  decrease  this  timeframe.  The general
partners have  evaluated the local real estate market and  determined  that the
best  course  of  liquidation  is to sell  this  property  as part of a  larger
portfolio of all properties  currently owned by the AAA Funds described in this
section. The general partners are currently interviewing third-party brokers to
list the property for sale. The exact timing of the disposition  will depend on
market conditions which are outside the control of the general partners.

     Taylor Income Investors VI, Ltd.  terminated its offering in June 1987 and
received aggregate gross proceeds of $300,000,  representing subscriptions from
13 limited  partners.  Fund VI owns a 2.73%  interest in a La Petite Academy in
Houston, Texas. Additionally,  during 2001 the partnership sold a Pizza Inn and
a Whataburger  both located in Clute,  Texas that were purchased in March 1988.
100% of the net  sales  proceeds  from the sale of  Pizza  Inn and  Whataburger
allocable  to Fund VI were  distributed  to the  limited  partners as a capital
distribution.  The private  placement  memorandum  provided that the properties
purchased  by Fund VI would  typically  be held for a period of 12 to 15 years,
but that the general  partners,  in their sole  discretion,  could  increase or
decrease this  timeframe.  The general  partners have  evaluated the local real
estate market and  determined  that the best course of  liquidation  is to sell
this property as part of a larger  portfolio of all properties  currently owned
by the AAA Funds described in this section.  The general partners are currently
interviewing  third-party  brokers  to list the  property  for sale.  The exact
timing of the disposition  will depend on market  conditions  which are outside
the control of the general partners.



                                      48





     AAA NET REALTY  INVESTORS FUND VII, LTD.  terminated its offering in March
1988  and  received  aggregate  gross  proceeds  of  $1,125,100,   representing
subscriptions  from 40  limited  partners.  Fund VII owns  the  following  five
properties in joint venture with affiliates of AmREIT:


     o   91.25% interest in La Petite Academy in Houston, Texas;

     o   54.88% interest in Whataburger in Dallas, Texas;

     o   27.27% interest in Superior Sound Systems in Houston, Texas;

     o   27.27% interest in AFC, Inc. (Church's Fried Chicken) in Houston,
         Texas; and

     o   27.27% interest in Eller Media (Billboard) in Houston, Texas


The private placement memorandum provided that the properties purchased by Fund
VII would typically be held for a period of 12 to 15 years, but that the
general partners, in their sole discretion, could increase or decrease this
timeframe. The general partners have evaluated the local real estate market and
determined the best course of liquidation is to sell these properties as part
of a larger portfolio of all properties currently owned by the AAA Funds
described in this section. The general partners are currently interviewing
third-party brokers to sell the properties. The exact timing of the
dispositions will depend on market conditions which are outside the control of
the general partners.

     AAA NET REALTY INVESTORS FUND VIII, LTD.  terminated its offering in March
1989  and  received  aggregate  gross  proceeds  of  $1,860,000,   representing
subscriptions  from 55 limited partners.  Fund VIII owns a 100% interest in two
properties and five  properties in joint venture with affiliates of the General
Partner:


     o   Discount Tire Center in Ft. Worth, Texas;

     o   La Petite Academy in Houston, Texas;

     o   45.12% interest in Whataburger in Dallas, Texas;

     o   72.72% interest in Superior Sound Systems in Houston, Texas;

     o   72.72% interest in AFC, Inc. (Church's Fried Chicken) in Houston,
         Texas;

     o   72.72% interest in Eller Media (Billboard) in Houston, Texas; and

     o   25.27% interest in Goodyear Tire in Dallas, Texas


The private placement memorandum provided that the properties purchased by Fund
VIII would typically be held for a period of 12 to 15 years, but that the
general partner, in their sole discretion, could increase or decrease this
timeframe. The general partners have evaluated the local real estate market and
determined the best course of liquidation is to sell these properties as part
of a larger portfolio of all properties currently owned by the AAA Funds
described in this section. The general partners are currently interviewing
third-party brokers to sell the properties. The exact timing of the
dispositions will depend on market conditions which are outside the control of
the general partners.



                                      49





     AAA Net Realty Fund  Goodyear,  Ltd.  terminated its offering in July 1991
and received aggregate gross proceeds of $1,335,000, representing subscriptions
from 37 limited partners.  Fund Goodyear owns a Goodyear Tire in Dallas,  Texas
and a 74.72% interest in another Goodyear Tire in Dallas, Texas through a joint
venture with an affiliated fund of the general partner.  The private  placement
memorandum  provided  that the  properties  purchased  by Fund  Goodyear  would
typically  be held  for a  period  of 12 to 15  years,  but  that  the  general
partners, in their sole discretion,  could increase or decrease this timeframe.
The general partners have evaluated the local real estate market and determined
the best course of liquidation is to sell these  properties as part of a larger
portfolio of all properties  currently owned by the AAA Funds described in this
section. The general partners are currently interviewing third-party brokers to
sell the properties. The exact timing of the dispositions will depend on market
conditions which are outside the control of the general partners.


     AAA NET  DEVELOPERS,  LTD.  terminated  its  offering in January  1997 and
received  aggregate  gross proceeds of $1,862,100,  representing  subscriptions
from 30 limited  partners.  Net  Developers  owns an interest in the  following
three properties:

     o   50% interest in Parkwood Square Shopping Center,  a multi-tenant
         retail center located in Huntsville, Texas;

     o   15%  interest in Vista Ridge  Shopping  Center,  a  multi-tenant
         retail center located in Lewisville, Texas; and

     o   50% interest in Hollywood Video located in Montgomery, Alabama


     Parkwood  Square  Shopping  Center is a 14,271  square  foot multi  tenant
center located in Huntsville,  Texas.  Tenants include H&R Block, GNC, Friedman
Jewelers,  Cingular Wireless, Pizza Hut, IHOP and A1 Liquer. At March 31, 2003,
the  property  was  encumbered  with a $1.473  million  first lien by GMAC that
matures  in  June  2010.  Net  Developers  has  approximately  $166,000  equity
remaining in this project,  receives a 15%  preferred  return on its equity and
then 50% of the cash flow and  profit  upon  disposition  above  the  preferred
return.  The project is  currently  under  contract  to sell,  with the closing
expected to occur in September 2003, subject to certain closing conditions.


     Vista Ridge  Shopping  Center is a 36,271  square foot multi tenant center
located in Lewisville,  Texas.  Tenants include  Caldwell  Watson,  Planet Tan,
American Laser Vision,  Frazier Ancillary Services and The Trakz Group, Inc. At
March 31, 2003, the property was encumbered with a $4.243 million mortgage note
secured by the  property  that  matures in March 2010.  Net  Developers  has no
remaining  equity in this project and maintains an 8.3% carried interest in the
cash flows and profit upon disposition. The project is currently being marketed
for sale.

     Hollywood  Video  is a  single  tenant  property  located  in  Montgomery,
Alabama.  At March 31, 2003, the property was  encumbered  with a $946 thousand
mortgage  note  secured  by the  property  that  matures  in  April  2009.  Net
Developers has no remaining  equity in this project and maintains a 50% carried
interest  in the cash  flows  and  profit  upon  disposition.  The  project  is
currently being marketed for sale.

     Other projects that Net Developers  made an investment in and have already
been liquidated include:

     o   Copper Plaza, a multi-tenant shopping center located in Houston,
         Texas;

     o   Just For Feet located in Lewisville, Texas;

                                      50




     o   Hollywood Video located in Covington, Louisiana;

     o   Hollywood Video located in Saraland, Alabama;

     o   IHOP located in Gainesville, Georgia;

     o   IHOP located in Falls Church, Virginia; and

     o   IHOP located in Keyport, New Jersey

Net Developers was the first in a series of actively managed funds. Per the
private placement memorandum, it was a three-year fund that entered into
liquidation in August 1999. The remaining properties are currently listed for
sale, and upon disposition, net sales proceeds will be allocated to the general
partner and the limited partners in accordance with the limited partnership
agreement.

     AMREIT OPPORTUNITY FUND, LTD.  terminated its offering in January 2001 and
received  aggregate  gross proceeds of $2,353,750,  representing  subscriptions
from  71  limited  partners.  AOF  owns  an  interest  in  the  following  five
properties:

     o    50%  interest in  McLendon  Plaza,  a  multi-tenant  shopping  center
          located in Houston, Texas;

     o    50%  interest  in ARC Round  Rock,  a  multi-tenant  shopping  center
          located in Round Rock, Texas;

     o    10%  interest  in  River  Park  Shopping  Center,  a  multi-  tenant,
          multi-pad shopping center located in Sugarland, Texas;

     o    45% interest in Temple TX 363,  Ltd, a multi-pad  project  located in
          Temple, Texas;

     o    29%  interest  in  CDP  #33,   three  IHOP   properties   located  in
          Haggarstown, Maryland; Orem, Utah and Houston, Texas

     McLendon  Plaza is a 16,000  square foot  multi-tenant  center  located in
Houston,  Texas. Tenants include Sprint PCS, Sketchers and Subway. The property
is under construction, with approximately 80% of the construction complete. The
property  is subject to a  construction  loan in the amount of  $286,550  as of
October 31, 2002.  Upon  completion of  construction  and leasing,  the general
partner expects to pay off the construction loan with a permanent loan and list
the property for sale.

     ARC Round Rock is a 9,600 square foot multi-tenant center located in Round
Rock, Texas.  Tenants include The Sleep Shop, Noodles Etc., and ABC Liquer. The
property is newly  constructed  and as of October 31, 2002 is encumbered with a
construction loan in the amount of $1,606,294.  AOF is currently  negotiating a
permanent loan, which will be used to pay off the construction  loan, and is in
the process of marketing the property for sale.

     River  Park  Shopping  Center  is a 40 acre foot  multi-tenant,  multi-pad
shopping  center located in Sugarland,  Texas.  The property is anchored by HEB
and includes significant shadow space and free standing pad sites. The property
is currently under construction.  AOF has a 10% interest in the project. As the
project is  completed,  the  intent is to fully  lease the space and market the
entire project for sale.


                                      51



     Temple TX 363, Ltd. is a multi-pad project located in Temple,  Texas. This
project  included four  individual,  freestanding  pad sites.  Three of the pad
sites have been developed and sold, which included a McDonalds  restaurant,  an
IHOP  restaurant  and a Chili's  restaurant.  The fourth pad site is  currently
being  marketed  and will either be  developed  and sold or sold  directly to a
user/operator.


     CDP # 33 is three IHOP properties located in Haggarstown,  Maryland; Orem,
Utah; and Houston,  Texas.  The  properties are encumbered  with three separate
mortgage notes totaling  $2,293,540 that are secured by the property and mature
in January 2012. Two of these properties have been sold, and the third property
located in Houston is under contract to sell, subject to certain closing
conditions.
         Other projects that AOF made an investment in and have already been
liquidated include:


     o    IHOP located in Norfolk, Virginia;

     o    IHOP located in Houston, Texas;

     o    Cooper Plaza,  a  multi-tenant  shopping  center  located in Houston,
          Texas;

     o    CPD # 31, two IHOP  properties  located  in  Memphis,  Tennessee  and
          Cookeville, Tennessee;

     o    IHOP and pad site located in Kenosha, Wisconsin;

     o    Temple TX 363, a multi-pad project consisting of McDonalds,  IHOP and
          Chili's located in Temple, Texas



     o    IHOP located in Haggarstown, Maryland; and



     o    IHOP located in Orem, Utah.


AOF is the second in a series of actively managed funds. Per the private
placement memorandum, AOF entered into liquidation in August 2002. The
remaining properties are still in the development stage or are currently listed
for sale, and upon disposition, net sales proceeds will be allocated to the
general partners and the limited partners in accordance with the limited
partnership agreement.


     AMREIT INCOME & GROWTH FUND  terminated  its offering in November 2002 and
received  aggregate gross proceeds of $10,000,000,  representing  subscriptions
from  185  limited  partners.  AIG  owns  an  interest  in  the  following  six
properties:

     o    IHOP located in Irondequoit, New York;

     o    50%  interest in  McLendon  Plaza,  a  multi-tenant  shopping  center
          located in Houston, Texas;

     o    20% interest in a portfolio of 17 IHOP  properties,  AAA CTL, located
          in twelve different states;

     o    TGI Friday's located in Crystal Lake, Illinois;

     o    45% interest in Temple TX 363,  Ltd, a multi-pad  project  located in
          Temple, Texas;

     o    38%  interest  in  CDP  #33,   three  IHOP   properties   located  in
          Haggarstown, Maryland; Orem, Utah and Houston, Texas

                                      52




     IHOP - Irondequoit is an IHOP property  located in Irondequoit,  New York.
The  property  was  purchased  for cash in  November  2002.  AIG will hold this
property  for  investment  purposes  and  collect  rental  income.  During  the
operating  stage of the  partnership,  the general  partner  will  evaluate the
credit of the tenant and the local real estate  market,  and when  appropriate,
market the property for sale.

     McLendon  Plaza is a 16,000  square foot  multi-tenant  center  located in
Houston,  Texas. Tenants include Sprint PCS, Sketchers and Subway. The property
is under construction, with approximately 80% of the construction complete. The
property  is subject to a  construction  loan in the amount of  $286,550  as of
October 31, 2002.  Upon  completion of  construction  and leasing,  the general
partner expects to pay off the construction loan with a permanent loan and list
the property for sale.

     AAA CTL is a  portfolio  of 17 IHOP  properties  located  in 12  different
states.  AIG will hold its  interest in the AAA for  investment  purposes,  and
collect  rental  income.  During the operating  stage of the  partnership,  the
general  partner  will  evaluate  the  credit of the  tenant and the local real
estate market, and when appropriate, market the property for sale.

     TGI  Friday's  is a full  service  restaurant  located  in  Crystal  Lake,
Illinois.  The property was purchased for cash in November  2002. AIG will hold
this property for investment  purposes and collect  rental  income.  During the
operating  stage of the  partnership,  the general  partner  will  evaluate the
credit of the tenant and the local real estate  market,  and when  appropriate,
market the property for sale.

     Temple TX 363, Ltd. is a multi-pad project located in Temple,  Texas. This
project  included four  individual,  freestanding  pad sites.  Three of the pad
sites have been developed and sold, which included a McDonalds  restaurant,  an
IHOP  restaurant  and a Chili's  restaurant.  The fourth pad site is  currently
being  marketed  and will either be  developed  and sold or sold  directly to a
user/operator.


     CDP # 33 is three IHOP properties located in Haggarstown,  Maryland; Orem,
Utah; and Houston,  Texas.  The  properties are encumbered  with three separate
mortgage notes totaling  $2,293,540 that are secured by the property and mature
in January 2012. Two of these properties have been sold, and the third property
located in  Houston  is under  contract  to sell,  subject  to certain  closing
conditions.


     Other  projects  that AIG made an  investment  in and  have  already  been
liquidated include:

     o    CDP #27, IHOP located in Memphis, Tennessee and Tupelo, Mississippi;

     o    CDP # 31, two IHOP  properties  located in  Scottsdale,  Arizona  and
          Cookeville, Tennessee;

     o    IHOP and pad site located in Kenosha, Wisconsin;

     o    Temple TX 363, a multi-pad project consisting of McDonalds,  IHOP and
          Chili's located in Temple, Texas


     o    IHOP located in Haggarstown, Maryland; and

     o    IHOP located in Orem, Utah.



                                      53





AIG is the third in a series of actively managed funds. Per the private
placement memorandum, AIG is a seven year, actively managed fund that we enter
into a final liquidation during 2008. During the operating state of the
partnership, the general partner will negotiate the acquisition, development
and disposition of properties, focusing on generating dependable, increasing,
monthly income with appreciation on original capital during a seven year
actively managed time period.


                      Cumulative Distributions to Partners





                                          Capital Raised    Distributions Per   Annual Return    Properties     Sold
                                                                 $1,000                            Bought
                                                                                                    
Taylor Income Investors III                 $   945,000         $ 2,405             9.98%            3           2
Taylor Income Investors IV                      615,000           1,031             6.09%            2           1
Taylor Income Investors V                       480,000           1,776             7.83%            4           3
Taylor Income Investors VI                      300,000           1,817             6.98%            3           2
Taylor Income Investors VII                   1,125,000           1,124             7.79%            5           0
AAA Net Realty Fund VIII                      1,860,000           1,097             8.20%            7           0
AAA Net Realty Fund Gdyr                      1,335,000             924             8.06%            2           0
AAA Net Realty Fund IX                        5,390,000           1,850             7.73%            5           5
AAA Net Realty Fund X                        11,453,000           1,649             7.21%            8           8
AAA Net Realty Fund XI                        7,061,000           1,471             6.73%            7           7
AAA Net Developers                            1,800,000           1,227               (1)           10           7
AmREIT Opportunity Fund                       2,800,000             659               (1)           20          12
AmREIT Income & Growth Fund                  10,000,000             180             9.00%           17           8







(1) Paid no current return. Funds are currently in liquidation, and are
anticipated to generate a 10%-14% return.


                             CONFLICTS OF INTEREST


     As an  internally  advised  REIT, we have  eliminated  the single  largest
conflict of interest of many REITs:  The conflict  between the external adviser
and the  shareholders.  As an  internally  advised  REIT,  the interests of our
board,  management  team and employees are more fully aligned with those of our
shareholders.  We will,  however,  be subject to various  conflicts of interest
arising out of the normal course of business, relationships with our affiliated
investment  funds,  and  the  acquisition  and  allocation  of  properties,  as
described below.

PRIOR AND FUTURE PROGRAMS

     The  Company  and its  affiliates  have  organized  15 other  real  estate
investment funds,  currently have other real estate holdings, and in the future
expect to form,  offer  interests in, and manage other real estate  programs in
addition to the Company,  and make additional real estate  investments.  Future
real estate programs may involve our affiliates owning,  financing,  operating,
leasing,  and managing  properties  that may be suitable for acquisition by us.
AmREIT, or a wholly-owned subsidiary of AmREIT, is the general partner of these
other investment  funds. As a result,  our board of trust managers may be faced
with  conflicting  fiduciary  obligations to the shareholders of AmREIT and the
limited partners of the funds.


                                      54





     Some of these  affiliated real estate programs may in the future invest in
properties owned by us, may purchase  properties  concurrently  with us and may
lease  properties  to  operators  who also  lease  or  operate  certain  of our
properties.  These  properties,  if located in the vicinity of, or adjacent to,
properties acquired by us, may affect our properties' gross revenues. Conflicts
between us and affiliated  programs may affect the value of our  investments as
well as our net income. We believe that our advisor has established  guidelines
to minimize  such  conflicts.  See  "Conflicts  of Interest - Certain  Conflict
Resolution Procedures" below.

COMPETITION TO ACQUIRE PROPERTIES

     Affiliates  of the Company may compete with us to acquire  properties of a
type suitable for  acquisition by us and may be better  positioned to make such
acquisitions as a result of relationships  that may develop with various owners
of real estate.  See  "Business -- General." A purchaser  who wishes to acquire
one or more of these  properties  may have to do so within a  relatively  short
period of time,  occasionally at a time when we (due to insufficient funds, for
example) may be unable to make the acquisition.

     In an effort to address  these  situations  and preserve  the  acquisition
opportunities, the Company or its affiliates may maintain lines of credit which
enable them to acquire properties on an interim basis.

     The Company and its affiliates also may be subject to potential  conflicts
of  interest  at the time we wish to  acquire a  property  that also would be a
suitable  investment  for an affiliate  of ours.  Our trust  managers,  in this
capacity,  have a  fiduciary  obligation  to act in the  best  interest  of our
shareholders and, as general partners or directors of our affiliates, to act in
the best interests of the investors in other programs with investments that may
be similar to ours and will use their best  efforts to assure  that the Company
will be treated as favorably as any of our  affiliated  investment  funds.  See
"Management - Fiduciary Responsibility of the Board of Trust Managers." We have
also  developed the  following  procedures  to resolve  potential  conflicts of
interest in the allocation of properties between the Company and certain of our
affiliates.

     Our board of trust managers, investment committee and management team have
agreed that AmREIT will have the first opportunity to purchase any asset, other
than   multi-tenant   shopping  centers  under  20,000  square  feet.  Once  an
opportunity  is  presented,   the  investment  committee  and  management  will
determine if the potential acquisition is an appropriate opportunity for AmREIT
by evaluating the following criteria:

     o    Whether the asset is suitable for holding long-term or more likely to
          be disposed of following a brief holding period;

     o    Amount of funds available for investment;

     o    Tenant  concentration  exposure  (limited  to 15%,  unless  expressly
          approved by the trust managers);

     o    Geographic concentration exposure;

     o    Anticipated cash flows that will support  financial  underwriting for
          projected dividends, FFO, and cost of capital; and

     o    Compliance with loan agreements and debt covenants.


                                      55





     Management  believes  that its real estate  pipeline of single  tenant CTL
properties, multi-tenant acquisition and development projects and joint-venture
development  opportunities  are  sufficient  to  supply  the  Company  and  its
affiliated  investment funds with the appropriate amount and diversification of
suitable properties.

     We will supplement this prospectus  during the offering period to disclose
the  acquisition  of a  property  at the  time  we  believe  that a  reasonable
probability exists that we will acquire the property. Based upon the experience
of our management team, a reasonable probability will exist for the acquisition
of a property when: (1) a commitment  letter is executed by a proposed  tenant,
(2) a  satisfactory  credit  underwriting  for the  proposed  tenant  has  been
completed,  (3) a satisfactory  site inspection has been  completed,  and (4) a
refundable earnest money deposit has been paid on the property.

JOINT INVESTMENT WITH AN AFFILIATED PROGRAM

     We may invest in Joint  Ventures  with  another  program  sponsored by the
Company or its  affiliates  if such  investment  and joint  venture is fair and
reasonable to the Company and on substantially the same terms and conditions as
those to be received by the co-venturer or co-venturers, and is approved by our
investment committee.  Potential situations may arise in which the interests of
the co-venturer or co-venturers may conflict with ours. In addition, we and the
co-venturer  or  co-venturers  may reach an  impasse  with  regard to  business
decisions,  such as the purchase or sale of property, in which our approval and
each co-venturer is required.  In this event,  none of the parties may have the
funds  necessary to purchase the  interests of the other  co-venturers.  We may
experience difficulty in locating a third party purchaser for our Joint Venture
interest  and in  obtaining  a  favorable  sales  price for our  Joint  Venture
interest.  See "Risk Factors - Real Estate Risks - We may not control the joint
ventures in which we enter."

COMPETITION FOR MANAGEMENT TIME

     The trust managers,  officers,  and management of the Company are engaged,
and in the future will engage,  in the management of our affiliated  investment
funds, their properties and business. They will devote as much of their time to
the  Company  as is  required,  however,  a portion  of their time will also be
allocated to the management of our affiliated  investment  funds.  The officers
and directors of the Company may experience conflicts of interest in allocating
management  time,  services,  and  functions  among the Company and its various
investment funds.

RELATIONSHIP WITH THE DEALER MANAGER

     The Dealer Manager is AmREIT Securities Company, a wholly-owned affiliated
of the Company.  Certain of the officers and  directors of the Company are also
officers,  directors,  and registered  principals of the Dealer  Manager.  This
relationship  may create  conflicts in connection  with the  fulfillment by the
Dealer Manager of its due diligence  obligations  under the federal  securities
laws.  Although  the  Dealer  Manager  will  examine  the  information  in  the
prospectus for accuracy and completeness, the Dealer Manager is an affiliate of
ours and will not make an  independent  review of the Company or this offering.
Accordingly,  the investors do not have the benefit of such independent review.
Certain of the Soliciting Dealers have made, or are expected to make, their own
independent due diligence investigations.  The Dealer Manager is not prohibited
from acting in any capacity in connection with the offer and sale of securities
offered by entities that may have some or all investment  objectives similar to
those  of the  Company  and is  expected  to  participate  in  other  offerings
sponsored by the Company.

LEGAL REPRESENTATION

     Locke Liddell & Sapp LLP, which serves as securities and tax counsel to us
in this offering,  also serves as securities and tax counsel for certain of our
affiliates,  including  other real estate  programs,  in connection  with other
matters.  Neither the Company nor our shareholders  will have separate counsel.
In the event any controversy  arises following the termination of this offering
in which our  interests  appear to be in conflict  with those of the Company or
its affiliates, other counsel may be retained for one or both parties.


                                      56




                      PRICE RANGE OF CLASS A COMMON SHARES



         As of June 30, 2003, there were approximately 863 record holders
of 2,794,225 of the Company's class a common shares net of 90,322 shares held in
treasury.  AmREIT's class a common shares are listed on the AMEX and trade under
the symbol  "AMY." The  following  table  sets  forth for the  calendar  periods
indicated  the high and low sale prices per class A common  share as reported on
the AMEX and the dividends paid per share for the corresponding period since the
commencement of trading on July 23, 2002.




Calendar Period                                                           High           Low          Dividends
2002
                                                                                             
     Third Quarter (from July 23, 2002)(1)........................       $7.50          $6.20           $.095
     Fourth Quarter...............................................       $6.55          $6.15           $.100



2003
     First Quarter ...............................................       $6.80          $6.05           $.109
     Second Quarter ..............................................       $6.80          $6.55           $.111






     (1) The Company listed its class A common shares on the AMEX on
         July 23, 2002.  Prior to July 23, 2002, the Company's shares
         were not listed on a public exchange, and therefore, there
         is no public trading or pricing information available.


     The payment of any future dividends by AmREIT is dependent upon applicable
legal and  contractual  restrictions,  including the  provisions of the class C
common shares, as well as its earnings and financial needs.


                       REDEMPTION OF SHARES


     Prior to the time at which the class C common shares become eligible to be
converted  into class A common  shares,  any  shareholder  who has held class C
common  shares for not less than one year may present all or any portion  equal
to at least 25% of those  shares  to  AmREIT  for  redemption  at any time,  in
accordance with the procedures  outlined herein.  At that time,  AmREIT may, at
its sole option,  redeem those shares  presented for redemption for cash to the
extent it has sufficient funds available. There is no assurance that there will
be sufficient funds available for redemption and, accordingly,  a shareholder's
shares may not be redeemed.  If AmREIT elects to redeem  shares,  the following
conditions and  limitations  would apply.  The full amount of the proceeds from
the sale of shares under our dividend reinvestment plan (Reinvestment Proceeds)
attributable  to any calendar  quarter will be used to redeem shares  presented
for redemption during that quarter. In addition, AmREIT may, at its discretion,
use up to $100,000 per calendar  quarter of the proceeds of any public offering
of its common shares for redemptions.  Any amount of offering proceeds which is
available for redemptions, but which is unused, may be carried over to the next
succeeding  calendar  quarter  for use in  addition  to the amount of  offering
proceeds and  Reinvestment  Proceeds  that would  otherwise  be  available  for
redemptions.  At no time during a 12-month period,  however,  may the number of
shares redeemed by AmREIT exceed 5% of the number of class C shares outstanding
at the beginning of that 12-month period.


                                      57





     In the event there are insufficient  funds to redeem all of the shares for
which  redemption  requests  have been  submitted,  AmREIT  plans to redeem the
shares in the order in which such  redemption  requests have been  received.  A
shareholder  whose shares are not redeemed  due to  insufficient  funds can ask
that the request to redeem the shares be honored at such time, if any, as there
are sufficient  funds available for redemption.  In that case, the.  redemption
request  will be  retained  and  those  shares  will  be  redeemed  before  any
subsequently  received  redemption  requests  are  honored.   Alternatively,  a
shareholder  whose shares are not  redeemed may withdraw his or her  redemption
request.  Shareholders  will not  relinquish  their  shares  until such time as
AmREIT commits to redeeming such shares.


     A shareholder  who wishes to have his or her shares  redeemed must mail or
deliver a written  request on a form  provided  by AmREIT and  executed  by the
shareholder,   its  trustee  or  authorized  agent,  to  the  redemption  agent
(Redemption Agent), which currently is ___________. The Redemption Agent at all
times will be registered as a  broker-dealer  with the SEC and each  applicable
state securities  commission.  Within 30 days following the Redemption  Agent's
receipt of the shareholder's request, the Redemption Agent will forward to that
shareholder  the documents  necessary to effect the  redemption,  including any
signature guarantee AmREIT or the Redemption Agent may require.  The Redemption
Agent will effect the  redemption  for the calendar  quarter  provided  that it
receives the properly completed  redemption documents relating to the shares to
be redeemed from the  shareholder at least one calendar month prior to the last
day of the current  calendar  quarter and has  sufficient  funds  available  to
redeem the shares.  The effective date of any redemption  will be the last date
during a quarter  during  which the  Redemption  Agent  receives  the  properly
completed redemption documents.  As a result, AmREIT anticipates that, assuming
sufficient   funds  are  available  for  redemption,   the  effective  date  of
redemptions will be no later than thirty days after the quarterly determination
of the availability of funds for redemption.




     Upon the  Redemption  Agent's  receipt of notice for redemption of shares,
the redemption price for this limited optional  redemption right will initially
be $9.00  per  share  $10.00  per  share,  which  was  calculated  by AmREIT by
subtracting a discount of 10% off the $10.00 per share  offering  price,  for a
net redemption  price of $9.00 per share. The net redemption price was intended
to approximates the per share net proceeds received by AmREIT in this offering,
after  deducting  selling  commissions  of 7.5% and the Dealer Manager fee. Our
board of trust  managers may change the  redemption  price at any time and will
announce  publicly any price  adjustment as part of its regular  communications
with our  stockholders,  such adjustment  being effective on the 10th day after
the first  public  announcement  of same.  Any shares  acquired  pursuant  to a
redemption will be retired and no longer available for issuance by AmREIT.





     A  shareholder  may present  fewer than all of his or her shares to AmREIT
for redemption;  provided, however, that (1) the minimum number of shares which
must be presented  for  redemption  shall be at least 25% of his or her shares,
and (2) if the shareholder  retains any shares,  he or she must retain at least
$2,500 worth of shares based on the current  offering  price  ($1,000  worth of
shares based on the current  offering  price for an IRA,  Keogh Plan or pension
plan).


                                      58





     Our board of trust managers, in its sole discretion,  may amend or suspend
the redemption  plan at any time it determines that any amendment or suspension
is in the best interest of AmREIT.  Our board of trust managers may suspend the
redemption of shares if (1) it  determines,  in its sole  discretion,  that the
redemption  impairs the capital or the operations of AmREIT; (2) it determines,
in its sole discretion,  that an emergency makes such redemption not reasonably
practical;  (3) any governmental or regulatory  agency with  jurisdiction  over
AmREIT so demands for the protection of the shareholders; (4) it determines, in
its sole discretion,  that the redemption would be unlawful; (5) it determines,
in its sole  discretion,  that the  redemption,  when considered with all other
redemptions, sales, assignments,  transfers and exchanges of our common shares,
could  cause  direct or  indirect  ownership  of shares of our common  stock to
become  concentrated to an extent which would prevent AmREIT from qualifying as
a REIT under the  Internal  Revenue  Code;  or (6) it  determines,  in its sole
discretion, the suspension to be in the best interest of AmREIT. The redemption
plan will terminate, and AmREIT no longer shall accept shares for redemption at
such time as the class C common shares become  eligible to convert into class A
common shares.

                       SELECTED HISTORICAL FINANCIAL DATA

     The following tables set forth the selected historical  financial data for
AmREIT. The selected historical operating,  balance sheet and cash flow data of
AmREIT  for each of the four  years  are  derived  from the  audited  financial
statements  of AmREIT as reported  in its Annual  Reports on form  10-KSB.  The
selected  historical  operating balance sheet and cash flow data for AmREIT for
the three  months  ended  March 31,  2003 and 2002 are  derived  from  AmREIT's
unaudited  financial  statements  and include,  in  management's  opinion,  all
adjustments  necessary  to  present  fairly  the data for such  periods.  These
historical data are not necessarily indicative of the results to be expected in
the future and should be read in conjunction with the financial  statements and
notes thereto  contained in this  prospectus.  Prior to 1998,  AmREIT (formerly
American Asset Advisors Trust) was an externally advised REIT. As an externally
advised REIT,  the results of operations  and balance  sheet  presentation  are
materially  different and not  comparable  to AmREIT as an  internally  advised
REIT.


     On July 23, 2002,  AmREIT  completed a merger with three of its affiliated
partnerships,  AAA Net Realty Funds IX, X and XI. The December 31, 2002 balance
sheet and income  statement do reflect the effect of this merger for the period
subsequent  to the  consummation  of the merger.  Through this  merger,  AmREIT
acquired  approximately  $24.3  million  in net  lease  real  estate  assets in
exchange  for  issuing   approximately   2.6  million  class  B  common  shares
Additionally,  AmREIT expensed approximately $1.9 million, based on the payment
of 302,281  class A common  shares,  as deferred  merger costs paid to Mr. Kerr
Taylor in conjunction with the sale of his advisory company to AmREIT in 1998.



                                      59



                                    AmREIT
                              Selected Historical
                       Combined Financial and Other Data





                                                         December 31,       December 31,      December 31,       December 31,
                                                            2002               2001               2000              1999
                                                                                                     
Balance sheet data (at end of period)
   Total Property ...................................    $47,979,848       $ 30,726,025       $ 31,622,098       $31,136,268
   Accumulated depreciation .........................     (2,136,376)        (2,066,067)        (1,601,758)       (1,148,503)
   Cash and cash equivalents ........................      2,506,868            227,117            935,867         1,118,746
   Total assets .....................................     73,975,753         38,828,393         36,522,276        37,018,186
   Notes payable ....................................     33,586,085         16,971,549         15,472,183        15,480,378
   Total liabilities ................................     34,958,534         18,399,279         16,063,221        16,048,366
   Minority interest ................................        810,971          5,075,333          5,130,337         5,180,546

   Shareholders' equity .............................     38,206,248         15,353,781         15,328,718        15,789,274

   Fully diluted class A common shares issued (3)....      5,236,547          2,384,117          2,384,117         2,384,117

   Treasury shares ..................................         65,379             39,323             11,373            11,373

Other data
   Cash flows provided by (used in):
                       Operating ....................      3,729,090          1,625,417            676,430           469,700
                       Investing ....................    (15,268,195)        (2,332,891)           (25,720)       (2,439,262)
                       Financing ....................     13,818,856             (1,276)          (833,589)        3,039,788

   Net increase (decrease) in cash and cash
   equivalents ......................................      2,279,751           (708,750)          (182,879)        1,070,226
   Funds from operations (1) ........................          6,000            978,565            222,767         1,605,091
   Adjusted funds from operations (2) ...............      1,910,370            978,565            222,767         1,605,091
   Book value per share .............................           7.30               6.44               6.43              6.62









                                                                                      Un-Audited
                                                          December 31,        March 31,         March 31,
                                                              1998              2003              2002
                                                                                      
Balance sheet data (at end of period)
   Total Property ...................................     $ 29,574,366      $ 48,520,661       $28,837,053
   Accumulated depreciation .........................         (696,384)       (2,327,147)       (2,186,281)
   Cash and cash equivalents ........................           48,520           825,560           679,302
   Total assets .....................................       33,137,546        75,082,173        38,614,567
   Notes payable ....................................       10,580,110        35,852,721        17,326,725
   Total liabilities ................................       10,796,439        36,651,061        17,997,289
   Minority interest ................................        5,218,999           782,440         5,057,606

   Shareholders' equity .............................       17,122,108        37,648,672        15,559,672

   Fully diluted class A common shares issued (3)....        2,384,117         5,301,916         2,384,117

   Treasury shares ..................................           11,373            90,322            19,310

Other data
   Cash flows provided by (used in):
                       Operating ....................        1,510,069           252,160           322,400
                       Investing ....................       (7,687,454)       (3,056,444)           63,991
                       Financing ....................        4,824,165         1,122,976            65,794

   Net increase (decrease) in cash and cash
   equivalents ......................................       (1,353,220)       (1,681,308)          452,185
   Funds from operations (1) ........................        1,436,063           680,140           309,159
   Adjusted funds from operations (2) ...............        1,436,063           680,140           309,159
   Book value per share .............................             7.18              7.10              6.53







(1)  AmREIT has  adopted the  National  Association  of Real Estate  Investment
     Trusts  (NAREIT)  definition  of  FFO.  FFO is  calculated  as net  income
     (computed in accordance  with generally  accepted  accounting  principles)
     excluding  gains or losses from sales of depreciable  operating  property,
     depreciation and amortization of real estate assets, and excluding results
     defined as  "extraordinary  items"  under  generally  accepted  accounting
     principles. FFO should not be considered an alternative to cash flows from
     operating,  investing and financing activities in accordance with general
     accepted accounting  principles and is not necessarily  indicative of cash
     available to meet cash needs.  AmREIT's  computation of FFO may difer from
     the  methodology  for  calculating FFO utilized by other equity REITs and,
     therefore,  may not be comparable to such other REITS.  FFO is not defined
     by generally accepted  accounting  principles and should not be considered
     an alternative to net income as an indication of AmREIT's performance,  or
     of cash flows as a measure of liquidity.  Please see the reconciliation of
     Net Income to FFO on page __.

(2)  Based on the adherence to the NAREIT  definition of FFO, we have not added
     back the $1.90  million  charge to earnings  in the third  quarter of 2002
     resulting  from  shares  issued to Mr.  Taylor  as  deferred  merger  cost
     stemming  from the sale of his  advisory  company  to AmREIT in June 1998.
     Adding this $1.90 million charge back to earnings would result in Adjusted
     FFO of $1.91 million.
(3)  Fully diluted class A common shares at December 31, 2002 include the class
     B common shares, which are convertible, at the option of the holder for no
     additional consideration,  into the class A common shares on a one-for-one
     basis.

                                      60






                                    AmREIT
                              Selected Historical
                       Combined Financial and Other Data




                                                            December 31,      December 31,       December 31,       December 31,
                                                                2002               2001               2000              1999
                                                                                                        
Operating Data
Revenues:
   Rental income and earned income from DFL ................$ 5,494,211       $  3,285,774       $  3,125,294       $ 3,649,818
   Interest income .........................................      4,206             10,555             31,630           199,448
   Service fee, other income, and gain and loss
   on sale of property......................................  2,691,260          2,650,113            793,268           754,059
                       Total revenues ......................  8,189,677          5,946,442          3,950,192         4,603,325

Expenses:
   General operating, administrative, legal and
   professional ............................................  4,134,134          2,956,061          1,688,799         1,290,433
   Reimbursements and fees to realted party.................        -                  -                  -                 -
   Interest ................................................  1,774,973          1,063,574          1,339,622         1,134,919
   Depreciation and amortization ...........................    666,307            464,308            453,906           494,797
   Merger related acquisition costs ........................       -                  -                  -             262,495
   Bad debts ...............................................        -                  -                  -             189,490
   Merger costs ............................................        -                  -                  -                 -
   Deferred merger costs....................................  1,904,370                -                  -                 -
   Potential acquisition costs .............................        -                  -              153,236           743,001
                       Total expense .......................  8,479,784          4,483,943          3,635,563         4,115,135

Income (loss) before federal income taxes and minority
interest in net income of consolidated joint ventures ......   (290,107)         1,462,499            314,629           488,190
Federal income tax expense .................................     60,656            144,420                -                 -
Minority interest in net income of consolidated joint
ventures ...................................................   (308,010)          (527,571)          (527,121)         (526,052)
Net income (loss) ..........................................   (658,773)      $    790,508       $   (212,492)      $   (37,862)

Basic earnings (loss) per share ............................$     (0.62)      $       0.34       $      (0.09)      $     (0.02)
Diluted earnings (loss) per share ..........................$     (0.62)      $       0.34       $      (0.09)      $     (0.02)
Distributions per share - class A ..........................$      0.34       $       0.26       $       0.10       $      0.55
Weighted average number of Series A common shares
outstanding ................................................  2,469,725          2,354,572          2,373,060         2,372,744
Weighted average number of common shares plus dilutive
potential common shares ....................................  2,469,725          2,354,572          2,373,060         2,372,744








                                                                                       Un-Audited
                                                             December 31,       March 31,       March 31,
                                                                 1998              2003           2002
                                                                                     
Operating Data
Revenues:
   Rental income and earned income from DFL ................$  2,741,757      $  1,831,460    $   897,922
   Interest income .........................................      98,692             1,839          1,014
   Service fee, other income, and gain and loss
   on sale of property......................................     187,577           308,933        853,204
                       Total revenues ......................   3,028,026         2,142,232      1,752,140

Expenses:
   General operating, administrative, legal and
   professional ............................................     562,110           943,863        973,488
   Reimbursements and fees to realted party.................      40,607               -              -
   Interest ................................................     402,707           551,441        253,648
   Depreciation and amortization ...........................     417,868           222,303        126,848
   Merger related acquisition costs ........................        -                 -              -
   Bad debts ...............................................         -                 -              -
   Merger costs ............................................   2,427,658               -              -
   Deferred merger costs....................................         -                 -              -
   Potential acquisition costs .............................     464,303               -              -
                       Total expense .......................   4,315,253         1,717,607      1,353,984

Income (loss) before federal income taxes and minority
interest in net income of consolidated joint ventures ......  (1,287,227)          424,625        398,156
Federal income tax expense .................................         -              73,000        (84,000)
Minority interest in net income of consolidated joint
ventures ...................................................    (518,559)          (39,788)      (131,845)
Net income (loss) ..........................................$ (1,805,786)     $    457,837    $   182,311

Basic earnings (loss) per share ............................$      (0.81)     $      0.002    $      0.08
Diluted earnings (loss) per share ..........................$      (0.81)     $      0.002    $      0.08
Distributions per share - class A ..........................$       0.71      $       0.11    $      0.07
Weighted average number of Series A common shares
outstanding ................................................   2,226,403         2,768,253      2,351,687
Weighted average number of common shares plus dilutive
potential common shares ....................................   2,226,403         2,768,253      2,351,687




                                      61






                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Certain   information    presented   in   this   prospectus    constitutes
forward-looking  statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934.  Although
the Company  believes that the expectations  reflected in such  forward-looking
statements are based upon reasonable assumptions,  the Company's actual results
could differ materially from those set forth in the forward-looking statements.
Certain  factors  that might cause such a  difference  include  the  following:
changes  in  general  economic  conditions,   changes  in  real  estate  market
conditions,  continued  availability  of proceeds  from the  Company's  debt or
equity capital,  the ability of the Company to locate suitable  tenants for its
properties and the ability of tenants to make payments  under their  respective
leases.


     The  following   discussion   should  be  read  in  conjunction  with  the
consolidated  financial statements and notes thereto contained in the Company's
Form 10-KSB for the fiscal year ended December 31, 2002 and Form 10-QSB for the
fiscal  quarter  ended  March 31,  2003,  and the of  selected  financial  data
appearing  elsewhere in this  prospectus.  Historical  results and trends which
might  appear  should  not be taken as  indicative  of future  operations.  The
results of operations and financial  condition of the Company,  as reflected in
the accompanying statements and related footnotes,  are subject to management's
evaluation and  interpretation of business  conditions,  retailer  performance,
changing  capital market  conditions and other factors,  which could affect the
ongoing  viability  of the  Company's  tenants.  Management  believes  the most
critical  accounting  policies  in this  regard  are the  accounting  for lease
revenues (including the straight-line  rent), the regular evaluation of whether
the  value of a real  estate  asset has been  impaired  and the  allowance  for
doubtful accounts.  Each of these issues requires  management to make judgments
that are subjective in nature.  Management  relies on its experience,  collects
historical  data and current  market data,  and analyzes  these  assumptions in
order to arrive at what it believes to be reasonable estimates.

     AmREIT,  a Texas real estate  investment  trust, is listed on the American
Stock Exchange (AMY), owns a portfolio of 47 properties, leased to 26 different
tenants located in 18 states, and is a pre-eminent sponsor of high quality real
estate  investment  opportunities  to the  financial  planning  community.  The
Company  researches,  identifies and participates in real estate  opportunities
and works hand in hand with the broker-dealer  community to sponsor real estate
investment products and services.

     For 18 years we have established a track record of investing in commercial
real estate  leased  primarily  to corporate  tenants in the retail,  financial
services and banking, medical and restaurant sectors. AmREIT's real estate team
focuses on  development,  management,  brokerage and ownership of  freestanding
credit tenant leased and frontage shopping centers that are located  contiguous
to major  thoroughfares and traffic  generators.  AmREIT's real estate customer
list includes national and regional tenants such as: Walgreen's, Goodyear Tire,
Washington Mutual,  IHOP,  McDonald's,  Herman Hospital,  Radio Shack,  Sprint,
Coldwell  Banker,  Guaranty  Federal,  Bennigan's,  Chili's,  Texas  Children's
Hospital, Discount Tire, etc.


Liquidity and Capital Resources

     Cash flow from operations has been the principal source of capital to fund
the Company's ongoing  operations.  The Company's  issuance of common stock and
the use of the Company's  credit  facility  have been the principal  sources of
capital to fund its growth.


     Net cash provided by operating  activities  decreased for the three months
ended March 31, 2003 when  compared to the three month  period  ended March 31,
2002 from  $322,400 in 2002 to $252,160 in 2003.  The decrease in cash provided



                                      62




by operating  activities was due primarily to the following  components:  (1) a
decrease  in  accounts  receivable  collections  of $150  thousand,  from  $188
thousand in 2002 to $38 thousand in 2003,  and (2) a decrease in collections of
accounts receivable - related party of $354 thousand,  from an increase of $298
thousand in 2002 to a decrease of $56 thousand in 2003. The above decreases are
offset  somewhat by (1) an increase in net income of $276  thousand,  from $182
thousand in 2002 to $458 thousand in 2003,  and (2) the increase in the paydown
of  accounts  payable  of $124  thousand,  from $672  thousand  in 2002 to $548
thousand in 2003.

     Net cash used in investing activities increased $3.1 million for the three
month period ended March 31, 2003 when compared to the three month period ended
March 31, 2002.  The increase in cash used was  primarily due to an increase in
acquisitions  of  real  estate  from  $0 in  2002  to  $2.7  million  in  2003.
Additionally,  $162 thousand was invested in joint  ventures in 2003,  where as
distributions from investments were $381 thousand in 2002.

     Net cash provided by financing  activities  increased $1.1 million for the
three month  period  ended March 31,  2003  compared to the three month  period
ended March 31, 2002.  The increase was  primarily  due to proceeds  from notes
payable, which totaled $2.4 million in 2003, compared to $370 thousand in 2002.
This  increase was  somewhat  offset by an increase in common  dividends  paid,
which was $760 thousand in 2003, compared to $162 thousand in 2002.



     Net cash provided by operating  activities increased from $1.64 million in
2001 to $3.73  million in 2002.  The  increase in cash  provided  by  operating
activities  was due primarily to the following  components:  (1) an increase in
deferred  merger  costs of $1.9  million in 2002,  compared to $0 in 2001.  The
deferred  merger costs  represent a charge to earnings taken for class A common
shares  issued to H. Kerr Taylor as deferred  consideration  as a result of the
sale of his  advisory  company  to  AmREIT  in June  1998.  The  merger  of the
Affiliated  Partnerships  triggered a payment under the deferred  consideration
agreement,  and  302,281  class A common  shares of AmREIT  were issued and the
charge taken to earnings,  which is the primary cause of the $659 thousand loss
in 2002,  (2) a decrease  in  accounts  receivable  from  during  2002 of $1.53
million  compared to an increase  in  accounts  receivable  during 2001 of $388
thousand,  and (3) an increase in  deferred  compensation  of $0 in 2001 to $48
thousand in 2002. The increase in deferred  compensation  was due to restricted
shares issued to employees and the board of trust managers as  compensation  in
2002.  The above changes are offset by the  operating  loss of $659 thousand in
2002  compared to an  operating  profit of $790  thousand in 2001.  The primary
cause  for the loss in 2002 is the $1.9  million  charge  to  earnings  for the
deferred acquisition costs.

     Net cash used in  investing  activities  increased  by $12.94  million  to
$15.27 million in 2002 when compared to 2001. The increase was primarily due to
an increase in property  acquisitions  of $15.51  million to $18.95  million in
2002.  This  increase is related to the purchase of seventeen  IHOP  properties
purchased during 2002 through a majority owned subsidiary. Eighty-three percent
of  the  $17.96  million  aggregate   purchase  price  was  financed  with  83%
non-recourse  debt.  This  increase  in net cash was  partially  offset  by the
proceeds  from the sale of the Office  Max  property  located in Lake  Jackson,
Texas,  which  increased  $1.17  million  from  $2.52  million in 2001 to $3.69
million in 2002.

     Net cash provided by financing activities increased $13.84 million in 2002
to $13.82 million in 2002 when compared to 2001. The increase was primarily due
to: (1) proceeds  from notes  payable,  which  totaled  $19.25  million in 2002
compared to $8.04 million in 2001, the proceeds of which were primarily used to
fund the  acquisition of the seventeen IHOP properties  purchased  during 2002,
(2) a decrease  in  payments of notes  payables  from $6.54  million in 2001 to
$3.40 million in 2002, and (3) an increase in dividends paid from $605 thousand
in 2001 to $1.73 million in 2002. The increase in dividends paid is a result of
a 28%  increase in the  dividends  per share paid to holders of class A shares,
the issuance of additional class A common shares, and the dividends paid on the
issuance of class B shares in July 2002 pursuant to the merger described below.


                                      63



     In order to continue to expand and develop its portfolio of properties and
other  investments,  the Company  intends to finance  future  acquisitions  and
growth through the most advantageous  sources of capital available at the time.
Such capital sources may include  proceeds from public or private  offerings of
the Company's debt or equity securities,  secured or unsecured  borrowings from
banks or other lenders,  acquisitions of the Company's  affiliated  entities or
other  unrelated   companies,   or  the  disposition  of  assets,  as  well  as
undistributed funds from operations.

     On July 23,  2002,  the Company  completed  a merger  with the  Affiliated
Partnerships, which increased the Company's real estate assets by approximately
$24.3 million.  Pursuant to the merger,  the Company issued  approximately  2.6
million  Class B  common  shares  to the  limited  partners  in the  Affiliated
Partnerships.   Approximately   $760  thousand  in  8  year,   interest   only,
subordinated   notes  were  issued  to  limited   partners  of  the  Affiliated
Partnerships  who dissented  against the merger.  The acquired  properties  are
unencumbered,  single tenant, free standing properties on lease to national and
regional  tenants,  where  the lease is the  direct  obligation  of the  parent
company. A deferred merger expense stemmed from stock issued to H. Kerr Taylor,
President and Chief Executive Officer, based on deferred consideration that was
approved by the  stockholders  in 1998 as a result of the sale of his  advisory
company to AmREIT.  Mr. Taylor was issued 302,281 Class A common shares,  which
resulted in a charge to earnings in the third quarter 2002.

     The Company's leases typically provide that the tenant bear responsibility
for  substantially  all  property  costs and expenses  associated  with ongoing
maintenance and operation,  including utilities,  property taxes and insurance.
In  addition,  the  Company's  leases  generally  provide  that the  tenant  be
responsible  for roof  and  structural  repairs.  Some of the  tenants'  leases
require the Company to be responsible for roof and structural repairs. In these
instances,  the Company normally requires warranties and/or guarantees from the
related vendors, suppliers and/or contractors,  to mitigate the potential costs
of  repairs  during  the  primary  terms  of the  leases.  Because  many of the
properties which are subject to leases that place these responsibilities on the
Company are recently constructed,  management  anticipates that capital demands
to meet  obligations  with respect to these  properties will be minimal for the
foreseeable  future  and can be met with  funds  from  operations  and  working
capital.  The Company may be required to use bank borrowing or other sources of
capital in the event of unforeseen significant capital expenditures.


     In November 1998, the Company  entered into an unsecured  credit  facility
(the  "Credit  Facility"),  which  is  being  used  to  provide  funds  for the
acquisition  of  properties  and  working  capital,   and  repaid  all  amounts
outstanding  under the  Company's  prior  credit  facility.  Under  the  Credit
Facility, which had an original term of one year, and has been extended through
April 2004,  the  Company may borrow up to $20 million  subject to the value of
unencumbered  assets.  The Company is working on a  modification  of the Credit
Facility,  and the  lender has agreed to extend the term by a period of fifteen
months under  comparable  terms and conditions.  The Credit  Facility  contains
covenants which,  among other  restrictions,  require the Company to maintain a
minimum net worth, a maximum  leverage ratio, and specified  interest  coverage
and fixed  charge  coverage  ratios.  At March 31,  2003,  the  Company  was in
compliance with all financial covenants.  The Credit Facility bears interest at
an annual rate of LIBOR plus a spread of 2.00%,  which resulted in an effective
interest rate of 3.30% at March 31, 2003.  As of March 31, 2003,  $14.1 million
was outstanding under the Credit Facility.  The Company has approximately  $5.9
million  availability  under its line of  credit,  subject  to use of  proceeds
approval by the lender.

     As of March 31, 2003, the Company owned 47 properties directly and through
a majority controlled  subsidiary and, since its inception,  had invested $73.7
million,  exclusive of any minority  interests,  including certain  acquisition
expenses  related  to the  Company's  investment  in  these  properties.  These
expenditures resulted in a corresponding decrease in the Company's liquidity.


                                      64





     Until properties are acquired by the Company, the Company's funds are held
in short-term,  highly liquid  investments  which the Company  believes to have
appropriate  safety of principal.  This  investment  strategy has allowed,  and
continues to allow,  high  liquidity to  facilitate  the Company's use of these
funds to acquire properties at such time as properties suitable for acquisition
are located. At March 31, 2003, the Company's cash and cash equivalents totaled
$826 thousand.

     The Company paid  aggregate  cash  dividends to the holders of its class A
and class B common shares, as applicable,  during 2002 and 2001, distributing a
total of $1.73 million and $605  thousand,  respectively,  for each such fiscal
year.  For the three months ended March 31, 2003 and 2002, the Company paid
aggregate cash dividends to the holders of its class A and class B common
shares of $760 thousand and $162 thousand, respectively.


     Inflation has had very little effect on income from operations. Management
expects  that  increases  in store sales  volumes due to  inflation  as well as
increases in the Consumer Price Index,  may contribute to capital  appreciation
of the Company  properties.  These factors,  however,  also may have an adverse
impact on the operating margins of the tenants of the properties.

FUNDS FROM OPERATIONS


     Funds from operations (FFO) decreased $973 thousand to $6 thousand in 2002
from $979  thousand in 2001.  The decrease in FFO is primarily due to the $1.90
million  charge to earnings in the third  quarter 2002  resulting  from 302,281
class A common shares issued to Mr.  Taylor,  resulting  from the merger of the
Affiliated  Partnerships.  FFO increased $376 thousand or 127% to $672 thousand
for the three  months  ended  March 31, 2003 from $296  thousand  for the three
months  ended March 31, 2002.  Management  considers  FFO to be an  appropriate
measure of  performance of an equity REIT. The Company has adopted the National
Association of Real Estate Investment  Trust's (NAREIT)  definition of FFO. FFO
is calculated as net income  (computed in accordance  with  generally  accepted
accounting  principles)  excluding  gains or losses  from sales of  depreciable
operating  property,  depreciation and amortization of real estate assets,  and
excluding  results defined as  "extraordinary  items" under generally  accepted
accounting  principles ("GAAP"). We believe that in order to facilitate a clear
understanding  of our  historic  operating  results,  FFO should be examined in
conjunction  with net income as  presented  in the  consolidated  statement  of
operations and data included  elsewhere in this  prospectus.  FFO should not be
considered an alternative to cash flows from operating, investing and financing
activities in accordance with generally accepted  accounting  principles and is
not necessarily  indicative of cash available to meet cash needs. The Company's
computation of FFO may differ from the methodology for calculating FFO utilized
by other equity  REIT's and,  therefore,  may not be  comparable  to such other
REIT's.  FFO is not defined by GAAP and should not be considered an alternative
to net income as an indication of the Company's performance.



                                      65





     Below is the  reconciliation of net income,  which the Company believes is
the most comparable GAAP financial measure, to FFO in thousands:




                                                                                      2002                           2001
                                                                                ----------------              ------------------
                                                                                                        
Net (loss) income                                                                       $   (659)                        $   791
Plus depreciation of real estate assets                                                      617                             442
Less loss (gain) on sale of real estate assets                                                48                            (254)
                                                                               -----------------              ------------------
Total Funds From Operations  *                                                          $      6                         $   979


Cash dividends paid                                                                     $  1,730                         $   605
Dividends in excess of (less than) FFO *                                                $  1,724                         $  (374)




* Based on the adherence to the NAREIT definition of FFO, we have not added
back the $1.90 million charge to earnings in the third quarter 2002 resulting
from shares issued to Mr.Taylor.  Adding this $1.90 million charge to earnings
back to earnings would result in $1.90 million adjusted funds from operations,
and dividends paid less than adjusted FFO of $170 thousand.



     Below is the reconciliation of net income to funds from operations for the
three months ended March 31:



                                                           2003                        2002
                                                                              


Net income                                              $ 457,837                   $ 182,311
Plus depreciation and amortization                        214,245                     113,365
                                                        ---------                   ---------
Total funds from operations                             $ 672,082                   $ 295,676

Cash distributions paid                                 $ 759,622                   $ 161,540
Distributions less (more)  than FFO                     $ (87,540)                  $ 134,136





     Cash flows from operating activities,  investing activities, and financing
activities are presented below in thousands:




                                                                  2002                       2001
                                                                 -------                    -------
                                                                                      
Operating activities                                             $ 3,729                    $ 1,642
Investing activities                                             (15,268)                    (2,333)
Financing activities                                              13,819                        (18)




     Cash flows from operating activities,  investing activities, and financing
activities for the three months ended March 31 are presented below:







                                                                  2003                        2002
                                                                 ----------                 ---------
                                                                                      
Operating activities                                             $  252,160                 $ 322,400
Investing activities                                             (3,056,444)                   63,991
Financing activities                                              1,122,976                    65,794





RESULTS OF OPERATIONS



     COMPARISON  OF THE THREE  MONTHS  ENDED MARCH 31, 2003 TO MARCH 21,  2002.
During the three months  ended March 31, 2003 and March 31,  2002,  the Company
earned $1.8  million and $898  thousand,  respectively,  in rental  income from
operating leases and earned income from direct financing leases. The additional
properties purchased by the Company, as well as the properties acquired through
the merger of three affiliated partnerships, resulted in the increased income



                                      66




from rents and earned income from direct financing leases. Service fees and
other income decreased $269 thousand, from $480 thousand in 2002 to $211
thousand in 2003. The decrease in service fees and other income was primarily
due to a decrease in advisory fees, which decreased because the affiliated
partnerships involved in the merger paid advisory fees to AmREIT during the
first quarter of 2002. After the merger, the affiliated partnerships stopped
paying advisory fees to AmREIT.

     During the three  months  ended  March 31,  2003 and March 31,  2002,  the
Company's  expenses were $1.7 million and $1.4 million  respectively.  The $364
thousand  increase in expenses is primarily  attributable to interest  expense,
which  increased $297 thousand,  from $254 thousand in 2002 to $551 thousand in
2003.  The  increase  in  interest  expense is due to  additional  debt used to
finance the acquisition of additional  properties.  Additionally,  depreciation
and amortization increased by $95 thousand,  from $127 thousand in 2002 to $222
thousand in 2003.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2002 AND 2001


     As of December 31, 2002 and 2001,  the Company  owned and leased 46 and 19
properties,  respectively.  During the years ended  December 31, 2002 and 2001,
the Company had revenues of: (1) $5.49 million and $3.29 million, respectively,
in rental income from operating  leases and earned income from direct financing
leases, (2) $2.04 million and $2.03 million,  respectively,  in service fee and
other income, (3) $280 thousand and $342 thousand,  respectively, in management
fee income,  (4) $417 thousand and $20 thousand,  respectively,  in income from
non-consolidated   affiliates   and  (5)  $(48)  thousand  and  $254  thousand,
respectively, in (loss) gain on sale of property.

     The increase in gross revenue is primarily attributed to the merger of the
Affiliated  Partnerships  in  July  2002  and  the  acquisition  of the 17 IHOP
properties  during 2002,  which generated  increases in both rental income from
operating leases and earned income from direct financing leases.


     The Company  sold an  OfficeMax in Lake  Jackson,  Texas during 2002.  The
Company  recorded  a loss on the  sale of this  property  primarily  due to the
write-off of accrued rental income.

     The decrease in  management  fee income is primarily  due to the merger of
the  Affiliated  Partnerships  in July 2002,  which  resulted  in a decrease in
management   fees  that  had   historically   been  paid  from  the  Affiliated
Partnerships.  The  increase  in income  from  non-consolidated  affiliates  is
primarily  due to  Company's  interest  in AmREIT  Opportunity  Fund and AmREIT
Income & Growth Fund. The Company is the general partner of AmREIT  Opportunity
Fund and AmREIT Income & Growth Fund,  and receives a profit  interest in these
funds as certain investment  objectives and returns are met for the third party
limited partners.

     Service fees and other income  increased  based  on:(1)  additional  asset
management and advisory fee income and commissions  generated by an increase in
capital raised through the Company's direct participation  investment funds and
(2) income earned in our non-consolidated affiliates, which are a result of the
Company's  general partner  interest's in its direct  participation  investment
funds.

     General and  administrative  costs were $2.80  million in 2002 compared to
$1.95  million in 2001.  The  increased  general and  administrative  costs are
primarily related to: (1) property costs incurred due to a vacancy and required
maintenance at Copper Plaza, and (2) increase in the number of employees during
2002 as we  built  the  management  and  facilitation  teams,  resulting  in an
increase in personnel and benefit costs.


                                      67




     Legal and professional  fees increased from $1.00 million in 2001 to $1.33
million in 2002. The primary increase was an increase in commission  expense to
third party broker dealers as a result of an increase in capital raised through
the Company's direct participation investment funds and an increase in transfer
agent  costs due to the  issuance  of 2.6  million  class B common  shares as a
result of the merger of the Affiliated Partnerships.

     Interest  expense was $1.77  million in 2002  compared to $1.06 million in
2001. The increase in interest  expense is due to the  acquisition of seventeen
IHOP properties, which were purchased utilizing approximately $14.76 million in
non-recourse debt with an average interest rate of 7.85%.  Included in interest
expense is $131 thousand and $8 thousand,  respectively  for 2002 and 2001, for
amortized loan acquisition costs.


                       INVESTMENT OBJECTIVES AND CRITERIA

AMREIT'S INVESTMENT POLICIES

     AmREIT's  investment  policies  have  been  adopted  by its board of trust
managers and set forth the policies and  restrictions  pursuant to which AmREIT
conducts its  affairs.  The board of trust  managers may change any  investment
policy  without the approval of  shareholders.  Set forth below is a summary of
AmREIT's investment policies.

     INVESTMENTS IN PROPERTIES. AmREIT will:

     o    invest only in interests in (including mortgage loan interests
          secured by) income-producing, undeveloped, development stage and
          improved real estate properties using borrowed capital only where
          prudent as determined by the board;

     o    not invest more than 10% of its total assets in unimproved real
          property or mortgage loans on unimproved real property;


     o    not  acquire  properties  leased,  or to be  leased,  to  one  tenant
          generating  annual rental  income in excess of 15% of AmREIT's  total
          annual  rental  income,  without  the prior  approval of our board of
          trust managers;


     o    not engage in the purchase and sale of investments, other than real
          property interests which satisfy AmREIT's investment objectives or
          for the purpose of investing on a short-term basis reserves and funds
          available for the purchase of properties; and

     o    pay consideration for a property which is based on its fair market
          value as determined by a majority of the trust managers. In cases
          where the majority of the independent trust managers determine, and
          in all acquisitions from interested persons, such fair market value
          shall be determined by an independent expert selected by the
          independent trust managers.

     POLICY RESTRICTIONS.   AmREIT will not:

     o    invest more than ten percent (10%) of its total assets in second
          mortgages, excluding wrap-around type second mortgage loans;


     o    make or invest in mortgage loans, including construction loans, on
          any one property if the aggregate amount of all mortgage loans
          outstanding on the property, including AmREIT's loan(s), would exceed
          an amount equal to eighty-five percent (85%) of the appraised value
          of the property as determined by appraisal unless substantial


                                      68




          justification exists because of the presence of other underwriting
          criteria. For purposes of this subsection, the "aggregate amount of
          all mortgage loans outstanding on the property" shall include all
          interest (excluding contingent participation in income and/or
          appreciation in value of the mortgaged property), the current payment
          of which may be deferred pursuant to the terms of such loans, to the
          extent that deferred interest on each loan exceeds five percent (5%)
          per annum of the principal balance of the loan;

     o    make or invest in any  mortgage  loans  that are  subordinate  to any
          mortgage or equity interest of any affiliate of AmREIT;

     o    invest in any mortgage loans that are subordinate to any liens or
          other indebtedness on a property if the effect of such mortgage loans
          would be to cause the aggregate value of all such subordinated
          indebtedness to exceed twenty-five percent (25%) of AmREIT's tangible
          assets;

     o    invest in equity securities of other issuers unless a majority of the
          trust managers, including a majority of the independent trust
          managers, not otherwise interested in the transaction approve the
          transaction as being fair, competitive and commercially reasonable;

     o    invest in the equity securities of any non-governmental issue,
          including other real estate investment trusts or limited partnerships
          for a period in excess of eighteen (18) months, unless approved by a
          majority of the trust managers, including a majority of the
          independent trust managers;

     o    engage in underwriting or the agency distribution of securities
          issued by others;

     o    invest in commodities or commodity futures contracts, other than
          solely for hedging purposes;

     o    engage in short sales of securities or trading, as distinguished from
          investment activities;

     o    invest in real estate contracts of sale, otherwise known as land sale
          contracts, unless such contracts are in recordable form and
          appropriately recorded in the chain of title;

     o    issue equity securities which are redeemable at the election of the
          holder of such securities;

     o    issue debt securities unless the historical debt service coverage (in
          the most recently completed fiscal year) as adjusted for known
          changes is sufficient to properly service that higher level of debt;

     o    issue warrants, options or similar evidences of a right to buy its
          securities, unless issued to all of its security holders ratably,

     o    issued as part of a financing arrangement; or

     o    issue shares on a deferred payment basis or other similar
          arrangement.

     RESTRICTIONS ON LEVERAGE.  AmREIT  may not  borrow  funds  in  order  to
distribute   the   proceeds   to   the    shareholders   and   thereby   offset
under-performance  by the  properties,  unless it is required to do so for REIT
qualification purposes.


                                      69




     The trust managers must review AmREIT's  borrowings at least quarterly for
reasonableness in relation to its net assets. AmREIT may not incur indebtedness
if, after giving  effect to the  incurrence  thereof,  aggregate  indebtedness,
secured and unsecured,  would exceed fifty-five percent (55%) of its net assets
on a  consolidated  basis.  For this  purpose,  the term "net assets" means the
value of our total assets  (less  intangibles)  based on market  capitalization
rates and current  year  rental  income,  as  determined  by our board,  before
deducting depreciation or other non-cash reserves,  less total liabilities,  as
calculated at the end of each quarter on a basis consistently applied.

     TRANSACTIONS WITH AFFILIATES.  AmREIT is self-managed and does not have an
external  advisor.  AmREIT's  dealings with and its officers,  trust  managers,
sponsors and any advisor are subject to the following restrictions:


     SALES TO INTERESTED PERSONS. An advisor,  officer or trust manager may not
acquire  assets from AmREIT except as approved by a majority of trust  managers
(including a majority of independent trust managers),  not otherwise interested
in such transaction, as being fair and reasonable to AmREIT.

     ACQUISITIONS FROM INTERESTED PERSONS.  Any  transaction  with  a  trust
manager,  officer or affiliate that involves the acquisition of a property from
an interested  person must be approved by a majority of the  independent  trust
managers as being fair and reasonable to AmREIT and at a price not greater than
the cost of the  property  to such  seller,  or if at a greater  price  only if
substantial  justification  exists  and such  excess is  reasonable  and not in
excess of the properties' current appraised value.

         LEASES TO INTERESTED PERSONS. AmREIT may lease assets to an advisor,
or a trust manager only if such transaction is approved by a majority of trust
managers  (including  a  majority  of  independent  directors),   not  otherwise
interested in such transaction, as being fair and reasonable to AmREIT.

     LOANS FROM INTERESTED PERSONS. AmREIT may not borrow money from an advisor
or a trust  manager  unless a  majority  of the  trust  managers,  including  a
majority  of the  independent  directors,  not  otherwise  interested  in  such
transaction   approve  the   transaction  as  being  fair,   competitive,   and
commercially  reasonable  and no less  favorable  to AmREIT than loans  between
unaffiliated parties under the same circumstances.

     LOANS TO INTERESTED PERSONS.  AmREIT may not make or invest in loans to a
sponsor, advisor or trust manager, which includes any affiliate thereof, except
for mortgage loans for the  construction  of  improvements  on properties to be
acquired  by AmREIT  that are under  lease or binding  contract to be leased to
qualifying  tenants and those loans  insured or  guaranteed  by a government or
government  agency  or  unless  an  appraisal  is  obtained  on the  underlying
property.  An  appraisal  of the  underlying  property  shall  be  obtained  in
connection with any loan to an advisor, trust manager or their affiliate.

     OTHER TRANSACTIONS WITH INTERESTED PERSONS. All other transactions between
AmREIT and the sponsor, advisor, or a trust manager shall require approval by a
majority of the trust managers  (including a majority of the independent  trust
managers)  not  otherwise  interested  in such  transactions  as being fair and
reasonable to AmREIT and on terms and  conditions  not less favorable to AmREIT
than those available from unaffiliated third parties.

     JOINT VENTURE IMPROVEMENTS.  AmREIT may enter into  joint  ventures  with
unaffiliated  third  parties.  AmREIT  may also  invest  jointly  with  another
publicly-registered  entity  sponsored by a sponsor,  advisor or trust  manager
that  has  investment   objectives  and  management   compensation   provisions
substantially  identical  to  those of  AmREIT,  provided  that  the  following
conditions must be satisfied:



                                      70




     o    the joint venture must have approval of a majority of the trust
          managers, including a majority of the independent trust managers;

     o    the joint venture must have investment objectives comparable to
          AmREIT;

     o    the investment by each party to the joint venture must be on
          substantially the same terms and conditions; provided, however,
          AmREIT shall own more than fifty percent (50%) of any joint venture
          between it and its sponsor or affiliate;

     o    in making any such joint venture investment, AmREIT may not pay more
          than once, directly or indirectly, for the same services and may not
          act indirectly through any such joint venture if AmREIT would be
          prohibited from doing so directly because of restrictions contained
          in the bylaws; and

     o    in the event of a proposed sale of the property initiated by the
          other joint venture partner, AmREIT must have a right of first
          refusal to purchase the other party's interest.


     REAL ESTATE COMMISSIONS ON RESALE OF PROPERTY.  If an advisor,  officer or
trust manager  provides a  substantial  amount of the services in the effort to
sell an AmREIT  property,  that such  person may  receive up to one-half of the
brokerage  commission  paid but in no event to exceed an amount  equal to 3% of
the contract price for the property. In addition, the amount paid when added to
the sums paid to  unaffiliated  parties in such a capacity shall not exceed the
lesser of the  Competitive  Real Estate  Commission or an amount equal to 6% of
the contract price for the property.  The Competitive Real Estate Commission is
the real  estate or  brokerage  commission  paid for the  purchase or sale of a
property which is reasonable,  customary and  competitive in light of the size,
type and location of such property. The "contract price" is the amount actually
paid or allocated to the purchase,  development, or construction or improvement
of a property exclusive of the acquisition fees and acquisition expenses.


     ACQUISITION FEES AND ACQUISITION EXPENSES.  AmREIT may not pay acquisition
fees and acquisition expenses which are unreasonable.  The total amount of such
fees may not exceed 6% of the contract price of the property, or in the case of
a mortgage loan, 6% of the funds  advanced.  Notwithstanding  the foregoing,  a
majority of the trust managers,  including a majority of the independent  trust
managers,  not  otherwise  interested  in the  transaction  may approve fees in
excess of these limits if they  determine the  transaction  to be  commercially
competitive, fair and reasonable to AmREIT.

AMREIT'S OPERATING STRATEGY


     AmREIT's  policies  with  respect to the  following  activities  have been
determined by our board of trust managers  within the  restrictions of AmREIT's
stated  investment  policies and, in general,  may be amended or revised,  from
time to time,  subject  to the stated  objectives  and  policies,  by the board
without a vote of the shareholders.


     Real  Estate  Strategy.   Over  the  years,   AmREIT  has  emphasized  the
development,  ownership and sale of  commercial  frontage  properties  that are
located on prime  tracts of land,  which will  maximize the total return to its
shareholders,  consisting of both dividends paid and  appreciation  in value of
the shares.  These  properties  are often  adjacent to major regional malls and
other high traffic  generators and are either single tenant  projects leased to
national  and/or  regional  companies  or strip  centers  leased  to  national,
regional and local tenants. These properties are usually smaller in size (2,500
to 50,000  sq.  ft.) and have a large,  stable  and deep pool of  investors  as
buyers for this type of real estate.  In  particular,  tax concerned  investors
("1031  investors"),  wealthy  family estates and  professional  investors find
these types of properties valuable. Therefore, the marketability of this type


                                      71




of property is usually appealing.  For these reasons,  management believes that
AmREIT's niche of frontage  commercial  credit is among the most liquid type of
real  estate.  AmREIT  intends to  continue  to focus on  acquiring  commercial
frontage  properties,  believing  that this  sector  is  capable  of  providing
appealing  returns at more  attractive  risk levels  than other  sectors of the
retail/commercial  real estate market. In pursuing its growth strategy,  AmREIT
intends to utilize  research-driven  investment analysis,  disciplined buy/sell
decisions and up-to-date  operating  systems.  AmREIT's  business has, however,
expanded  beyond  being  solely  dependent  on the income  produced by its real
estate  portfolio  to include the real  estate  operating  and capital  raising
operations of its  wholly-owned  taxable REIT  subsidiaries.  See "Business and
Properties on page ___.  Today,  AmREIT's lines of business are expanding,  its
core portfolio is improved and more  diversified,  and AmREIT has the best team
of people in its history.  AmREIT's  real estate  strategy  will focus on major
markets,  with the goal of  achieving a  significant  presence in major  retail
corridor markets of targeted cities.  These new operations  provide AmREIT with
additional  funds to pay  distributions to its shareholders and increased asset
value through its ownership of the equity securities of these subsidiaries.


     Management   believes  that  AmREIT's  focus  on  upgrading  its  property
portfolio and its continued  emphasis on commercial  frontage  properties which
are often adjacent to major  regional  malls or other high traffic  generators,
coupled with  increasing the size of the portfolio  through the  acquisition of
the properties  through the merger with certain of its affiliated  partnerships
and of the financing  opportunities  provided by these new  properties,  should
allow  AmREIT  to  increase  revenue   distributable  to  shareholders  in  the
short-term.  The revenue  growth  strategy is  enhanced by the  possibility  of
increased  long-term  value  arising  from the  operating  success of  AmREIT's
subsidiaries.  Management  believes that AmREIT's  structure allows it to be an
entrepreneurial  real estate company,  with income  producing assets to provide
attractive  returns to shareholders plus revenue producing  subsidiaries  which
can both support  AmREIT's  distributions  and produce cash flow for  continued
growth.

     INVESTMENT STRATEGY.   AmREIT  will  continue  to  invest  in  existing,
newly-developed,  development stage or undeveloped retail properties subject to
leases under which the tenant is responsible for all operating costs (i.e., the
tenant pays non-capital  costs associated with operating the leased  premises),
frequently referred to as a net lease. AmREIT will continue to seek to lease to
single tenant and multiple  tenant  properties.  AmREIT  intends to continue to
concentrate  its  investments  in the  Southwest,  but may invest in properties
anywhere in the continental United States.

     In determining whether a property is a suitable for investment, management
considers the following factors, among others:

     o    the safety of the investment;

     o    the location, condition, use and design of the property and its
          suitability for a long-term net lease or a lease that otherwise
          limits the amount of expenses to be incurred by AmREIT;

     o    the cash flow expected to be generated by the property;

     o    the terms of the proposed lease (including, specifically, provisions
          relating to rent increases or percentage rent and provisions relating
          to passing on operating expenses to tenants);

     o    the creditworthiness of the lessee (based on the lessee's most recent
          audited financial statement or other similar evidence establishing
          net worth) and the cash flow expected to be generated by the
          property;


                                      72




     o    the prospects for long-term appreciation of the property;

     o    the prospects for long-range liquidity of the investment; and

     o    the stability and potential growth of the community.


     AmREIT  invests in properties  which are either under current lease or are
to  be  leased  upon  completion  of  development  to a  national  or  regional
corporation. However, in circumstances deemed appropriate, leases may be with a
sole proprietor or franchisee operating the businesses on the property.  AmREIT
has no  minimum  financial  requirements  for  its  tenants,  which  will  vary
depending on  individual  circumstances  of the  property  and the lease.  With
respect to the credit of a prospective tenant, AmREIT will evaluate the party's
creditworthiness in terms of its most recent audited financial statements,  its
general credit history, any trends exhibited by its credit rating,  appropriate
references,  if available,  the type of business in which it engages,  the size
and scope of its business,  the length of its operating history, the background
and experience of its management and similar types of factors.

     Management   also   considers  a  property's   prospects   for   long-term
appreciation  and the prospects  for  long-range  liquidity of the  investment.
Other  considerations  of AmREIT  affecting  appreciation of the properties and
liquidity of the investment  include:  inclusion of lease clauses providing for
increased rents based on a tenant's increased revenues, lease clauses providing
for  periodic  inflation  adjustments  to the base  rent,  minimizing  deferred
maintenance  by  prompt  attention  to  repair  and  replacement  needs  at the
properties and by including common area maintenance clauses in the leases.

     AmREIT's  procedures  with respect to  environmental  due diligence are to
require, prior to the purchase of a property,  that all conditions imposed by a
lender  loaning funds toward the  acquisition  of the property,  if applicable,
have been satisfied and that all conditions  imposed by the title insurer which
exclude coverage due to environmental  conditions are either removed, waived or
found acceptable by a majority of AmREIT's trust managers. Where neither lender
nor  title  insurer   conditions  raise  issues  regarding   environmental  due
diligence,  AmREIT may nevertheless require certain protective  representations
from the seller of a property, including a satisfactory phase one environmental
study of the property site.

     AmREIT competes for both investment opportunities and the operation of its
properties  with other real  estate  investors  (both  domestic  and  foreign),
including other real estate  investment trusts and limited  partnerships  which
have investment  objectives  similar to those of AmREIT and which are likely to
have resources greater than those of AmREIT.  Management  continually  monitors
the real  estate  market  in order to  identify  potential  desirable  property
acquisitions and advantageous disposition opportunities for its properties.

     AmREIT plans to explore  possible  acquisitions  of properties in whole or
partial  exchange  for its equity  securities.  AmREIT has  authority  to issue
additional  shares or other securities in exchange for property and other valid
consideration, and to repurchase or otherwise reacquire its shares or any other
securities  and may  engage  in  such  activities  in the  future.  AmREIT  has
authorized preferred shares, but has not issued such senior securities.


         LINE OF BUSINESS STRATEGY. AmREIT has two primary areas of business
beyond its portfolio: an operating company and its affiliates (ARIC)
and its capital formation subsidiaries  (investment sponsorship business).  ARIC
is  contributing  strongly  to  AmREIT's  profitability  through  brokerage  and
development fee income.  AmREIT's commercial brokerage activity allows it to buy
and sell  properties,  thereby creating  potential fee income for  shareholders.
This line of business  carries little overhead burden and has proven  profitable
from the  beginning.  During the past year,  AmREIT was  successful in selling a



                                      73



number of projects to investors  across the United  States.  AmREIT's  facility
development  division  provides  comprehensive   development  and  construction
services  from site  selection  and  design  through  building  completion  for
creditworthy tenants across the nation. These tenants include retail,  banking,
medical and other  diversified  types of  business.  Not only does this area of
expertise allow AmREIT to generate third party fee income,  but also respond to
its own portfolio  needs when the situation  calls for it. AmREIT's second line
of business, its sponsorship activity,  continues to grow and gain traction. By
sponsoring  investment funds through the NASD financial broker dealers,  AmREIT
is able to: (1) better  match its capital  with its real estate  pipeline,  (2)
generate fee income from the real estate  activities and asset  management fees
that  benefit  the AmREIT  shareholders,  and 3)  participate,  as the  general
partner of these investment  funds, in the "back end" or "carried  interest" in
these funds.

     As a sponsor of real estate investment opportunities to the NASD financial
planning broker dealer  community,  the Company  maintains a 1% general partner
interest in the  investment  funds that it  sponsors.  The funds are  typically
structured  such that the limited  partners  receive 99% of the available  cash
flow until 100% of their  original  invested  capital has been  returned  and a
preferred return has been met. Once this has happened, then the general partner
begins  sharing in the  available  cash flow at various  promoted  levels.  The
Company  also  assigns a portion  of this  general  partner  interest  in these
investment  funds to management as long term,  contingent  compensation.  In so
doing,  the Company believes that it will align the interest of management with
that of the  shareholders,  while at the same time  allowing for a  competitive
compensation  structure in order to attract and retain key management positions
without increasing the overhead burden.

     MANAGEMENT OF PROPERTIES.   AmREIT   internally   manages  each  of  its
properties.  Such management  includes providing leasing services in connection
with  identifying  and  qualifying   prospective  tenants,   assisting  in  the
negotiation  of the leases,  providing  statements as to the income and expense
applicable to each property,  receiving and depositing  monthly lease payments,
periodic  verification  of tenant  payment of real estate  taxes and  insurance
coverage,  and periodic  inspection  of properties  and tenants'  sales records
where applicable. AmREIT pays no property management fees or advisory fees. The
tenants will be  responsible,  at their expense,  for day-to-day  oversight and
maintenance of the properties.

     AmREIT acquires  marketable title to each of its properties,  subject only
to such liens and  encumbrances  as are acceptable to  management.  Evidence of
title includes a policy of title insurance, an opinion of counsel or such other
evidence as is customary in the locality in which the property is situated.

     DEVELOPMENT OF PROPERTIES.  AmREIT intends to continue to increase its own
development of properties. Under AmREIT's investment policies not more than 10%
of AmREIT's total assets may be invested in unimproved real property and AmREIT
does not intend to exceed such  percentage.  Depending upon the  circumstances,
improvements will be developed and/or constructed either through joint ventures
with  third  party  development   companies  from  whom  AmREIT  purchases  the
properties,  by  the  tenants  to  whom  such  properties  are  leased,  or  by
development companies other than the sellers of the properties. AmREIT finances
the construction or completion of improvements on particular properties through
borrowing  under its current  credit  facilities,  which it intends to increase
should the merger be consummated.

     To the extent AmREIT  acquires  property on which  improvements  are to be
constructed  or  completed,  AmREIT is subject to risk in  connection  with the
builder's ability to control  construction costs or to build in conformity with
plans,  specifications and timetables and to make the property available to the
lessee  within the time  projected.  Performance  may be affected or delayed by
conditions  beyond  the  builder's  control  such  as  building   restrictions,
clearances and  environmental  impact studies imposed or caused by governmental


                                      74




bodies,  labor  strikes,  adverse  weather,  unavailability  of materials or of
skilled  labor,  and  by  the  financial  insolvency  of  the  builder  or  any
subcontractors prior to completion of construction.  Such factors can result in
increased  costs of a project,  corresponding  depletion  of AmREIT's  offering
proceeds,  working  capital  reserves  and/or  cash from  operations  and could
possibly result in the loss of permanent  mortgage loan commitments relied upon
as a primary source for repayment of construction loans.

     AmREIT may use one or more of the following  techniques to reduce the risk
of any  non-performance  by the builder and to assure  compliance with approved
plans and specifications:

     o    a labor and material bond, a completion bond or a performance bond,
          or more than one of the foregoing, may be required;

     o    if in management's opinion, the financial position of the builder so
          requires, a personal guaranty or pledge of other assets may be
          accepted in lieu of, or required in addition to, a bond;

     o    in some cases, the builder of the property will be required to
          leaseback the property from AmREIT until construction is completed
          with lease payments designed to return to AmREIT a portion of its
          funds paid to the builder during construction and to require the
          builder to bear the risk of construction;

     o    where possible, AmREIT will purchase property subject to the
          construction loan and management will endeavor not to have AmREIT be
          liable on such loan; and

     o    depending on the financial condition of the builder, the contract may
          provide that portions of the purchase price payments to the former
          owners will be withheld until a notice of completion of construction
          is obtained.

     PROPERTY SALE AND DISPOSITION STRATEGY.  AmREIT  intends  to sell  some
properties over time. The determination of whether a particular property should
be  sold  or  otherwise  disposed  of  will  be  made  after  consideration  of
performance of the property and market  conditions and will depend, in part, on
the  economic  benefits of  continued  ownership.  In deciding  whether to sell
properties,   management  will  consider  factors  such  as  potential  capital
appreciation,  cash flow and federal  income tax  consequences.  Affiliates  of
AmREIT or of one or more of its  trust  managers  may be  selected  to  perform
various substantial real estate brokerage functions in connection with the sale
of  properties  by AmREIT.  AmREIT  will not sell or lease any  property to its
trust managers or their affiliates.

     Management  will  periodically   review  the  assets  comprising  AmREIT's
portfolio.  AmREIT has no current intention to dispose of any of its properties
or other  properties  acquired in the merger with its affiliated  partnerships,
unless the sale of properties is necessary or appropriate  because of liquidity
problems.  AmREIT reserves the right to dispose of any of the properties or any
property  that may be  acquired in the future if the trust  managers,  based in
part upon  management's  periodic  reviews,  determines that the disposition of
such property is in the best interests of AmREIT.


     Any net proceeds from the sale of any property may, at the election of our
board of trust managers,  based upon their then current  evaluation of the real
estate market  conditions,  either be  distributed  to the  shareholders  or be
reinvested in other  properties.  A reinvestment in other  properties  would be
feasible  only if it could be  accomplished  so that the  status of AmREIT as a
REIT would not be adversely affected. Any properties in which net proceeds from
a sale are  reinvested  will be subject to the same  acquisition  guidelines as
properties initially acquired by AmREIT. See "Business and Properties."



                                       75




     In connection with the sale of a property owned by AmREIT,  purchase money
obligations secured by mortgages may be taken as partial payment.  The terms of
payment to AmREIT will be affected by custom in the area in which the  property
being sold is  located  and the then  prevailing  economic  conditions.  To the
extent  AmREIT  receives  notes and  property  other  than cash on sales,  such
proceeds  will not be included in net  proceeds of sale until and to the extent
the  notes or other  property  are  actually  collected,  sold,  refinanced  or
otherwise liquidated. Therefore, dividends to shareholders of the proceeds of a
sale may be  delayed  until  the  notes  or other  property  are  collected  at
maturity,  sold,  refinanced or otherwise converted to cash. AmREIT may receive
payments  (cash and other  property) in the year of sale in an amount less than
the full sales price and subsequent  payments may be spread over several years.
The entire  balance of the principal may be a balloon  payment due at maturity.
For federal income tax purposes,  unless AmREIT elects otherwise it will report
the gain on such sale  ratably as principal  payments  are  received  under the
installment method of accounting.

     BORROWING POLICIES.  AmREIT  may elect to  borrow  funds in order to take
advantage of particular acquisition opportunities,  cover the cost of improving
a property,  cover costs not met by insurance  or cover  operating  costs.  The
amount of borrowings  will be determined from time to time based on a number of
factors,  including the use of the  proceeds,  the lender's  restrictions,  the
likelihood  that the loan can be readily  serviced  from rents at the  property
where the  proceeds  are applied and  similar  considerations.  AmREIT will not
borrow funds in order to use the proceeds  from the  borrowing to pay dividends
to  AmREIT's  shareholders,  unless  such  borrowings  are  necessary  for REIT
qualification purposes.


     AmREIT  may not borrow  from a trust  manager,  officer  or any  affiliate
thereof,  unless  a  majority  of  trust  managers,  including  a  majority  of
independent  trust  managers,  not  otherwise  interested  in such  transaction
approve the transaction as being fair, competitive, and commercially reasonable
and no less favorable to AmREIT than loans between  unaffiliated  parties under
the same circumstances.

     CONFLICT OF INTEREST AND AFFILIATE TRANSACTION POLICY.  Mr. Taylor,  our
Chairman of the Board and Chief Executive Officer,  is prohibited from engaging
in competitive real estate activities,  including any real estate acquisitions,
development  or  management  activities  in  connection  therewith,  during his
employment  with  AmREIT,  except as may be approved by the  independent  trust
managers.

     AmREIT  will  not  enter  into  any   transactions,   including,   without
limitation,  loans,  acquisitions  or sales of  property,  joint  ventures  and
partnerships,  in which  AmREIT  or a  subsidiary  is a party  and in which any
officer,  trust manager,  principal security holder or affiliate has any direct
or  indirect  pecuniary  interest,  unless  such  transaction  is approved by a
majority  of the  independent  trust  managers  after full  disclosure  of such
interests.  In determining whether to approve the transaction,  the independent
trust managers will condition such approval on the  transaction  being fair and
reasonable  to AmREIT and, to the extent  deemed  relevant by such  independent
trust  managers,  on terms no less favorable to AmREIT than  prevailing  market
terms and conditions for comparable  transactions.  Independent  trust managers
will be considered to be  disinterested  for this purpose provided they have no
direct or indirect pecuniary interest in the transaction.

     SUMMARY OF AMREIT'S GROWTH  STRATEGY.  AmREIT has focused on strengthening
its  management,  its board of trust  managers  and thereby,  its  intellectual
capital base over the past two years.  Simultaneously,  a stronger  emphasis on
long  term  growth  and  value  creation  has been  embraced.  Along  with this
long-term growth and value creation focus,  AmREIT's management also recognizes
the need to provide short-term results for its shareholders.  This balances the
desire  to  create  long-term  value  and the  short-term  need to  provide  an
acceptable  and steady  current  returns to its  investors.  This approach also
recognizes the reality of the variable nature of AmREIT's net income as profits
from its lines of business  fluctuate as compared to a larger REIT that looks to



                                      76





its portfolio income for its distributable cash flow.  Although it is a reality
that  AmREIT's  net income is not as  predictable  as a larger  portfolio  REIT,
AmREIT is able to potentially generate very attractive long term yields because
its smaller  equity base creates more upside for  shareholders  as its lines of
business create profits.


     Today, AmREIT is a nimble,  efficient and effective  entrepreneurial  real
estate  company  which has the  ability to  generate  attractive  non-portfolio
yields through its lines of business including investment sponsorship, merchant
development, brokerage, construction and property management.


                    AMREIT'S DECLARATION OF TRUST AND BYLAWS

     The  following   summarizes  the  material   terms  of  AmREIT's   current
declaration  of trust and bylaws,  but does not set forth all the provisions of
AmREIT's  declaration  of trust or bylaws.  For  additional  information  about
AmREIT's  declaration  of trust and bylaws,  you should  read these  documents,
which  are  included  as  exhibits  to this  registration  statement,  in their
entirety.

AUTHORIZED STOCK


     The charter provides that AmREIT is authorized to issue 103,000,000 equity
shares  consisting of  50,000,000  class A common  shares,  $0.01 par value per
share,  3,000,000 class B common shares, $0.01 par value per share,  40,000,000
undesignated common shares, $0.01 par value per share, and 10,000,000 preferred
shares,  par value  $0.01 per share.  The  undesignated  common  shares and the
preferred  shares may be issued from time to time, in one or more series,  each
of which series shall have such voting powers,  designations,  preferences  and
rights, and the qualifications,  limitations or restrictions  relating thereto,
as shall be  authorized by the board of trust  managers.  See  "Description  of
AmREIT's Capital Shares" beginning on page [___].


TRUST MANAGERS

     The bylaws  provide that the number of trust managers shall consist of not
less than three nor more than nine members,  the exact number of which shall be
fixed by the board  from  time to time.  The  bylaws  provide  that,  except as
otherwise  provided  by law or the  charter,  a  quorum  of the  board  for the
transaction  of business  shall consist of a majority of the entire board.  The
act of a majority of the trust  managers  present at any meeting at which there
is a quorum  shall be the act of the board.  The  charter and the bylaws do not
provide for a  classified  board or for  cumulative  voting in the  election of
trust  managers  to the  board.  The  bylaws  provide  that  vacancies  and any
newly-created  trust  manager  portions  resulting  from  an  increase  in  the
authorized  number of trust  managers  may be filled by a majority of the trust
managers then in office, though less than a quorum.

SHAREHOLDER MEETINGS AND SPECIAL VOTING REQUIREMENTS

     The  annual  meetings  of  shareholders  are held on such date as shall be
fixed by the board.  The bylaws  specify such date to be not fewer than 30 days
nor  more  than 61  days  after  distribution  of  AmREIT's  annual  report  to
shareholders.  Special  meetings  of  shareholders  may be called only upon the
request of a majority  of the trust  managers,  a majority  of the  independent
trust  managers,  the president,  or upon the written  request of  shareholders
entitled to cast at least 10 % of all of the votes  entitled to be cast at such
meeting.  In  general,  the  presence  in  person  or by proxy of  shareholders
entitled  to  cast a  majority  of  votes  shall  constitute  a  quorum  at any
shareholders'  meeting. The charter and the bylaws may in general be amended by
a majority vote of the shareholders.  However, an amendment of any provision of
the charter or bylaws which  requires a greater than  majority vote must itself
be approved by a vote of the shareholders  holding shares representing at least
66 2/3 % of the votes entitled to be cast thereon.



                                      77




     Other matters on which the shareholders are entitled to vote include:

          o    the election and removal of trust managers;

          o    a voluntary change in AmREIT's status as a REIT; and/or

          o    the dissolution of AmREIT.


AMENDMENT OF THE CHARTER AND BYLAWS

     A majority of the trust  managers  may in their  discretion,  from time to
time, amend, without a shareholder vote, the bylaws. The shareholders may amend
the bylaws by a majority vote.

TRANSACTIONS WITH INTERESTED OFFICERS OR TRUST MANAGERS

     The bylaws  provide that  contracts or  transactions  between AmREIT and a
trust  manager or officer  of AmREIT or a  corporation  or entity in which such
officer or trust manager is also an officer or trust manager or has a financial
interest, are not void or voidable solely for such reason or solely because the
officer or trust  manager is present at or  participates  in any meeting of the
board which  authorizes  the  transaction  or contract,  or solely because such
officer's or trust  manager's  vote is counted for such  purpose,  if the bylaw
restrictions  regarding such  transactions  are satisfied (see discussion under
stated investment policies above) and:

          o    the material facts as to his relationship or interest are
               disclosed or are known to the board or a committee and the board
               or a committee in good faith authorizes such contract or
               transaction;

          o    the material facts as to his relationship or interest are
               disclosed or are known to the shareholders entitled to vote
               thereon and the shareholders in good faith specifically approve
               such contract or transact; or

          o    the contract or transaction is fair to AmREIT at the time it is
               authorized, approved or ratified by the board, a committee or
               the shareholders.

     In addition,  the bylaws  provide that any  transactions  with  interested
trust managers or officers or their  affiliates  shall be made on  commercially
reasonable terms substantially equivalent to terms available from third parties
in an arm's-length transaction in the competitive marketplace.

LIMITATIONS ON HOLDINGS AND TRANSFER

     For AmREIT to continue to qualify as a REIT under the Code,  not more than
fifty  percent  (50%) of its  outstanding  shares may be owned by five or fewer
individuals  during the last half of each year and  outstanding  shares must be
owned by 100 or more  persons  during at least 335 days of a taxable year of 12
months or during a  proportionate  part of a shorter  taxable  year except with
respect to the first taxable year for which an election to be treated as a REIT
is made. The charter restricts the accumulation or transfer of common shares if
any accumulation or transfer could result in any person beneficially owning, in
accordance  with the Code,  in excess  of 9.0% of the then  outstanding  common
shares, or could result in AmREIT being  disqualified as a REIT under the Code.
Such restrictions authorize the board to refuse to give effect to such transfer
on  AmREIT's  books as to  common  shares  accumulated  in  excess  of the 9.0%
ownership  limit.  Although  the intent of these  restrictions  is to  preclude
transfers  which would  violate  the  ownership  limit or protect the  AmREIT's
status  as a  REIT  under  the  Code,  there  can  be no  assurance  that  such
restrictions  will achieve their intent.  See  "Description of AmREIT's Capital
Shares -- Ownership Limits and Restrictions on Transfer."


                                      78




     A transferee who acquires  shares in a restricted  transfer is required to
indemnify, defend, and hold AmREIT and its other shareholders harmless from and
against  all  damages,   losses,  costs,  and  expenses,   including,   without
limitation,  reasonable attorneys' fees, incurred or suffered by AmREIT or such
shareholders by virtue of AmREIT's loss of its  qualification as a REIT if such
loss is a result of the  transferee's  acquisition.  See  "Federal  Income  Tax
Consequences" beginning on page [___].


LIABILITY FOR MONETARY DAMAGES

     The declaration of trust provides that no trust manager will be personally
liable  to  AmREIT or its  shareholders  for  monetary  damages  for  breach of
fiduciary duty as a trust manager,  other than liability for breach of the duty
of loyalty to AmREIT or its shareholders,  acts or omissions not in good faith,
intentional misconduct, a knowing violation of law, certain unlawful dividends,
share  repurchases  or  redemptions  or any  transaction  from  which the trust
manager  derived an improper  personal  benefit.  Any repeal or modification of
such  provision by the  shareholders  of AmREIT will not  adversely  affect any
right or protection  of a trust manager  existing at the time of such repeal or
modification  with respect to acts or omissions  occurring prior to such repeal
or modification.

INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

     The declaration of trust provides for the  indemnification  of present and
former  trust  managers  and  officers of AmREIT and  persons  serving as trust
managers, officers, employees or agents of another corporation or entity at the
request of AmREIT to the fullest  extent  permitted  by Texas law.  Indemnified
parties  are  specifically  indemnified  in the  charter  and  the  bylaws  for
expenses,  including  attorneys'  fees,  judgments,  fines and amounts  paid in
settlement  actually and  reasonably  incurred by an  indemnified  party (1) in
connection with a threatened,  pending or completed action,  suit or proceeding
(whether civil,  criminal,  administrative  or  investigative) by reason of the
fact  that he is or was a trust  manager  or  officer  of  AmREIT  or is or was
serving as a trust  manager,  director,  officer,  employee or agent of another
corporation or entity at the request of AmREIT,  or (2) in connection  with the
defense or settlement of a threatened,  pending or completed  action or suit by
or in the right of AmREIT, provided that such indemnification is permitted only
with  judicial  approval if the  indemnified  party is adjudged to be liable to
AmREIT. Such indemnified party must have acted in good faith and in a manner he
reasonably  believed  to be in or not  opposed  to the  best  interests  of the
subject  entity and, with respect to any criminal  action or  proceeding,  must
have  had no  reasonable  cause  to  believe  his  conduct  was  unlawful.  Any
indemnification  under the indemnification  provisions must be authorized based
on a  determination  that  the  indemnification  is  proper  if the  applicable
standard of conduct has been met by the  indemnified  party,  provided  that no
such authorization is required, and indemnification is mandatory, where a trust
manager or officer of AmREIT is successful in the defense of such action,  suit
or proceeding or any claim or matter  therein.  Otherwise,  such  determination
will be made by a majority  vote of a quorum of the board  consisting  of trust
managers not a party to the suit, action or proceeding, by a written opinion of
independent  legal  counsel  or by  the  shareholders.  In  the  event  that  a
determination  is made that a trust  manager  or  officer  is not  entitled  to
indemnification  under  the  indemnification  provisions,  the  indemnification
provisions provide that the indemnified party may seek a judicial determination
of his right to indemnification. The indemnification provisions further provide
that the  indemnified  party is entitled to  indemnification  for all  expenses
(including  attorneys' fees) incurred in any proceeding seeking to collect from
AmREIT  an  indemnity  claim  under  the  indemnification  provisions  if  such
indemnified  party is successful.  Other than  proceedings to enforce rights to
indemnification,  AmREIT is not obligated to indemnify any person in connection
with a proceeding initiated by such person, unless authorized by the board.


                                      79




     AmREIT will pay expenses incurred by a trust manager or officer of AmREIT,
or a former trust manager or officer, in advance of the final disposition of an
action, suit or proceeding, if he undertakes to repay amounts advanced if it is
ultimately determined that he is not entitled to be indemnified by AmREIT.

     The  indemnification  provisions and provisions for advancing  expenses in
the  charter  will  be  expressly   not   exclusive  of  any  other  rights  of
indemnification or advancement of expenses pursuant to the bylaws. The
indemnification provisions and provisions for advancing expenses in the bylaws
and the charter will be expressly not exclusive of any other rights of
indemnification or advancement of expenses pursuant to any agreement, vote of
the shareholders or disinterested trust managers or pursuant to judicial
direction. AmREIT will be authorized to purchase insurance on behalf of an
indemnified party for liabilities incurred, whether or not AmREIT would have
the power or obligation to indemnify him pursuant to the charter, the bylaws or
Texas law.

     In addition,  AmREIT will enter into  indemnification  agreements with its
trust  managers and certain of its  executive  officers  pursuant to which such
persons are indemnified for costs and expenses actually and reasonably incurred
by such persons in  connection  with a threatened,  pending or completed  claim
arising out of service as a trust manager,  officer,  employee,  trustee and/or
agent of AmREIT or another entity at the request of AmREIT.

                    CERTAIN ANTI-TAKEOVER PROVISIONS OF THE
                   DECLARATION OF TRUST, BYLAWS AND TEXAS LAW

     AmREIT's  declaration of trust and bylaws contain certain  provisions that
may inhibit or impede acquisition or attempted acquisition of control of AmREIT
by means of a tender offer, a proxy contest or otherwise.  These provisions are
expected  to  discourage  certain  types of  coercive  takeover  practices  and
inadequate takeover bids and to encourage persons seeking to acquire control of
AmREIT to negotiate first with the trust  managers.  AmREIT believes that these
provisions  increase the likelihood  that  proposals  initially will be on more
attractive  terms  than would be the case in their  absence  and  increase  the
likelihood of negotiations, which might outweigh the potential disadvantages of
discouraging such proposals  because,  among other things,  negotiation of such
proposals might result in improvement of terms. The description set forth below
is only a summary  of the terms of the  declaration  of trust and  bylaws.  See
"Description of AmREIT's Capital Shares -- Ownership Limits and Restrictions on
Transfer."

NUMBER OF TRUST MANAGERS; REMOVAL; FILLING VACANCIES

     Subject to any rights of holders of preferred  shares to elect  additional
trust managers under specified circumstances ("Preferred Holders' Rights"), the
declaration  of trust  provides that the number of trust managers will be fixed
by, or in the manner  provided  in, the bylaws,  but must not be more than nine
nor less than three.  See  "Preferred  Shares" below.  In addition,  the bylaws
provide that,  subject to any Preferred  Holders'  Rights,  the number of trust
managers  will be fixed by the trust  managers,  but must not be more than nine
nor less than three.  In  addition,  the bylaws  provide  that,  subject to any
Preferred Holders' Rights,  and unless the trust managers otherwise  determine,
any vacancies (other than vacancies  created by an increase in the total number
of trust managers) will be filled by the affirmative  vote of a majority of the
remaining  trust  managers,  although  less  than a quorum,  and any  vacancies
created by an increase in the total number of trust managers may be filled by a
majority of the entire trust  managers.  Accordingly,  the trust managers could
temporarily  prevent any shareholder from enlarging the trust managers and then
filling the new trust manager position with such shareholder's own nominees.


                                      80





     The  declaration  of trust and the  bylaws  provide  that,  subject to any
Preferred  Holders'  Rights,  trust managers may be removed only for cause upon
the  affirmative  vote of holders of at least 80% of the entire voting power of
all the  then-outstanding  shares entitled to vote generally in the election of
trust managers, voting together as a single class.


RELEVANT FACTORS TO BE CONSIDERED BY THE BOARD OF TRUST MANAGERS


     The declaration of trust provides that, in determining what is in the best
interest of AmREIT in evaluating a "business  combination," "change in control"
or other  transaction,  a trust  manager of AmREIT  shall  consider  all of the
relevant  factors.  These  factors may include (1) the  immediate and long-term
effects of the transaction on AmREIT shareholders,  including shareholders,  if
any, who do not  participate in the  transaction;  (2) the social and economic
effects of the  transaction  on AmREIT's  employees,  suppliers,  creditors and
customers and others dealing with AmREIT and on the communities in which AmREIT
operates and is located; (3) whether the transaction is acceptable,  based on
the historical and current operating results and financial condition of AmREIT;
(4) whether a more  favorable  price would be obtained  for AmREIT's  stock or
other  securities in the future;  (5) the reputation and business  practices of
the other party or parties to the proposed transaction,  including its or their
management and affiliates,  as they would affect employees of AmREIT;  (6) the
future  value of  AmREIT's  securities;  (7) any legal or  regulatory  issues
raised by the transaction;  and (8) the business and financial condition and
earnings  prospects of the other party or parties to the  proposed  transaction
including,  without  limitation,  debt  service  and other  existing  financial
obligations,  financial  obligations  to be  incurred  in  connection  with the
transaction, and other foreseeable financial obligations of such other party or
parties. Pursuant to this provision, the trust managers may consider subjective
factors affecting a proposal,  including certain nonfinancial  matters, and, on
the basis of these  considerations,  may oppose a business combination or other
transaction  which,  evaluated only in terms of its financial merits,  might be
attractive to some, or a majority, of AmREIT's shareholders.


ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS

     The bylaws provide for an advance  notice  procedure for  shareholders  to
make nominations of candidates for trust manager or bring other business before
an  annual  meeting  of  shareholders  of  AmREIT  (the   "Shareholder   Notice
Procedure").

     Pursuant to the  Shareholder  Notice  Procedure  (i) only  persons who are
nominated by, or at the direction of, the trust  managers,  or by a shareholder
who has given timely written  notice  containing  specified  information to the
Secretary  of AmREIT  prior to the  meeting at which trust  managers  are to be
elected,  will be eligible for election as trust managers of AmREIT and (ii) at
an annual  meeting,  only such  business  may be  conducted as has been brought
before  the  meeting  by, or at the  direction  of, the  Chairman  or the trust
managers  or by a  shareholder  who has  given  timely  written  notice  to the
Secretary  of AmREIT of such  shareholder's  intention  to bring such  business
before such  meeting.  In general,  for notice of  shareholder  nominations  or
proposed  business  to be  conducted  at an annual  meeting to be timely,  such
notice  must be  received by AmREIT not less than 70 days nor more than 90 days
prior to the first anniversary of the previous year's annual meeting.

     The purpose of requiring  shareholders  to give AmREIT  advance  notice of
nominations  and other  business is to afford the trust  managers a  meaningful
opportunity  to consider the  qualifications  of the  proposed  nominees or the
advisability of the other proposed business and, to the extent deemed necessary
or  desirable  by  the  trust  managers,   to  inform   shareholders  and  make
recommendations  about  such  nominees  or  business,  as well as to  ensure an
orderly procedure for conducting meetings of shareholders.


                                      81






     Although  the  bylaws  do not  give  the  trust  managers  power  to block
shareholder  nominations  for the  election of trust  managers or proposal  for
action,  the Shareholder Notice Procedure may have the effect of discouraging a
shareholder from proposing  nominees or business,  precluding a contest for the
election of trust managers or the  consideration  of  shareholder  proposals if
procedural   requirements  are  not  met,  and  deterring  third  parties  from
soliciting  proxies for a  non-management  proposal or slate of trust managers,
without regard to the merits of such proposal or slate.


PREFERRED SHARES


     The declaration of trust authorizes the trust managers to establish one or
more series of preferred shares and to determine, with respect to any series of
preferred  shares,  the  preferences,  rights and other  terms of such  series,
subject to the prior approval rights of the class B common shareholders. AmREIT
believes that the ability of the trust  managers to issue one or more series of
preferred shares will provide AmREIT with increased  flexibility in structuring
possible future  financings and  acquisitions,  and in meeting other needs. The
authorized  preferred  shares are available for issuance without further action
by AmREIT's  shareholders,  unless such action is required by applicable law or
the rules of any stock exchange or automated quotation system on which AmREIT's
securities  may be  listed  or  traded  at the  time of  issuance  or  proposed
issuance.  Although the trust managers have no present intention to do so, they
could,  in the future,  issue a series of preferred  shares  which,  due to its
terms, could impede a merger, tender offer or other transaction that some, or a
majority,  of AmREIT's shareholders might believe to be in their best interests
or in which  shareholders might receive a premium over  then-prevailing  market
prices for their common shares.


AMENDMENT OF DECLARATION OF TRUST

     The  declaration  of trust  provides  that it may be  amended  only by the
affirmative  vote of the  holders  of not less  than  two-thirds  of the  votes
entitled to be cast,  except that the  provisions of the  declaration  of trust
relating to "business  combinations"  or "control  shares" (as described  below
under "-- Business  Combinations" and "-- Control Share  Acquisitions")  may be
amended only with the affirmative vote of 80% of the votes entitled to be cast,
voting together as a single class.

RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY

     The  declaration of trust  authorizes the trust  managers,  subject to any
rights of holders of any series of preferred shares, to create and issue rights
entitling  the holders  thereof to purchase  from AmREIT common shares or other
securities or property. The times at which and terms upon which such rights are
to be issued are within the discretion of the trust managers. This provision is
intended to confirm the authority of the trust managers to issue share purchase
rights which could have terms that would impede a merger, tender offer or other
takeover attempt, or other rights to purchase securities of AmREIT or any other
entity.

BUSINESS COMBINATIONS


     The declaration of trust establishes special  requirements with respect to
"business combinations" (including a merger, consolidation, share exchange, or,
in certain circumstances,  an asset transfer or issuance of reclassification of
equity  securities)  between  AmREIT  and any  person  who  beneficially  owns,
directly or indirectly,  10% or more of the voting power of AmREIT's shares (an
"Interested  Shareholder"),  subject to certain  exemptions.  In  general,  the
declaration of trust  provides that an Interested  Shareholder or any affiliate
thereof may not engage in a "business  combination" with AmREIT for a period of
five years following the date he becomes an Interested Shareholder. Thereafter,



                                      82





pursuant to the declaration of trust, such transactions must be (1) approved by
the trust  managers of AmREIT and (2) approved by the  affirmative  vote of at
least 80% of the votes  entitled to be cast by holders of voting  shares  other
than voting shares held by the  Interested  Shareholder  with whom the business
combination  is to be  effected,  unless,  among other  things,  the holders of
equity shares receive a minimum price (as defined in our  declaration of trust)
for their shares and the  consideration is received in cash or in the same form
as  previously  paid  by the  Interested  Shareholder  for  his  shares.  These
provisions  of the  declaration  of trust do not apply,  however,  to  business
combinations  that are  approved or  exempted  by the trust  managers of AmREIT
prior to the  time  that  the  Interested  Shareholder  becomes  an  Interested
Shareholder.


CONTROL SHARE ACQUISITIONS


     The declaration of trust provides that "control shares" of AmREIT acquired
in a control  share  acquisition  have no voting  rights  except to the  extent
approved  by a vote  of  two-thirds  of the  votes  entitled  to be cast by the
holders of equity shares,  excluding shares as to which the acquiror,  officers
of AmREIT and employees of AmREIT who are also trust managers have the right to
vote or  direct  the  vote.  "Control  shares"  are  Equity  Shares  which,  if
aggregated with all other equity shares previously acquired which the person is
entitled to vote,  would  entitle the acquiror to vote (1) 20% or more but less
than  one-third;  (2)  one-third  or more but less  than a  majority;  or (3) a
majority of the  outstanding  voting  shares of AmREIT.  Control  shares do not
include  equity  shares  that the  acquiring  person is entitled to vote on the
basis of prior shareholder  approval.  A "control share acquisition" is defined
as the acquisition of control shares,  subject to certain exemptions enumerated
in the declaration of trust.


     The  declaration  of trust provides that a person who has made or proposed
to make a control share acquisition and who has obtained a definitive financing
agreement with a responsible  financial institution providing for any amount of
financing  not to be  provided  by the  acquiring  person  may compel the trust
managers of AmREIT to call a special  meeting of shareholders to be held within
50 days of demand to consider  the voting  rights of the Equity  Shares.  If no
request for a meeting is made,  the  declaration of trust permits AmREIT itself
to present the question at any shareholders' meeting.

     Pursuant to the declaration of trust, if voting rights are not approved at
a  shareholders'  meeting  or if the  acquiring  person  does  not  deliver  an
acquiring  person  statement  as required by the  declaration  of trust,  then,
subject to certain  conditions and  limitations set forth in the declaration of
trust,  AmREIT will have the right to redeem any or all of the control  shares,
except those for which voting rights have  previously  been approved,  for fair
value determined, without regard to the absence of voting rights of the control
shares,  as of the date of the last control share acquisition or of any meeting
of  shareholders  at which the voting rights of such shares are  considered and
not  approved.  Under the  declaration  of trust,  if voting rights for control
shares are approved at a shareholders'  meeting and, as a result,  the acquiror
would be entitled to vote a majority of the Equity Shares entitled to vote, all
other  shareholders will have the rights of dissenting  shareholders  under the
Texas Real Estate  Investment  Trust Act (the "TRA").  The declaration of trust
provides  that the  fair  value  of the  Equity  Shares  for  purposes  of such
appraisal  rights may not be less than the highest  price per share paid by the
acquiror in the control share  acquisition,  and that certain  limitations  and
restrictions  of the TRA otherwise  applicable  to the exercise of  dissenters'
rights do not apply.

     These provisions of the declaration of trust do not apply to Equity Shares
acquired in a merger,  consolidation  or share exchange if AmREIT is a party to
the  transaction,  or if  the  acquisition  is  approved  or  excepted  by  the
declaration of trust or bylaws of AmREIT prior to a control share acquisition.


                                      83






OWNERSHIP LIMIT

     The  limitation  on  ownership  of shares of  common  shares  set forth in
AmREIT's declaration of trust, as well as the provisions of the TRA, could have
the effect of  discouraging  offers to acquire  AmREIT  and of  increasing  the
difficulty of consummating any such offer. See "Description of AmREIT's Capital
Shares -- Ownership Limits and Restrictions on Transfer."


                     DESCRIPTION OF AMREIT'S CAPITAL SHARES

GENERAL


     AmREIT's authorized equity structure consists of 93,000,000 common shares,
$0.01 par value per share, and 10,000,000 preferred shares, par value $0.01 per
share. As of March 31, 2003,  AmREIT had outstanding  approximately 2.8 million
class A common  shares,  2.4  million  class B common  shares and no  preferred
shares.  AmREIT is authorized to issue 93,000,000  common shares  consisting of
50,000,000  class  A  common  shares,  3,000,000  class  B  common  shares  and
40,000,000 undesignated common shares.



CLASS A COMMON SHARES


     Subject  to such  preferential  rights as may be  granted  by the board of
trust managers in connection with the future  issuance of preferred  shares and
the  preferential  rights  of the  holders  of the  class B and  class C common
shares,  holders of class A common shares are exclusively  entitled to one vote
for each class A common  shares on all  matters to be voted on by  shareholders
and are entitled to receive  ratably  such  dividends as may be declared on the
class A common  shares by the board of trust  managers in its  discretion  from
legally  available  funds.  In the  event of the  liquidation,  dissolution  or
winding up of AmREIT,  holders of class A common  shares are  entitled to share
ratably  with holders of class B common  shares and class C common  shares that
portion  of  aggregate  assets  available  for  distribution  as the  number of
outstanding class A common shares held by such holder bears to the total number
of (1) class A common  shares then  outstanding,  (2) the class B common shares
then  outstanding,  (3) the class C common shares then  outstanding and (4) any
other series of common shares then  outstanding  that rank on a parity with the
class A common  shares  as to the  distribution  of  assets  upon  liquidation.
Holders of class A common shares have no subscription,  redemption,  conversion
or preemptive  rights.  Matters  submitted for shareholder  approval  generally
require a majority vote of the shares present and voting thereon.


     The transfer  agent and  registrar  for the class A common shares is Wells
Fargo  Shareowner  Services,  161 North  Concord  Exchange,  South St. Paul, MN
55075.

CLASS B COMMON SHARES

         DIVIDENDS. Subject to the preferential rights of any series of our
preferred shares (of which there is currently none issued), holders of class B
common shares will be entitled to receive, when and as declared by the AmREIT
board of trust managers, out of funds legally available for the payment of
dividends, cumulative cash dividends in an amount per class B common share
equal to $0.74 per annum. Dividends with respect to the class B common shares
will be cumulative from the date of original issuance and will be payable


                                      84





quarterly in arrears on March 31, June 30, September 30 and December 31 (each,
a Dividend Payment Date), beginning with a partial dividend on September 30,
2002, with respect to the period from the date of original issuance to the
initial Dividend Payment Date. Any dividend payable on the class B common
shares for any partial dividend period after the initial dividend period will
be computed on the basis of a 360-day year consisting of twelve 30-day months.
Dividends payable on the class B common shares for each full dividend period
will be computed by dividing the annual dividend rate by four. Dividends will
be payable to holders of record as they appear in the share records of AmREIT
at the close of business on the applicable record date, which will be the first
day of the calendar month in which the applicable Dividend Payment Date falls
or such other date designated by the AmREIT board for the payment of dividends
that is no more than thirty (30) nor less than ten (10) days prior to the
Dividend Payment Date (each, a Dividend Record Date).

     No dividends on class B common shares will be declared by the AmREIT board
or paid or set apart for payment at such time as, and to the extent  that,  the
terms and provisions of any AmREIT agreement,  including any agreement relating
to its indebtedness, or any provisions of its charter relating to any series of
preferred  stock,  prohibit  such  declaration,  payment or  setting  apart for
payment or provide that such declaration,  payment or setting apart for payment
would  constitute  a  breach  thereof  or a  default  thereunder,  or  if  such
declaration or payment will be restricted or prohibited by law. Notwithstanding
the  foregoing,  dividends on the class B common shares will accrue  whether or
not AmREIT has earnings,  whether or not there are funds legally  available for
the payment of such  dividends and whether or not such  dividends are declared.
Holders of the class B common  shares will not be entitled to any  dividends in
excess of full cumulative dividends as described above.

     If any class B common shares are  outstanding,  no full  dividends will be
declared or paid or set apart for payment on the class A common  shares for any
period unless full  cumulative  dividends  have been or  contemporaneously  are
declared and paid or declared and a sum sufficient for the payment  thereof set
apart for such  payment  on the  class B common  shares  for all past  dividend
periods and the then current dividend period.  No interest,  or sum of money in
lieu of  interest,  will be  payable  in  respect  of any  dividend  payment or
payments on class B common shares which may be in arrears. Any dividend payment
made on class B common  shares  will first be  credited  against  the  earliest
accrued but unpaid  dividend  due with  respect to class B common  shares which
remains payable.

     LIQUIDATION RIGHTS.  In the  event  of any  liquidation,  dissolution  or
winding up of AmREIT,  subject to the prior  rights of any series of  preferred
stock,  the  holders  of class B common  shares  will  share  pro rata with the
holders  of the  class A common  shares,  class C common  shares  and any other
series of common shares then outstanding that rank on a parity with the class B
common shares as to the  distribution of assets on  liquidation,  the assets of
AmREIT remaining following the payment of all liquidating distributions payable
to holders of capital shares of AmREIT with liquidation  rights senior to those
of the common shares.

     REDEMPTION. The class B common shares will not be redeemable prior to July
16, 2005,  except under certain limited  circumstances to preserve the AmREIT's
status as a REIT.  On and after July 16,  2005,  AmREIT,  at its option (to the
extent AmREIT has funds legally available  therefore) upon not less than 30 nor
more than 60 days' written notice,  may redeem class B common shares,  in whole
or in part, at any time or from time to time,  for, at the option of the holder
thereof,  either in cash at the redemption price per share of $10.18,  plus all
accrued  and  unpaid  dividends,  if any,  thereon  (whether  or not  earned or
declared) to the date fixed for redemption, or for one class A common share.

     Notwithstanding  the foregoing,  unless full  cumulative  dividends on all
class B common shares have been or  contemporaneously  are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past  dividend  periods and the then current  dividend  period,  no class B
common shares will be redeemed unless all outstanding class B common shares are
simultaneously redeemed. The foregoing,  however, will not prevent the purchase
or acquisition of the class B common shares  pursuant to a purchase or exchange
offer  made on the same  terms to  holders  of all  outstanding  class B common
shares.  Unless full  cumulative  dividends on all  outstanding  class B common
shares have been or  contemporaneously  are declared and paid or declared and a
sum  sufficient  for the  payment  thereof  set apart for  payment for all past
dividend periods and the then current dividend period, AmREIT will not purchase
or otherwise acquire directly or indirectly  through a subsidiary or otherwise,
any class B common shares.


                                      85






     If fewer  than all of the  outstanding  class B  common  shares  are to be
redeemed,  the number of shares to be redeemed will be determined by AmREIT and
those  shares  may be  redeemed  pro rata from the  holders  of record of those
shares in  proportion  to the number of those  shares  held by the  holders (as
nearly as may be practicable without creating fractional class B common shares)
or any other equitable method determined by AmREIT.

     Notice  of  redemption  will be given by  publication  in a  newspaper  of
general circulation in the City of New York, such publication to be made once a
week for two  successive  weeks  commencing  not less  than 30 nor more than 60
days' prior to the redemption  date. A similar notice will be mailed by AmREIT,
postage  prepaid,  not  less  than 30 nor  more  than  60  days'  prior  to the
redemption  date,  addressed  to the  respective  holders  of record of class B
common  shares to be redeemed at their  respective  addresses as they appear on
the stock transfer  records of AmREIT.  No failure to give notice or any defect
therein or in the mailing  thereof will affect the  validity of the  proceeding
for the redemption of any class B common shares except as to the holder to whom
notice was defective or not given.  Each notice will state:  (1) the redemption
date; (2) the redemption  price;  (3) the number of class B common shares to be
redeemed;  (4) the place or places  where the class B common  shares  are to be
surrendered  for payment of the  redemption  price;  (5) that  dividends on the
shares to be redeemed will cease to accrue on the redemption date; and (6) that
any  conversion  rights  will  terminate  at the close of business on the third
business day immediately  preceding the redemption  date. If fewer than all the
class B common shares held by any holder are to be redeemed,  the notice mailed
to that  holder  will also  specify  the number of class B common  shares to be
redeemed from that holder. If notice of redemption of any class B common shares
has been  properly  given  and if funds  necessary  for  redemption  have  been
irrevocably  set aside by AmREIT in trust for the benefit of the holders of any
of the class B common shares so called for redemption,  then from and after the
redemption  date dividends will cease to accrue on those class B common shares,
those shares will no longer be deemed to be  outstanding  and all rights of the
holders of those  shares  will  terminate  except for the right to receive  the
applicable  redemption  price and other  amounts  payable  in  respect  of such
shares.

     The  holders  of class B common  shares  at the  close  of  business  on a
Dividend  Record Date will be entitled to receive  the  dividend  payable  with
respect to class B common  shares on the  corresponding  Dividend  Payment Date
notwithstanding  the redemption  thereof  between that Dividend Record Date and
the  corresponding  Dividend Payment Date or AmREIT's default in the payment of
the  dividend  due.  Except as provided  above,  AmREIT will make no payment or
allowance for unpaid  dividends,  whether or not in arrears,  on class B common
shares called for redemption.


     VOTING RIGHTS. Holders of the class B common shares have the right to vote
on all  matters  presented  to  shareholders  as a single  class with all other
holders of common shares.  In any matter in which the class B common shares may
vote,  including any action by written consent,  each class B common share will
be entitled to one vote.

     AmREIT  shall  not  issue any  preferred  shares or other  class of common
shares with dividend preferences senior to the dividends payable on the class B
common  shares  without the approval of 66 2/3% of the class B common shares
then outstanding.



                                      86





     Whenever  dividends on any class B common  shares have been in arrears for
six or more consecutive  quarterly periods, the holders of those class B common
shares  will be  entitled  to vote for the  election  of two  additional  trust
managers of AmREIT at a special  meeting  called by the holders of record of at
least 10% of the class B common  shares  (unless the  request is received  less
than 90 days  before the date fixed for the next  annual or special  meeting of
the stockholders),  or at the next annual meeting of shareholders,  and at each
subsequent annual meeting until all dividends accumulated on the class B common
shares for the past dividend  periods and the then current dividend period have
been fully paid or declared and a sum  sufficient  for the payment  thereof set
aside for payment.  In this event,  the entire  AmREIT board of trust  managers
will be increased by two trust managers.  Each of these two trust managers will
be elected to serve until the earlier of (1) the election and  qualification of
that trust manager's successor or (2) payment of the dividend arrearage for the
class B common shares.


     In addition,  AmREIT may not sell all or substantially  all of its assets,
dissolve,  or amend its  declaration of trust in any manner that materially and
adversely  affects the voting  powers,  rights or preferences of the holders of
class B common shares  without the approval of 66 2/3% of the class B common
shares then outstanding;  provided,  however, the issuance of any security with
dividend or liquidation preferences that rank equally with our are or junior to
the  dividend or  liquidation  preferences  of the class B common  shareholders
shall not be considered to  materially or adversely  affect the voting  powers,
rights or preferences of the class B common shareholders.


     The foregoing voting provisions will not apply if, at or prior to the time
when the act with  respect  to which a vote  would  otherwise  be  required  is
effected,  all  outstanding  class B common shares have been redeemed or called
for redemption  upon proper notice and sufficient  funds have been deposited in
trust to effect such redemption.

     CONVERSION.   Subject  to  the  exceptions  described  under  the  caption
"Restrictions  on Transfer"  below,  holders of the class B common  shares will
have the right, at any time and from time to time, to convert all or any of the
class B common  shares  into  class A  common  shares  on a one for one  basis,
subject to adjustment  upon the occurrence of the events  described  below (the
Conversion Price).

     Class B common  shares will be deemed to have been  converted  immediately
prior to the close of  business  on the date the  shares  are  surrendered  for
conversion  and notice of  election  to convert the same is received by AmREIT.
Upon conversion, no adjustment or prepayment will be made for dividends, but if
any holder  surrenders  class B common shares for conversion after the close of
business on a Dividend  Record Date and prior to the opening of business on the
related  Dividend  Payment Date,  then,  notwithstanding  the  conversion,  the
dividend  payable on that  Dividend  Payment Date will be paid on that Dividend
Payment Date to the registered  holder of those shares on that Dividend  Record
Date. Class B common shares  surrendered for conversion  during the period from
the close of business on a Dividend  Record Date to the  Dividend  Payment Date
must also pay the amount of the dividend which is payable.  No fractional class
A common shares will be issued upon conversion  and, if the conversion  results
in a fractional interest,  an amount will be paid in cash equal to the value of
the  fractional  interest based on the market price of the common shares on the
last trading day prior to the date of conversion.

     The  number  of  class A  common  shares  or other  assets  issuable  upon
conversion  and the  Conversion  Price  are  subject  to  adjustment  upon  the
occurrence of the following events:

          (1)  the issuance of class A common shares as a dividend or
               distribution on class A common shares;

          (2)  the subdivision, combination or reclassification of the
               outstanding class A common shares;


                                      87






          (3)  the issuance to all holders of class A common shares of rights
               or warrants to subscribe for or purchase class A common shares
               (or securities convertible into class A common shares) at a
               price per share less than the then current market price per
               share;

          (4)  the distribution to all holders of class A common shares of
               evidences of indebtedness or assets (including securities, but
               excluding Ordinary Cash Distributions, as defined below, and
               those dividends, distributions, rights or warrants referred to
               above); and

          (5)  the distribution to all holders of class A common shares of
               rights or warrants to subscribe for securities (other than those
               referred to in clause (3) above).


     In the event of a distribution of evidence of indebtedness or other assets
(as  described  in clause  (4)) or a dividend  to all holders of class A common
shares of rights to subscribe for additional AmREIT's capital stock (other than
those  referred  to in clause  (3)  above),  AmREIT  may,  instead of making an
adjustment of the Conversion  Price,  make proper provision so that each holder
who converts shares will be entitled to receive upon conversion, in addition to
class A  common  shares,  an  appropriate  number  of those  rights,  warrants,
evidences of  indebtedness  or other  assets.  No  adjustment  will be made for
"Ordinary Cash  Distributions,"  which are  distributions to holders of class A
common  shares in an amount  not  exceeding  AmREIT's  accumulated  funds  from
operations   since  its   formation,   after   deducting   dividends  or  other
distributions (1) paid in respect of all classes of capital shares of AmREIT or
(2) accrued in respect of the class B common shares,  and any preferred shares.
In  addition,  no  adjustment  of the  Conversion  Price  will  be  made  until
cumulative adjustments amount to one percent or more of the Conversion Price as
last  adjusted.  Any  adjustments  not so  required  to be made will be carried
forward and taken into account in subsequent adjustments.

     Whenever the number of class A common shares or other assets issuable upon
conversion and the Conversion Price are adjusted as herein provided, AmREIT (1)
will  promptly make  available at the office of the transfer  agent a statement
describing  in  reasonable  detail  such  adjustment,  and (2) will cause to be
mailed by first class mail,  postage prepaid,  as soon as practicable,  to each
holder of record of class B common shares,  a notice  stating that  adjustments
have been made and stating the adjusted conversion price.

     In the event of any  capital  reorganization  or  reclassification  of the
capital  shares of AmREIT,  or  consolidation  or merger of AmREIT with another
corporation,  or the sale, transfer or lease of all or substantially all of its
assets to another  corporation,  is effected  in a way that  holders of class A
common  shares will be entitled to receive  stock,  securities  or other assets
with respect to or in exchange for class A common shares,  then, as a condition
of that reorganization, reclassification, consolidation, merger, sale, transfer
or  lease,  the  holder  of each  class B common  share  will  have  the  right
immediately to convert that share into the kind and amount of stock, securities
or other  assets  which the  holders of those  shares  would have owned or been
entitled to receive  immediately  after the  transaction  if those  holders had
converted such shares immediately before the effective date of the transaction,
subject to  further  adjustment  upon the  occurrence  of the events  described
above.

     RESTRICTIONS  ON  TRANSFER.  The  class  B  common  shares  are  generally
transferable,  subject to  restrictions  to enable  AmREIT to maintain its REIT
status. See "--Ownership Limits and Restrictions on Transfer."


                                      88






CLASS C COMMON SHARES


     DIVIDENDS.  Subject  to  the  preferential  rights  of any  series  of our
preferred shares (of which there is currently none issued),  holders of class C
common  shares  will be  entitled  to  receive,  when, as and if declared by the
AmREIT board of trust managers,  out of funds legally available for the payment
of  dividends,  non-cumulative  cash  dividends in an amount per class C common
share equal to $0.70 per annum.  Dividends payable on the class C common shares
for each full monthly  dividend  period will be computed by dividing the annual
dividend  rate by twelve.  Dividends  with respect to the class C common shares
will be  non-cumulative  from the date of original issuance and will be payable
monthly  when,  as and if the AmREIT board  declares a monthly  dividend on the
class C common shares for that month in its sole  discretion  (each, a Dividend
Payment  Date).  Any  dividend  payable  on the class C common  shares  for any
partial  dividend period after the initial  dividend period will be computed on
the basis of a 360-day year consisting of twelve 30-day months.  Dividends will
be payable to holders of record as they  appear in the share  records of AmREIT
at the close of business on the applicable record date, which will be the first
day of the calendar month in which the applicable  Dividend  Payment Date falls
or such other date  designated by the AmREIT board for the payment of dividends
that is no more  than  thirty  (30) nor less  than ten (10)  days  prior to the
Dividend Payment Date (each, a Dividend Record Date).


     No dividends on class C common shares will be declared by the AmREIT board
or paid or set apart for payment at such time as, and to the extent  that,  the
terms and provisions of any AmREIT agreement,  including any agreement relating
to its indebtedness, or any provisions of its charter relating to any series of
preferred  stock,  prohibit  such  declaration,  payment or  setting  apart for
payment or provide that such declaration,  payment or setting apart for payment
would  constitute  a  breach  thereof  or a  default  thereunder,  or  if  such
declaration or payment will be restricted or prohibited by law.

     LIQUIDATION  RIGHTS.  In the  event  of any  liquidation,  dissolution  or
winding up of AmREIT,  subject to the prior  rights of any series of  preferred
stock,  the  holders  of class C common  shares  will  share  pro rata with the
holders  of the  class A common  shares,  class B common  shares  and any other
series of common shares then outstanding that rank on a parity with the class C
common shares as to the  distribution of assets on  liquidation,  the assets of
AmREIT remaining following the payment of all liquidating distributions payable
to holders of capital shares of AmREIT with liquidation  rights senior to those
of the common shares.


     REDEMPTION.  The class C common shares will not be redeemable prior to the
third anniversary of the date of issuance of such shares,  except under certain
limited  circumstances  to preserve the AmREIT's status as a REIT. On and after
such third  anniversary  date,  AmREIT, at its option (to the extent AmREIT has
funds legally available therefore) upon not less than 30 nor more than 60 days'
written notice,  may redeem class C common shares,  in whole or in part, at any
time or from time to time, for, at the option of the holder thereof, either (i)
cash at the  redemption  price  per  share of $11.00 or (ii) one class A common
share per each class C common share redeemed by such holder.

     Notwithstanding  the foregoing,  unless the full then current dividends on
all class C common shares have been or contemporaneously  are declared and paid
or declared and a sum sufficient for the payment  thereof set apart for payment
for the then current dividend period (without regard to whether  dividends were
paid or not  paid in any  prior  monthly  dividend  period),  no class C common
shares  will be  redeemed  unless  all  outstanding  class C common  shares are
simultaneously redeemed. The foregoing,  however, will not prevent the purchase
or acquisition of the class C common shares  pursuant to a purchase or exchange
offer  made on the same  terms to  holders  of all  outstanding  class C common
shares. Unless full current monthly dividends on all outstanding class C common
shares have been or  contemporaneously  are declared and paid or declared and a
sum  sufficient  for the  payment  thereof  set apart for  payment for the then
current  dividend period (without regard to whether  dividends were paid or not
paid in any  prior  monthly  dividend  period),  AmREIT  will not  purchase  or
otherwise acquire directly or indirectly through a subsidiary or otherwise, any
class C common shares.



                                      89






         If fewer than all of the outstanding class C common shares are to be
redeemed, the number of shares to be redeemed will be determined by AmREIT and
those shares may be redeemed pro rata from the holders of record of those
shares in proportion to the number of those shares held by the holders (as
nearly as may be practicable without creating fractional class C common shares)
or any other equitable method determined by AmREIT.

     Notice  of  redemption  will be given by  publication  in a  newspaper  of
general circulation in the City of New York, such publication to be made once a
week for two  successive  weeks  commencing  not less  than 30 nor more than 60
days' prior to the redemption  date. A similar notice will be mailed by AmREIT,
postage  prepaid,  not  less  than 30 nor  more  than  60  days'  prior  to the
redemption  date,  addressed  to the  respective  holders  of record of class C
common  shares to be redeemed at their  respective  addresses as they appear on
the stock transfer  records of AmREIT.  No failure to give notice or any defect
therein or in the mailing  thereof will affect the  validity of the  proceeding
for the redemption of any class C common shares except as to the holder to whom
notice was defective or not given. Each notice will state: (1) the redemption
date; (2) the redemption price; (3) the number of class C common shares to be
redeemed; (4) the place or places where the class C common shares are to be
surrendered for payment of the redemption price; (5) that dividends on the
shares to be redeemed will cease to accrue on the redemption date; and (6) that
any conversion rights will terminate at the close of business on the third
business day immediately preceding the redemption date. If fewer than all the
class C common shares held by any holder are to be redeemed, the notice mailed
to that holder will also specify the number of class C common shares to be
redeemed from that holder. If notice of redemption of any class C common shares
has been properly given and if funds necessary for redemption have been
irrevocably set aside by AmREIT in trust for the benefit of the holders of any
of the class C common shares so called for redemption, then from and after the
redemption date dividends will cease to accrue on those class C common shares,
those shares will no longer be deemed to be outstanding and all rights of the
holders of those shares will terminate except for the right to receive the
applicable redemption price and other amounts payable in respect of such
shares.


     The  holders  of class C common  shares  at the  close  of  business  on a
Dividend  Record Date will be entitled to receive  the  dividend  payable  with
respect to class C common  shares on the  corresponding  Dividend  Payment Date
notwithstanding  the redemption  thereof  between that Dividend Record Date and
the  corresponding  Dividend Payment Date or AmREIT's default in the payment of
the  dividend  due.  Except as provided  above,  AmREIT will make no payment or
allowance for unpaid dividends on class C common shares called for redemption.


     Limited Optional Redemption. Prior to the time at which the class C common
shares  become  eligible  to be  converted  into  class A  common  shares,  any
shareholder  who has held class C common  shares for not less than one year may
present all or any portion  equal to at least 25% of those shares to AmREIT for
redemption at any time, in accordance with the procedures  outlined herein.  At
that time,  AmREIT may, at its sole option,  redeem those shares  presented for
redemption for cash to the extent it has sufficient funds  available.  There is
no assurance that there will be sufficient  funds available for redemption and,
accordingly,  a shareholder's  shares may not be redeemed.  If AmREIT elects to
redeem shares,  the following  conditions and limitations would apply. The full
amount of the proceeds from the sale of shares under our dividend  reinvestment
plan (Reinvestment  Proceeds) attributable to any calendar quarter will be used
to redeem shares  presented for  redemption  during that quarter.  In addition,
AmREIT may, at its discretion,  use up to $100,000 per calendar  quarter of the
proceeds  of any public  offering  of its common  shares for  redemptions.  Any
amount of offering  proceeds which is available for  redemptions,  but which is
unused, may be carried over to the next succeeding  calendar quarter for use in
addition to the amount of offering  proceeds  and  Reinvestment  Proceeds  that
would  otherwise be  available  for  redemptions.  At no time during a 12-month
period,  however,  may the number of shares redeemed by AmREIT exceed 5% of the
number of class C shares outstanding at the beginning of that 12-month period.

     In the event there are insufficient  funds to redeem all of the shares for
which  redemption  requests  have been  submitted,  AmREIT  plans to redeem the
shares in the order in which such  redemption  requests have been  received.  A
shareholder  whose shares are not redeemed  due to  insufficient  funds can ask
that the request to redeem the shares be honored at such time, if any, as there
are sufficient  funds available for redemption.  In that case, the.  redemption
request  will be  retained  and  those  shares  will  be  redeemed  before  any
subsequently  received  redemption  requests  are  honored.   Alternatively,  a
shareholder  whose shares are not  redeemed may withdraw his or her  redemption
request.  Shareholders  will not  relinquish  their  shares  until such time as
AmREIT commits to redeeming such shares.

     A shareholder  who wishes to have his or her shares  redeemed must mail or
deliver a written  request on a form  provided  by AmREIT and  executed  by the
shareholder,   its  trustee  or  authorized  agent,  to  the  redemption  agent
(Redemption Agent), which currently is ___________. The Redemption Agent at all
times will be registered as a  broker-dealer  with the SEC and each  applicable
state securities  commission.  Within 30 days following the Redemption  Agent's
receipt of the shareholder's request, the Redemption Agent will forward to that
shareholder  the documents  necessary to effect the  redemption,  including any
signature guarantee AmREIT or the Redemption Agent may require.  The Redemption
Agent will effect the  redemption  for the calendar  quarter  provided  that it
receives the properly completed  redemption documents relating to the shares to
be redeemed from the  shareholder at least one calendar month prior to the last
day of the current  calendar  quarter and has  sufficient  funds  available  to
redeem the shares.  The effective date of any redemption  will be the last date
during a quarter  during  which the  Redemption  Agent  receives  the  properly
completed redemption documents.  As a result, AmREIT anticipates that, assuming
sufficient   funds  are  available  for  redemption,   the  effective  date  of
redemptions will be no later than thirty days after the quarterly determination
of the availability of funds for redemption.

     Upon the  Redemption  Agent's  receipt of notice for redemption of shares,
the redemption price for this limited optional  redemption right will initially
be $9.00 per share, which was calculated by AmREIT by subtracting a discount of
10% off of the $10.00 per share offering price,  for a net redemption  price of
$9.00 per share.  The net redemption  price was intended to approximate the per
share net proceeds received by AmREIT in this offering, after deducting selling
commissions of 7.5% and the Dealer Manager fee. Our board of trust managers may
change the  redemption  price at any time and will announce  publicly any price
adjustment as part of its regular  communications  with our stockholders,  such
adjustment  being effective on the 10th day after first public  announcement of
same.  Any shares  acquired  pursuant  to a  redemption  will be retired and no
longer available for issuance by AmREIT.

     A  shareholder  may present  fewer than all of his or her shares to AmREIT
for redemption;  provided, however, that (1) the minimum number of shares which
must be presented  for  redemption  shall be at least 25% of his or her shares,
and (2) if the shareholder  retains any shares,  he or she must retain at least
$2,500 worth of shares based on the current  offering  price  ($1,000  worth of
shares based on the current  offering  price for an IRA,  Keogh Plan or pension
plan).

     Our board of trust managers, in its sole discretion,  may amend or suspend
the redemption  plan at any time it determines that any amendment or suspension
is in the best interest of AmREIT.  Our board of trust managers may suspend the
redemption of shares if (1) it  determines,  in its sole  discretion,  that the
redemption  impairs the capital or the operations of AmREIT; (2) it determines,
in its sole discretion,  that an emergency makes such redemption not reasonably
practical;  (3) any governmental or regulatory  agency with  jurisdiction  over
AmREIT so demands for the protection of the shareholders; (4) it determines, in
its sole discretion,  that the redemption would be unlawful; (5) it determines,
in its sole  discretion,  that the  redemption,  when considered with all other
redemptions, sales, assignments,  transfers and exchanges of our common shares,
could  cause  direct or  indirect  ownership  of shares of our common  stock to
become  concentrated to an extent which would prevent AmREIT from qualifying as
a REIT under the  Internal  Revenue  Code;  or (6) it  determines,  in its sole
discretion, the suspension to be in the best interest of AmREIT. The redemption
plan will terminate, and AmREIT no longer shall accept shares for redemption at
such time as the class C common shares become  eligible to convert into class A
common shares.



         VOTING RIGHTS. Holders of the class C common shares will have the
right to vote on all matters  presented to  shareholders  as a single class with
all other  holders of common  shares.  In any matter in which the class C common
shares may vote,  including any action by written  consent,  each class C common
share will be entitled to one vote.


     AmREIT  shall  not  issue any  preferred  shares or other  class of common
shares with dividend preferences senior to the dividends payable on the class C
common  shares  without the approval of 66 2/3% of the class C common shares
then outstanding.




     In addition,  AmREIT may not sell all or substantially  all of its assets,
dissolve,  or amend its  declaration of trust in any manner that materially and
adversely  affects the voting  powers,  rights or preferences of the holders of
class C common shares  without the approval of 66 2/3% of the class C common
shares then outstanding;  provided,  however, the issuance of any security with
dividend or liquidation preferences that rank equally with or are junior to the
dividend or liquidation  preferences of the class C common  shareholders  shall
not be considered to materially or adversely  affect the voting powers,  rights
or preferences of the class C common shareholders.


     The foregoing voting provisions will not apply if, at or prior to the time
when the act with  respect  to which a vote  would  otherwise  be  required  is
effected,  all  outstanding  class C common shares have been redeemed or called
for redemption  upon proper notice and sufficient  funds have been deposited in
trust to effect such redemption.


     CONVERSION.   Subject  to  the  exceptions  described  under  the  caption
"Restrictions  on Transfer"  below,  holders of the class C common  shares will
have the right, from time to time after the seventh anniversary of the issuance
of such shares, to convert all or any of the class C common shares into class A
common shares at a conversion  price equal to the purchase price of the class C
common shares,  plus a 10% premium.  As a result, each $1,000 of class C common
shares owned by an investor will be able to be converted into $1,100 of class A
common  shares,  with the exact number of class A common  shares to be acquired
upon conversion  being determined by dividing the $1,100 by the market price of
the class A common shares on the date notice of  conversion is delivered.  Upon
conversion, no gain or loss will be then recognized by the class C shareholder.


     Class C common  shares will be deemed to have been  converted  immediately
prior to the close of  business  on the date the  shares  are  surrendered  for
conversion  and notice of  election  to convert the same is received by AmREIT.
Upon conversion, no adjustment or prepayment will be made for dividends, but if
any holder  surrenders  class C common shares for conversion after the close of
business on a Dividend  Record Date and prior to the opening of business on the
related  Dividend  Payment Date,  then,  notwithstanding  the  conversion,  the
dividend  payable on that  Dividend  Payment Date will be paid on that Dividend
Payment Date to the registered  holder of those shares on that Dividend  Record
Date. Class C common shares  surrendered for conversion  during the period from
the close of business on a Dividend  Record Date to the  Dividend  Payment Date
must also pay the amount of the dividend which is payable.  No fractional class
A common shares will be issued upon conversion  and, if the conversion  results
in a fractional interest,  an amount will be paid in cash equal to the value of
the  fractional  interest based on the market price of the common shares on the
last trading day prior to the date of conversion.

     In the event of any  capital  reorganization  or  reclassification  of the
capital  shares of AmREIT,  or  consolidation  or merger of AmREIT with another
corporation,  or the sale, transfer or lease of all or substantially all of its
assets to another  corporation,  is effected  in a way that  holders of class A
common  shares will be entitled to receive  stock,  securities  or other assets
with respect to or in exchange for class A common shares,  then, as a condition
of that reorganization, reclassification, consolidation, merger, sale, transfer
or  lease,  the  holder  of each  class C common  share  will  have  the  right


                                      91





immediately to convert that share into the kind and amount of stock, securities
or other  assets  which the  holders of those  shares  would have owned or been
entitled to receive  immediately  after the  transaction  if those  holders had
converted such shares immediately before the effective date of the transaction,
subject to  further  adjustment  upon the  occurrence  of the events  described
above.

     RESTRICTIONS  ON  TRANSFER.  The  class  C  common  shares  are  generally
transferable,  subject to  restrictions  necessary to enable AmREIT to maintain
its REIT status. See "--Ownership Limits and Restrictions on Transfer."

PREFERRED SHARES

     The declaration of trust of AmREIT authorizes the trust managers of AmREIT
to issue up to 10,000,000  preferred shares of beneficial  interest,  par value
$.01 per share, to establish one or more series of such preferred shares and to
determine,  with respect to any series of preferred shares, the terms,  rights,
restrictions  and  qualifications  of such series.  Although the trust managers
have no present  intention to do so, they could, in the future,  issue a series
of preferred  shares  which,  due to its terms,  could impede a merger,  tender
offer or other transaction that some, or a majority,  of AmREIT's  shareholders
might  believe to be in their best  interests  or in which  shareholders  might
receive a premium over then prevailing market prices for their common shares.


OWNERSHIP LIMITS AND RESTRICTIONS ON TRANSFER


     For AmREIT to qualify as a REIT under the Internal  Revenue Code,  (1) not
more than 50% in value of outstanding  equity  securities of all classes may be
owned, directly or indirectly,  by five or fewer individuals (as defined in the
Internal  Revenue Code to include certain  entities)  during the last half of a
taxable year;  (2) the  outstanding  equity  securities of all classes must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of 12 months or during a proportionate part of a shorter taxable year; and
(3)  certain  percentages  of AmREIT's  gross  income must come from  certain
activities.


     To ensure that five or fewer individuals do not own more than 50% in value
of the outstanding  equity securities of all classes,  AmREIT's  declaration of
trust provides  generally that no holder may own, or be deemed to own by virtue
of certain attribution  provisions of the Internal Revenue Code, more than 9.0%
of the issued and outstanding common shares or more than 9.9% of the issued and
outstanding  shares of any  series of  preferred  shares,  except  that H. Kerr
Taylor, the chairman of the board of trust managers and chief executive officer
of AmREIT,  and certain related persons  together may own, or be deemed to own,
by virtue of certain attribution provisions of the Internal Revenue Code, up to
9.8% of the issued and outstanding  common shares. The board of trust managers,
upon receipt of a ruling from the IRS, an opinion of counsel, or other evidence
satisfactory  to the  board  of trust  managers,  in its  sole  discretion,  is
permitted  to waive or  change,  in whole or in part,  the  application  of the
ownership  limit with respect to any person that is not an individual  (as that
term is used in Section  542(a)(2) of the Internal Revenue Code). In connection
with any waiver or change,  the board of trust  managers  has the  authority to
require such  representations  and undertakings  from such person or affiliates
and to  impose  such  other  conditions  as the board of trust  managers  deems
necessary,  advisable or prudent,  in its sole  discretion,  to  determine  the
effect,  if any, of a proposed  transaction or ownership of outstanding  equity
securities  of all  classes on  AmREIT's  status as a REIT.  The board of trust
managers  also has the  authority  to  reduce  the  ownership  limit on H. Kerr
Taylor, with the written consent of Mr. Taylor or his  successor-in-interest or
designee, after any transfer permitted by the declaration of trust.


                                      92






     In addition, the board of trust managers will have the right, from time to
time, to increase the ownership limit on common shares, except that it will not
be  permissible  for the board of trust  managers (1) to increase the ownership
limit or create additional limitations if, after giving effect thereto,  AmREIT
would be "closely  held"  within the meaning of Section  856(h) of the Internal
Revenue Code,  (2) to increase  either the ownership  limit on common shares or
the ownership  limit on preferred  shares to a percentage  that is greater than
9.9%,  or (3) to increase the ownership  limit on H. Kerr Taylor.  Prior to any
modification  of the Ownership  limit with respect to any person,  the board of
trust  managers  will have the  right to  require  such  opinions  of  counsel,
affidavits,  undertakings or agreements as it may deem necessary,  advisable or
prudent,  in its sole  discretion,  in order to  determine  or ensure  AmREIT's
status as a REIT.

     Under  our  declaration  of  trust,   the  ownership  limit  will  not  be
automatically  removed even if the REIT provisions of the Internal Revenue Code
are changed so as to no longer contain any ownership  concentration  limitation
or if the ownership concentration limit is increased. In addition to preserving
AmREIT's status as a REIT for federal income tax purposes,  the ownership limit
may  prevent  any person or small group of persons  from  acquiring  control of
AmREIT.


     Our  declaration of trust also provides that if any issuance,  transfer or
acquisition  of equity  securities  (1) would result in a holder  exceeding the
ownership limit,  (2) would cause AmREIT to be beneficially  owned by less than
100 persons, (3) would result in AmREIT being "closely held" within the meaning
of Section 856(h) of the Internal  Revenue Code, or (4) would otherwise  result
in the failure of AmREIT to qualify as a REIT for federal  income tax purposes,
then  that  issuance,  transfer  or  acquisition  will be null  and void to the
intended  transferee  or holder,  and the  intended  transferee  or holder will
acquire no rights to the shares.  Pursuant to the declaration of trust,  equity
securities  owned,  transferred  or proposed to be transferred in excess of the
ownership limit or which would otherwise  jeopardize  AmREIT's status as a REIT
under  the  Internal  Revenue  Code  automatically  will be deemed to have been
transferred to a trustee appointed by AmREIT,  unaffiliated with AmREIT and the
intended  transferee or holder,  to serve as trustee of a charitable  trust for
the  exclusive  benefit of one or more  nonprofit  organizations  designated by
AmREIT so that the shares proposed to be transferred in excess of the ownership
limit held in the charitable trust would not violate ownership restrictions set
forth in the  declaration of trust.  The transfer to the trustee will be deemed
to be  effective  as of the close of business on the  business day prior to the
purported  transfer  or  other  event  that  results  in  the  transfer  to the
charitable trust.  Shares proposed to be transferred in excess of the ownership
limit held by the trustee shall be issued and outstanding  equity securities of
AmREIT.  The  intended  transferee  or holder will have no rights in the shares
proposed to be transferred in excess of the ownership  limit,  will not benefit
economically  from  these  shares,  will have no rights to  dividends  or other
distributions  associated  with the shares and shall not  possess any rights to
vote or other  rights  attributable  to the shares.  The trustee  will have all
voting  rights and rights to  dividends  or other  distributions  to which such
shares proposed to be transferred in excess of the ownership limit are entitled
with respect to such shares held in the charitable trust, which rights shall be
exercised for the exclusive benefit of the charitable beneficiary. Any dividend
or other  distribution  paid prior to the  discovery  by AmREIT that the shares
have been deemed  transferred  to the trustee shall be paid with respect to the
shares to the  trustee  upon  demand  and any  dividend  or other  distribution
authorized  but unpaid shall be paid when due to the trustee.  Any dividends or
distributions  so paid  over to the  trustee  shall  be held in  trust  for the
benefit of the charitable  beneficiary for distribution at such times as may be
determined by the trustee.  The  prohibited  owner of these shares will have no
voting  rights  with  respect to the shares held in the  charitable  trust and,
subject to Texas law, effective as of the date that the shares have been deemed
transferred to the trustee, the trustee shall have the authority (1) to rescind
as void any vote cast,  to the extent the  shares are  entitled  to vote,  by a
prohibited  owner  prior to the  discovery  by AmREIT that the shares have been
deemed  transferred  to the trustee and (2) to recast such vote,  to the extent
the shares are entitled to vote, in accordance  with the desires of the trustee
acting for the benefit of the charitable  beneficiary.  Within twenty (20) days
of  receiving  notice from AmREIT that  shares  proposed to be  transferred  in
excess of the ownership  limit have been deemed  transferred  to the charitable
trust,  the trustee of the  charitable  trust shall sell the shares held in the
charitable trust to a person, designated by the trustee, whose ownership of the




                                      93





shares will not violate  theownership  limit or otherwise  jeopardize  AmREIT's
status as a REIT under the Internal  Revenue Code.  Upon the sale, the interest
of the  charitable  beneficiary  in the  shares  sold shall  terminate  and the
trustee shall  distribute the net proceeds of the sale to the prohibited  owner
and to the charitable  beneficiary as follows:  (1) the prohibited  owner shall
receive the lesser of (a) the price paid by the prohibited owner for the shares
or, if the  prohibited  owner did not give value for the  shares in  connection
with the event that  resulted in the transfer of such shares to the  charitable
trust  (e.g.,  in the case of a gift,  devise or other such  transaction),  the
market  price at the time of such  gift,  devise  or  other  transaction  which
resulted  in the  transfer  of the  shares  and (b) the price per share (net of
costs of sales)  received by the trustee from the sale or other  disposition of
the shares  held in the  charitable  trust;  and (2) any net sales  proceeds in
excess of the amount payable to the prohibited  owner shall be immediately paid
to the  charitable  beneficiary.  If, prior to the discovery by AmREIT that the
shares have been deemed  transferred  to the trustee,  the shares are sold by a
prohibited  owner,  then (1) the  shares  shall be  deemed to have been sold on
behalf of the charitable  trust and (2) to the extent that the prohibited owner
received an amount for such shares that exceeds the amount that such prohibited
owner  would have been  entitled to receive if such shares had been sold by the
trustee such excess  shall be paid to the trustee upon demand.  The shares will
be subject to  repurchase by AmREIT at its election and shall be deemed to have
been offered for sale to AmREIT or its designee,  at a price per share equal to
the lesser of (1) the price per share in the transaction  that resulted in such
deemed transfer to the charitable trust (or, in the case of a devise or gift or
event other than a transfer or acquisition which results in the deemed transfer
of the  shares,  the market  price at the time of such  devise or gift or event
other than a transfer or  acquisition  which results in the deemed  transfer of
the shares) and (2) the market price of the shares on the date  AmREIT,  or its
designee,  accepts such offer.  AmREIT and its assignees will have the right to
accept the offer until the trustee  has  otherwise  sold the shares held in the
charitable trust. Upon such a sale to AmREIT or its designees,  the interest of
the charitable  beneficiary in the shares sold shall  terminate and the trustee
shall distribute all net sales proceeds of the sale to the prohibited owner.

     If the trust managers or any duly  authorized  committee  thereof shall at
any time determine in good faith that a transfer or other event has taken or is
otherwise  proposed to take place that results or will result in a violation of
the ownership  limit or otherwise  jeopardizes  AmREIT's status as a REIT under
the Internal Revenue Code, the trust managers or a committee thereof shall take
such  action as it deems  advisable  to refuse to give  effect to or to prevent
such transfer or other event, including, without limitation,  causing AmREIT to
redeem equity securities, refusing to give effect to such transfer on the books
of AmREIT or  instituting  proceedings  to enjoin such transfer or other event;
provided,  however that any  transfer or  attempted  transfer or other event in
violation  of the  declaration  of  trust  shall  automatically  result  in the
transfer to the charitable trust described above, and, where  applicable,  such
transfer  (or  other  event)  shall  be  void  ab  initio  as  provided   above
irrespective  of any action (or non-action) by the board of trust managers or a
committee thereof.

     Under the  declaration of trust,  AmREIT will have the  authority,  at any
time,  to waive  the  requirement  that the  shares be  deemed  outstanding  in
accordance with the provisions of the declaration of trust if the fact that the
shares  are  deemed to be  outstanding  would,  in the  opinion  of  nationally
recognized  tax counsel,  jeopardize the status of AmREIT as a REIT for federal
income tax purposes.

     All certificates issued by AmREIT representing equity securities will bear
a legend referring to the restrictions described above.

     The  declaration of trust of AmREIT also will provide that all persons who
own,  directly  or by  virtue of the  attribution  provisions  of the  Internal
Revenue Code,  more than 5.0% of the  outstanding  equity  securities  (or such
lower  percentage  as may be set by the  board of trust  managers),  must  give


                                      94





written notice to AmREIT containing information specified in the declaration of
trust no later than January 30 of each year. In addition, each shareholder will
be  required,  upon demand,  to disclose to AmREIT in writing such  information
with respect to the direct,  indirect and  constructive  ownership of shares as
the trust managers deem necessary to comply with the provisions of the Internal
Revenue Code, as applicable to a REIT, or to comply with the  requirements of a
governmental authority or agency.

     The  ownership   limitations  described  above  may  have  the  effect  of
inhibiting  or  impeding  acquisitions  of control of  AmREIT-Texas  by a third
party.  See "Certain  Provisions of the Declaration of Trust,  Bylaws and Texas
Law," below.



DIVIDEND REINVESTMENT PLAN

     AmREIT's board of trust  managers has  authorized a dividend  reinvestment
plan that allows you to have the dividends otherwise  distributable to you as a
class C common shareholder invested in additional class C common shares.


     You may purchase  class C common  shares  under our dividend  reinvestment
plan for $10 per  share  until  all of the  shares  registered  as part of this
offering have been sold. After that time, we may fund the dividend reinvestment
plan through  purchasing shares on the open market, if a market then exists, or
issuing  additional  shares.  In any case, the price per share will be equal to
the then-prevailing market price, which shall equal the price on the securities
exchange or over-the-counter market on which such shares are listed at the date
of purchase if such shares are then listed. A copy of our dividend reinvestment
plan as currently in effect is included as Exhibit __ to this  prospectus.  You
may elect to  participate in the dividend  reinvestment  plan by completing the
Subscription  Agreement,  the enrollment form or by other written notice to the
plan  administrator.  Participation  in the  plan  will  begin  with  the  next
distribution  made after receipt of your written  notice.  We may terminate the
dividend  reinvestment  plan for any  reason  at any time  upon 10 days'  prior
written notice to  participants.  Your  participation  in the plan will also be
terminated  to the extent  that a  reinvestment  of your  dividends  in class C
common shares would cause the percentage  ownership limitation contained in our
declaration  of trust to be  exceeded.  In  addition,  you may  terminate  your
participation  in the  dividend  reinvestment  plan at any time by providing us
with written notice.

     If you elect to  participate  in the  dividend  reinvestment  plan and are
subject  to  federal  income  taxation,  you  will  incur a tax  liability  for
dividends  allocated  to you even  though you have  elected  not to receive the
dividends  in cash but rather to have the  dividends  withheld  and  reinvested
pursuant to the dividend reinvestment plan.  Specifically,  you will be treated
as if you have  received  the  dividend  from us in cash and then  applied such
dividend to the purchase of  additional  shares.  Additionally,  the shares you
acquire will be held in book-entry  form on the books of the plan agent and may
only be resold at such  time as you  request  the plan  agent to  transfer  the
shares held into the plan to the books of the transfer agent. These shares will
be subject to the same liquidity  limitations as originally  purchased  shares.
See "Risk Factors -- There is no public  trading  market for the class C common
shares." You will be taxed on the amount of such dividend as ordinary income to
the extent such dividend is from current or  accumulated  earnings and profits,
unless we have  designated  all or a portion of the  dividend as a capital gain
dividend.




                                       95




                        FEDERAL INCOME TAX CONSEQUENCES

GENERAL

     The following summary of material federal income tax consequences that may
be  relevant  to a holder of our  securities  is based on current  law,  is for
general  information  only and is not  intended  as tax advice.  The  following
discussion, which is not exhaustive of all possible tax consequences,  does not
include a detailed  discussion of any state, local or foreign tax consequences.
Nor does it discuss all of the aspects of federal  income  taxation that may be
relevant  to a  prospective  holder  of our  securities  in light of his or her
particular  circumstances or to certain types of holders  (including  insurance
companies,  tax-exempt  entities,  financial  institutions  or  broker-dealers,
foreign  corporations  and persons who are not  citizens  or  residents  of the
United  States  and  persons  holding   securities  as  part  of  a  conversion
transaction,  a hedging  transaction  or as a position  in a  straddle  for tax
purposes)  who are subject to special  treatment  under the federal  income tax
laws.  Unless  otherwise  indicated  the terms  "we," "us," and "our" when used
herein refer to AmREIT.


     The statements in this  discussion are based on current  provisions of the
Internal  Revenue Code  existing,  temporary  and currently  proposed  Treasury
Regulations  under the Internal  Revenue Code, the  legislative  history of the
Internal RevenueCode,  existing administrative rulings and practices of the IRS
and judicial decisions. No assurance can be given that legislative, judicial or
administrative  changes will not affect the accuracy of any  statements in this
discussion with respect to transactions  entered into or contemplated  prior to
the effective date of such changes.  Any such change could apply  retroactively
to transactions preceding the date of the change. We do not plan to request any
rulings from the IRS  concerning  our tax treatment and the  statements in this
discussion  are not  binding on the IRS or any court.  Thus,  we can provide no
assurance that these  statements will not be challenged by the IRS or that such
challenge will not be sustained by a court.


         THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING. EACH PROSPECTIVE PURCHASER OF SECURITIES IS ADVISED TO CONSULT WITH
HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR
HER OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SECURITIES IN AN ENTITY
ELECTING TO BE TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, DISPOSITION AND
ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.


     We have elected to be treated as a REIT under  Sections 856 through 860 of
the Internal  Revenue Code for federal income tax purposes  commencing with our
taxable year ended  December 31, 1994.  We believe that we have been  organized
and have  operated in a manner that  qualifies for taxation as a REIT under the
Internal  Revenue  Code.  We also believe that we will continue to operate in a
manner that will preserve our status as a REIT. We cannot  however,  assure you
that such requirements will be met in the future.

     Locke  Liddell & Sapp LLP,  our legal  counsel,  is of the opinion that we
qualified as a REIT under the Internal  Revenue Code for our taxable year ended
December 31, 2002, we have been  organized and our manner of operation has been
in conformity with the requirements for qualification and taxation as a REIT as
of the date of this  prospectus  and that our proposed  manner of operation and
diversity  of equity  ownership  should  enable us to  continue  to satisfy the
requirements  for  qualification  as a REIT  in the  future  if we  operate  in
accordance  with the  methods of  operations  described  herein  including  our
representations  concerning  our  intended  method of  operation.  However,  no
opinion can be given that we will actually satisfy all REIT requirements in the
future since this depends on future  events.  You should be aware that opinions
of counsel are not binding on the IRS or on the courts, and, if the IRS were to
challenge these  conclusions,  no assurance can be given that these conclusions
would be sustained in court.



                                       96



The opinion of Locke Liddell & Sapp LLP is based on various assumptions as well
as on certain  representations  made by us as to factual  matters,  including a
factual  representation  letter  provided by us. The rules  governing REITs are
highly  technical and require  ongoing  compliance with a variety of tests that
depend, among other things, on future operating results, asset diversification,
distribution levels and diversity of stock ownership.  Locke Liddell & Sapp LLP
will not monitor our  compliance  with these  requirements.  While we expect to
satisfy  these tests,  and will use our best efforts to do so, no assurance can
be given that we will qualify as a REIT for any  particular  year,  or that the
applicable  law will not change and adversely  affect us and our  shareholders.
See "--  Failure  to  Qualify  as a REIT."  The  following  is a summary of the
material  federal  income  tax  considerations  affecting  us as a REIT and our
shareholders.  This  summary is  qualified  in its  entirety by the  applicable
Internal  Revenue Code provisions,  relevant rules and regulations  promulgated
under  the   Internal   Revenue   Code,   and   administrative   and   judicial
interpretations of the Internal Revenue Code and these rules and regulations.

REIT QUALIFICATION


     We must be  organized  as an entity that would,  if we do not maintain our
REIT  status,  be taxable as a regular  corporation.  We cannot be a  financial
institution  or an insurance  company.  We must be managed by one or more trust
managers.  Our taxable year must be the calendar year. Our beneficial ownership
must be evidenced by transferable shares. Our capital shares must be held by at
least 100  persons  during at least 335 days of a taxable  year of 12 months or
during a proportionate  part of a taxable year of less than 12 months. Not more
than 50% of the value of the shares of our capital shares may be held, directly
or indirectly,  applying the  applicable  constructive  ownership  rules of the
Internal Revenue Code, by five or fewer individuals at any time during the last
half of each of our  taxable  years.  We must also meet  certain  other  tests,
described  below,  regarding the nature of our income and assets and the amount
of our distributions.

     Our outstanding shares of common stock are owned by a sufficient number of
investors and in  appropriate  proportions  to permit us to satisfy these share
ownership requirements.  To protect against violations of these share ownership
requirements,  our declaration of trust provides that no person (other than the
existing holder) is permitted to own, applying constructive ownership tests set
forth in the Internal  Revenue Code, more than 9.0% of our  outstanding  common
shares, unless the trust managers are provided evidence satisfactory to them in
their sole discretion that our qualification as a REIT will not be jeopardized.
In addition,  our  declaration of trust contains  restrictions  on transfers of
capital  shares,  as well as provisions  that  automatically  transfer  capital
shares to a charitable trust for the benefit of a charitable beneficiary to the
extent that another investor's ownership of such capital shares otherwise might
jeopardize our REIT status. These restrictions,  however may not ensure that we
will, in all cases, be able to satisfy the share ownership requirements.  If we
fail to satisfy these share ownership  requirements,  except as provided in the
next sentence, our status as a REIT will terminate.  However, if we comply with
the rules  contained  in  applicable  Treasury  Regulations  that require us to
ascertain  the actual  ownership of our shares and we do not know, or would not
have known through the exercise of reasonable diligence, that we failed to meet
the 50%  requirement  described  above,  we will be  treated as having met this
requirement. See the section below entitled "-- Failure to Qualify as a REIT."


         To monitor our compliance with the share ownership requirements, we
are required to and we do maintain records disclosing the actual ownership of
our common shares. To do so, we will demand written statements each year from
the record holders of certain percentages of shares in which the record holders
are to disclose the actual owners of the shares (i.e., the persons required to
include in gross income the REIT dividends). A list of those persons failing or
refusing to comply with this demand will be maintained as part of our records.
Shareholders who fail or refuse to comply with the demand must submit a
statement with their tax returns disclosing the actual ownership of the shares
and certain other information.


                                       97



     We  currently  satisfy,  and expect to continue to satisfy,  each of these
requirements discussed above. We also currently satisfy, and expect to continue
to satisfy, the requirements that are separately described below concerning the
nature and amounts of our income and assets and the levels of  required  annual
distributions.


     Sources of Gross  Income.  In order to qualify as a REIT for a  particular
year,  we also must meet two tests  governing the sources of our income - a 75%
gross  income test and a 95% gross  income  test.  These tests are  designed to
ensure that a REIT  derives its income  principally  from  passive  real estate
investments.  The  Internal  Revenue  Code  allows a REIT to own and  operate a
number of its properties through wholly-owned subsidiaries which are "qualified
REIT  subsidiaries."  The Internal  Revenue Code provides that a qualified REIT
subsidiary  is not  treated as a separate  corporation,  and all of its assets,
liabilities  and items of income,  deduction  and credit are treated as assets,
liabilities and items of income, deduction and credit of the REIT.


     In the case of a REIT  which is a partner  in a  partnership  or any other
entity such as a limited liability company that is treated as a partnership for
federal income tax purposes, Treasury Regulations provide that the REIT will be
deemed to own its proportionate  share of the assets of the partnership.  Also,
the REIT will be deemed to be entitled to its proportionate share of the income
of the  partnership.  The  character  of the  assets  and  gross  income of the
partnership retains the same character in the hands of the REIT for purposes of
Section 856 of the Code,  including  satisfying  the gross income tests and the
asset tests. Thus, our proportionate share of the assets and items of income of
any partnership in which we own an interest are treated as our assets and items
of  income  for  purposes  of  applying  the  requirements  described  in  this
discussion, including the income and asset tests described below.

     75% Gross  Income  Test.  At least 75% of a REITs  gross  income  for each
taxable year must be derived from specified  classes of income that principally
are real estate related. The permitted categories of principal importance to us
are:

     o    rents from real property;

     o    interest on loans secured by real property;

     o    gains from the sale of real property or loans secured by real
          property (excluding gain from the sale of property held primarily for
          sale to customers in the ordinary course of our business, referred to
          below as "dealer property");

     o    income from the operation and gain from the sale of property acquired
          in connection with the foreclosure of a mortgage securing that
          property ("foreclosure property");

     o    distributions on, or gain from the sale of, shares of other
          qualifying REITs;

     o    abatements and refunds of real property taxes;

     o    amounts received as consideration for entering into agreements to
          make loans secured by real property or to purchase or lease real
          property; and

     o    "qualified temporary investment income" (described below).


                                       98



     In evaluating  our  compliance  with the 75% gross income test, as well as
the 95% gross income test described below,  gross income does not include gross
income from "prohibited  transactions." In general, a prohibited transaction is
one involving a sale of dealer property, not including foreclosure property and
not including certain dealer property we have held for at least four years.

     We expect that  substantially  all of our  operating  gross income will be
considered rent from real property and interest income. Rent from real property
is  qualifying  income for  purposes of the gross  income tests only if certain
conditions are satisfied. Rent from real property includes charges for services
customarily  rendered to tenants,  and rent  attributable to personal  property
leased together with the real property so long as the personal property rent is
not more than 15% of the total rent received or accrued under the lease for the
taxable year. We do not expect to earn material amounts in these categories.


     Rent from real  property  generally  does not  include  rent  based on the
income  or  profits  derived  from  the  property.  However,  rent  based  on a
percentage  of gross  receipts or sales is permitted as rent from real property
and we will have leases where rent is based on a percentage  of gross  receipts
or sales.  We  generally do not intend to lease  property  and receive  rentals
based on the tenant's  income or profit.  Also  excluded  from "rents from real
property" is rent received from a person or  corporation in which we (or any of
our 10% or greater  owners)  directly or  indirectly  through the  constructive
ownership rules contained in Section 318 and Section  856(d)(5) of the Internal
Revenue Code, own a 10% or greater interest in either vote or value.


     A third exclusion from qualifying rent income covers amounts received with
respect to real  property  if we furnish  services  to the tenants or manage or
operate the property,  other than through an "independent contractor" from whom
we do not derive any income or through a "taxable REIT  subsidiary."  A taxable
REIT  subsidiary  is a  corporation  in which a REIT owns  stock,  directly  or
indirectly,  and with respect to which the corporation and the REIT have made a
joint  election to treat the  corporation  as a taxable  REIT  subsidiary.  The
obligation  to operate  through an  independent  contractor  or a taxable  REIT
subsidiary  generally does not apply,  however,  if the services we provide are
"usually or  customarily  rendered" in connection  with the rental of space for
occupancy only and are not considered rendered primarily for the convenience of
the tenant (applying standards that govern in evaluating whether rent from real
property  would  be  unrelated  business  taxable  income  when  received  by a
tax-exempt owner of the property).  Further,  if the value of the non-customary
service  income with respect to a property,  valued at no less than 150% of our
direct cost of  performing  such  services,  is 1% or less of the total  income
derived from the property,  then the provision of such  non-customary  services
shall not prohibit the rental income (except the non-customary  service income)
from qualifying as "rents from real property."

     We believe  that the only  material  services  generally to be provided to
tenants will be those usually or  customarily  rendered in connection  with the
rental of space for occupancy  only. We do not intend to provide  services that
might be considered rendered primarily for the convenience of the tenants, such
as  hotel,   health  care  or  extensive   recreational  or  social   services.
Consequently,  we believe that  substantially  all of our rental income will be
qualifying  income  under the gross  income  tests,  and that our  provision of
services  will not cause the rental  income to fail to be  included  under that
test.

     Upon the ultimate  sale of our  properties,  any gains  realized  also are
expected  to  constitute  qualifying  income,  as gain  from  the  sale of real
property (not involving a prohibited transaction).

     95% Gross Income Test. In addition to earning 75% of our gross income from
the sources  listed  above,  95% of our gross income for each taxable year must
come either from those sources,  or from dividends,  interest or gains from the
sale or other  disposition of stock or other  securities that do not constitute


                                      99



dealer property.  This test permits a REIT to earn a significant portion of its
income from traditional  "passive"  investment sources that are not necessarily
real estate  related.  The term  "interest"  (under both the 75% and 95% tests)
does not include amounts that are based on the income or profits of any person,
unless the  computation  is based only on a fixed  percentage  of  receipts  or
sales.

     Failing the 75% or 95% Tests; Reasonable Cause. As a result of the 75% and
95% tests,  REITs  generally  are not  permitted  to earn more than 5% of their
gross income from active sources, including brokerage commissions or other fees
for services rendered.  We may receive certain types of that income.  This type
of income will not qualify for the 75% test or 95% test but is not  expected to
be significant and that income,  together with other  nonqualifying  income, is
expected to be at all times less than 5% of our annual gross  income.  While we
do not  anticipate  that we will  earn  substantial  amounts  of  nonqualifying
income,  if nonqualifying  income exceeds 5% of our gross income, we could lose
our status as a REIT. We may establish taxable REIT subsidiaries to hold assets
generating   non-qualifying   income.  The  gross  income  generated  by  these
subsidiaries would not be included in our gross income.  However,  dividends we
receive  from these  subsidiaries  would be  included  in our gross  income and
qualify for the 95% income test.

     If we fail to meet  either  the 75% or 95% income  tests  during a taxable
year,  we may still qualify as a REIT for that year if (1) we report the amount
and  nature of each item of our gross  income  in a  schedule  attached  to our
federal  income tax return for that year,  (2) the  inclusion of any  incorrect
information  in such schedule is not due to fraud with intent to evade tax, and
(3) the failure to meet the tests is due to reasonable cause and not to willful
neglect. It is not possible,  however, to state whether in all circumstances we
would be entitled to the benefit of this relief provision.  For example,  if we
fail to satisfy the gross income  tests  because  nonqualifying  income that we
intentionally accrue or receive causes us to exceed the limits on nonqualifying
income,  the IRS could  conclude  that our failure to satisfy the tests was not
due  to  reasonable  cause.  If  these  relief  provisions  do not  apply  to a
particular  set of  circumstances,  we will not qualify as a REIT. As discussed
below,  even if these relief  provisions  apply,  and we retain our status as a
REIT,  a tax would be imposed  with respect to our  non-qualifying  income.  We
would be subject  to a 100% tax based on the  greater of the amount by which we
fail either the 75% or 95% income tests  (substituting 90% for 95% for purposes
of calculating the amount by which the 95% income test is failed) for that year
multiplied  by a  fraction  intended  to  reflect  our  profitability.  See "--
Taxation as a REIT" below.

     Prohibited Transaction Income. Any gain that we realize on the sale of any
property  held as  inventory  or  other  property  held  primarily  for sale to
customers in the ordinary  course of business  (including our share of any such
gain  realized  by  any  subsidiary   partnerships  but  excluding  foreclosure
property),  will be treated as income  from a  prohibited  transaction  that is
subject to a 100%  penalty tax.  This  prohibited  transaction  income may also
adversely affect our ability to satisfy the income tests for qualification as a
REIT.  Under existing law,  whether  property is held as inventory or primarily
for sale to customers in the ordinary course of a trade or business  depends on
all the facts and  circumstances  surrounding  the particular  transaction.  We
intend  to hold  our and  our  subsidiary  partnerships  intend  to hold  their
properties for investment with a view to long-term  appreciation,  to engage in
the  business  of  acquiring,  developing  and owning  properties,  and to make
occasional  sales of the  properties as are  consistent  with their  investment
objectives.  The IRS may contend,  however,  that one or more of these sales is
subject to the 100% penalty tax.

     Character of Assets Owned.  At the close of each  calendar  quarter of our
taxable  year,  we also must meet  three  tests  concerning  the  nature of our
investments.  First,  at least 75% of the value of our total  assets  generally
must consist of real estate assets,  cash, cash items  (including  receivables)
and  government  securities.  For this purpose,  "real estate  assets"  include
interests in real  property,  interests  in loans  secured by mortgages on real
property or by certain interests in real property, shares in other REITs and


                                      100




certain options, but excluding mineral, oil or gas royalty interests. The
temporary investment of new capital in stock or debt instruments also qualifies
under this 75% asset test, but only for the one-year period beginning on the
date we receive the new capital. Second, although the balance of our assets
generally may be invested without restriction, other than certain debt
securities, we will not be permitted to own (1) securities of any one
non-governmental issuer that represent more than 5% of the value of our total
assets, (2) securities possessing more than 10% of the voting power of the
outstanding securities of any single issuer or (3) securities having a value of
more than 10% of the total value of the outstanding securities of any one
issuer. A REIT, however, may own 100% of the stock of a qualified REIT
subsidiary, in which case the assets, liabilities and items of income,
deduction and credit of the subsidiary are treated as those of the REIT. A REIT
may also own more than 10% of the voting power or value of a taxable REIT
subsidiary. Third, not more than 20% of the value of a REIT's total assets may
be represented by securities of one or more taxable REIT subsidiaries. In
evaluating a REIT's assets, if the REIT invests in a partnership, it is deemed
to own its proportionate share of the assets of the partnership.

     After  initially  meeting the asset tests at the close of any quarter,  we
will not lose our status as a REIT for  failure to satisfy  the asset  tests at
the end of a later quarter  solely by reason of changes in asset values.  If we
fail to satisfy the asset tests because we acquire securities or other property
during  a  quarter,  we can  cure  this  failure  by  disposing  of  sufficient
nonqualifying  assets within 30 days after the close of that quarter. We intend
to take such action within the 30 days after the close of any quarter as may be
required to cure any  noncompliance.  If we fail to cure noncompliance with the
asset tests within this time period, we would cease to qualify as a REIT.


     Annual  Distributions  to  Shareholders.  To maintain our REIT status,  we
generally  must  distribute as a dividend to our  shareholders  in each taxable
year at least 90% of our net ordinary  income.  Capital gain is not required to
be distributed.  More precisely,  we must distribute an amount equal to (1) 90%
of the sum of (a) our "REIT Taxable Income" before  deduction of dividends paid
and excluding any net capital gain and (b) 90% of the excess of net income from
foreclosure  property  over the tax on such income,  minus (2) certain  limited
categories  of "excess  noncash  income,"  including,  income  attributable  to
certain  payments for the use of property or services  described  under Section
467 of the Internal  Revenue Code,  cancellation of  indebtedness  and original
issue discount income.  REIT Taxable Income is defined to be the taxable income
of the REIT,  computed  as if it were an  ordinary  corporation,  with  certain
modifications.  For example,  the deduction for dividends paid is allowed,  but
neither net income from  foreclosure  property,  nor net income from prohibited
transactions,  is included. In addition, the REIT may carry over, but not carry
back,  a net  operating  loss for 20 years  following  the year in which it was
incurred.


     A REIT may satisfy the 90%  distribution  test with  dividends paid during
the taxable year and with certain  dividends  paid after the end of the taxable
year.  Dividends  paid in January that were  declared  during the last calendar
quarter of the prior year and were payable to  shareholders of record on a date
during the last  calendar  quarter  of that  prior year are  treated as paid on
December 31 of the prior year. Other dividends  declared before the due date of
our tax return for the taxable year, including extensions, also will be treated
as paid in the prior  year if they are paid (1)  within 12 months of the end of
that taxable year and (2) no later than our next regular distribution  payment.
Dividends  that are paid after the close of a taxable  year that do not qualify
under the rule  governing  payments made in January  (described  above) will be
taxable to the shareholders in the year paid, even though we may take them into
account  for a prior  year.  A  nondeductible  excise  tax  equal to 4% will be
imposed  for each  calendar  year to the extent  that  dividends  declared  and
distributed or deemed  distributed  on or before  December 31 are less than the
sum of (a) 85% of our  "ordinary  income"  plus (b) 95% of our capital gain net
income plus (c) any undistributed income from prior periods.


                                       101




     To be entitled to a dividends paid deduction,  the amount distributed by a
REIT must not be preferential.  For example,  every shareholder of the class of
shares to which a distribution  is made must be treated the same as every other
shareholder of that class, and no class of shares may be treated otherwise than
in accordance with its dividend rights as a class.

     We will be taxed at regular  corporate  rates to the extent that we retain
any portion of our taxable  income.  For  example,  if we  distribute  only the
required  90% of our taxable  income,  we would be taxed on the  retained  10%.
Under certain  circumstances  we may not have  sufficient  cash or other liquid
assets to meet the  distribution  requirement.  This  could  arise  because  of
competing  demands  for our funds,  or due to timing  differences  between  tax
reporting  and cash  receipts and  disbursements  (i.e.,  income may have to be
reported  before cash is  received,  or  expenses  may have to be paid before a
deduction is allowed).  Although we do not anticipate any difficulty in meeting
this  requirement,  no  assurance  can be given  that  necessary  funds will be
available. In the event these circumstances do occur, then in order to meet the
90%  distribution  requirement,  we may  arrange  for  short-term,  or possibly
long-term, borrowings to permit the payment of required dividends.

     If we  fail  to  meet  the  90%  distribution  requirement  because  of an
adjustment to our taxable income by the IRS, we may be able to cure the failure
retroactively by paying a "deficiency dividend," as well as applicable interest
and penalties, within a specified period.

     As a REIT, we generally will not be subject to corporate income tax to the
extent we currently  distribute  our REIT taxable  income to our  shareholders.
This  treatment  effectively   eliminates  the  "double  taxation"  imposed  on
investments  in most  corporations.  Double  taxation  refers to taxation  that
occurs once at the corporate  level when income is earned and once again at the
shareholder  level when such income is distributed.  We generally will be taxed
only on the portion of our taxable  income that we retain,  which will  include
any undistributed net capital gain,  because we will be entitled to a deduction
for dividends  paid to  shareholders  during the taxable year. A dividends paid
deduction is not  available  for  dividends  that are  considered  preferential
within  any given  class of shares or as between  classes  except to the extent
that class is entitled to a preference.  We do not anticipate  that we will pay
any of those preferential dividends.

     Even as a REIT,  we will be  subject to tax in  certain  circumstances  as
follows:

          o    We would be subject to tax on any income or gain from
               foreclosure property at the highest corporate rate (currently
               35%). Foreclosure property is generally defined as property
               acquired through foreclosure or after a default on a loan
               secured by the property or a lease of the property.

          o    A confiscatory tax of 100% applies to any net income from
               prohibited transactions which are, in general, certain sales or
               other dispositions of property held primarily for sale to
               customers in the ordinary course of business other than
               foreclosure property.

          o    If we fail to meet either the 75% or 95% source of income tests
               described above, but still qualify for REIT status under the
               reasonable cause exception to those tests, a 100% tax would be
               imposed equal to the amount obtained by multiplying (a) the
               greater of the amount, if any, by which it failed either the 75%
               income test or the 95% (substituting for purposes of calculating
               the amount by which the 95% gross income test is failed, 90% for
               95%) income test, times (b) a fraction intended to reflect our
               profitability.


                                      102




          o    We will be subject to the alternative minimum tax on items of
               tax preference, excluding items specifically allocable to our
               shareholders.

          o    If we should fail to distribute with respect to each calendar
               year at least the sum of (a) 85% of our REIT ordinary income for
               that year, (b) 95% of our REIT capital gain net income for that
               year, and (c) any undistributed taxable income from prior years,
               we would be subject to a 4% excise tax on the excess of the
               required distribution over the amounts actually distributed.

          o    Under temporary regulations, we also may be taxed at the highest
               regular corporate tax rate on any built-in gain attributable to
               assets that we acquire in certain tax-free corporate
               transactions, to the extent the gain is recognized during the
               first ten years after we acquire those assets. Built-in gain is
               the excess of (a) the fair market value of the asset over (b)
               our adjusted basis in the asset, in each case determined as of
               the beginning of the ten-year recognition period. The results
               described in this paragraph with respect to the recognition of
               built-in gain assume that we will make an election pursuant to
               the temporary regulations; and

          o    We will be taxed at regular corporate rates on any undistributed
               REIT taxable income, including undistributed net capital gains.

     As a result of recent  legislation,  a tax is  imposed  on a REIT equal to
100% of  redetermined  rents,  redetermined  deductions  and  excess  interest.
Redetermined rents are generally rents from real property which would otherwise
be reduced on  distribution,  apportionment  or allocation  to clearly  reflect
income  as a result  of  services  furnished  or  rendered  by a  taxable  REIT
subsidiary to tenants of the REIT. There are a number of exceptions with regard
to redetermined rents, which are summarized below.

          o    Redetermined rents do not include amounts received directly or
               indirectly by a REIT for services customarily furnished or
               rendered in connection with the rental of real property or
               services furnished through an independent contractor from whom
               the REIT does not derive or receive any income or through a
               taxable REIT subsidiary.

          o    Redetermined rents do not include de minimis payments received
               by the REIT with respect to non-customary services rendered to
               the tenants of a property owned by the REIT that do not exceed
               1% of all amounts received by the REIT with respect to the
               property.

          o    The redetermined rent provisions do not apply with respect to
               any services rendered by a taxable REIT subsidiary to the
               tenants of the REIT, as long as the taxable REIT subsidiary
               renders a significant amount of similar services to persons
               other than the REIT and to tenants who are unrelated to the REIT
               or the taxable REIT subsidiary or the REIT tenants, and the
               charge for these services is substantially comparable to the
               charge for similar services rendered to such unrelated persons.

          o    The redetermined rent provisions do not apply to any services
               rendered by a taxable REIT subsidiary to a tenant of a REIT if
               the rents paid by tenants leasing at least 25% of the net
               leaseable space in the REIT's property who are not receiving
               such services are substantially comparable to the rents paid by
               tenants leasing comparable space who are receiving the services
               and the charge for the services is separately stated.


                                      103




          o    The redetermined rent provisions do not apply to any services
               rendered by a taxable REIT subsidiary to tenants of a REIT if
               the gross income of the taxable REIT subsidiary from these
               services is at least 150% of the taxable REIT subsidiary's
               direct cost of rendering the service.

          o    The Secretary of the Treasury has the power to waive the tax
               that would otherwise be imposed on redetermined rents if the
               REIT establishes to the satisfaction of the Secretary that rents
               charged to tenants were established on an arm's length basis
               even though a taxable REIT subsidiary provided services to the
               tenants.

     Redetermined deductions are deductions,  other than redetermined rents, of
a taxable REIT subsidiary if the amount of these  deductions would be decreased
on distribution,  apportionment or allocation to clearly reflect income between
the taxable REIT subsidiary and the REIT.  Excess interest means any deductions
for  interest  payments  made by a taxable REIT  subsidiary  to the REIT to the
extent that the interest  payments  exceed a  commercially  reasonable  rate of
interest.

FAILURE TO QUALIFY AS A REIT

     For any  taxable  year in which we fail to qualify  as a REIT and  certain
relief  provisions do not apply, we would be taxed at regular  corporate rates,
including  alternative  minimum  tax  rates  on  all  of  our  taxable  income.
Distributions  to our  shareholders  would not be deductible in computing  that
taxable income,  and distributions  would no longer be required to be made. Any
corporate  level taxes  generally would reduce the amount of cash available for
distribution to our shareholders  and, because the shareholders  would continue
to be taxed on the distributions  they receive,  the net after tax yield to the
shareholders from their investment likely would be reduced substantially.  As a
result,  failure  to qualify as a REIT  during  any  taxable  year could have a
material  adverse effect on an investment in our shares of common stock.  If we
lose our REIT status,  unless certain relief  provisions apply, we would not be
eligible to elect REIT status  again until the fifth  taxable year which begins
after the taxable  year during which our  election  was  terminated.  It is not
possible  to state  whether in all  circumstances  we would be entitled to this
statutory relief.

TAXATION OF TAXABLE U.S. SHAREHOLDERS

     Except as  discussed  below,  distributions  generally  will be taxable to
taxable U.S.  shareholders  as ordinary  income to the extent of our current or
accumulated  earnings  and profits.  We may generate  cash in excess of our net
earnings.  If we distribute  cash to  shareholders in excess of our current and
accumulated  earnings and profits (other than as a capital gain dividend),  the
excess cash will be deemed to be a return of capital to each shareholder to the
extent of the adjusted tax basis of the shareholder's shares.  Distributions in
excess of the  adjusted  tax  basis  will be  treated  as gain from the sale or
exchange of the shares. A shareholder who has received a distribution in excess
of our current and  accumulated  earnings and profits may, upon the sale of the
shares,  realize a higher  taxable  gain or a smaller loss because the basis of
the shares as reduced will be used for purposes of computing  the amount of the
gain or loss.  Distributions we make, whether  characterized as ordinary income
or as capital gains, are not eligible for the dividends  received deduction for
corporations.

     Dividends  we declare in  October,  November,  or December of any year and
payable to a shareholder  of record on a specified  date in any of these months
shall be treated as both paid by us and received by the shareholder on December
31 of that year,  provided we actually pay the dividend on or before January 31
of the  following  calendar  year.  Shareholders  may not  include in their own
income tax returns any of our net operating losses or capital losses.


                                      104




     Distributions that we properly designate as capital gain dividends will be
taxable to taxable U.S. shareholders as gains from the sale or disposition of a
capital asset to the extent that they do not exceed our actual net capital gain
for the taxable year.  Depending on the period of time the tax  characteristics
of the assets which produced these gains, and on certain designations,  if any,
which  we  may  make,  these  gains  may  be  taxable  to  non-corporate   U.S.
shareholders at a 15% or 25% rate. U.S. shareholders that are corporations may,
however,  be required to treat up to 20% of certain  capital gain  dividends as
ordinary income.

     We may elect to retain, rather than distribute as a capital gain dividend,
our net long-term capital gains. If we make this election,  we would pay tax on
our  retained  net  long-term  capital  gains.  In  addition,  to the extent we
designate, a U.S. shareholder generally would:

          o    include its proportionate share of our undistributed long-term
               capital gains in computing its long-term capital gains in its
               return for its taxable year in which the last day of our taxable
               year falls;

          o    be deemed to have paid the capital gains tax imposed on us on
               the designated amounts included in the U.S. shareholder's
               long-term capital gains;

          o    receive a credit or refund for the amount of tax deemed paid by
               it; and

          o    increase the adjusted basis of its shares of common stock by the
               difference between the amount of includable gains and the tax
               deemed to have been paid by it; and, in the case of a U.S.
               shareholder that is a corporation, appropriately adjust its
               earnings and profits for the retained capital gains in
               accordance with Treasury Regulations to be prescribed by the
               IRS.


     Distributions we make and gain arising from the sale or exchange by a U.S.
shareholder  of our  shares  will  not be  treated  as  income  from a  passive
activity, within the meaning of Section 469 of the Internal Revenue Code, since
income from a passive  activity  generally does not include  dividends and gain
attributable  to the  disposition  of property  that produces  dividends.  As a
result, U.S.  shareholders subject to the passive activity rules will generally
be  unable  to  apply  any  "passive  losses"  against  this  income  or  gain.
Distributions  we make,  to the  extent  they do not  constitute  a  return  of
capital,  generally  will be  treated as  investment  income  for  purposes  of
computing the  investment  interest  limitation.  Gain arising from the sale or
other disposition of our shares,  however, will be treated as investment income
if a shareholder so elects, in which case the capital gain is taxed at ordinary
income rates.

     Generally,  gain or loss realized by a shareholder upon the sale of shares
will be  reportable  as  capital  gain  or  loss.  In  general,  capital  gains
recognized by individuals and other non-corporate shareholders upon the sale or
disposition  of shares of common  stock will be  subject  to a maximum  federal
income tax rate of 15% if the shares of common  stock are held for more than 12
months, and will be taxed at ordinary income rates of up to 35% if the shares
of  common  stock  are  held  for  12  months  or  less.  Gains  recognized  by
shareholders  that are  corporations  are  subject to  federal  income tax at a
maximum rate of 35%,  whether or not  classified  as long-term  capital  gains.
Capital losses  recognized by a shareholder  upon the  disposition of shares of
common  stock  held for more than one year at the time of  disposition  will be
considered long-term capital losses, and are generally available only to offset
capital gain income of the  shareholder  but not ordinary income (except in the
case of individuals, who may offset up to $3,000 of ordinary income each year).
In addition,  if a shareholder  receives a long-term capital gain dividend from
us and has held the  shares for six months or less,  any loss  incurred  on the
sale or exchange of the shares is treated as a  long-term  capital  loss to the
extent of the corresponding long-term capital gain dividend received.



                                      105




     In any  year in  which  we fail to  qualify  as a REIT,  the  shareholders
generally  will  continue to be treated in the same  fashion  described  above,
except that none of our  dividends  will be eligible  for  treatment as capital
gains dividends, corporate shareholders will qualify for the dividends received
deduction and the shareholders  will not be required to report any share of our
tax preference items.

BACKUP WITHHOLDING


     We will  report to our  shareholders  and the IRS the amount of  dividends
paid during each  calendar  year and the amount of tax  withheld,  if any. If a
shareholder is subject to backup withholding, we will be required to deduct and
withhold from any dividends payable to that shareholder a tax equal to the rate
as provided under Section  3406(a)(1) of the Internal Revenue Code. These rules
may  apply  (1)  when  a  shareholder   fails  to  supply  a  correct  taxpayer
identification  number,  (2) when the IRS notifies us that the  shareholder  is
subject to the rules or has  furnished  an  incorrect  taxpayer  identification
number,  or (3) in the case of  corporations  or others within  certain  exempt
categories,   when  they  fail  to  demonstrate  that  fact  when  required.  A
shareholder that does not provide a correct taxpayer  identification number may
also be subject to penalties  imposed by the IRS. Any amount withheld as backup
withholding  may be  credited  against  the  shareholder's  federal  income tax
liability.  We also may be  required  to  withhold a portion  of  capital  gain
distributions  made to  shareholders  who  fail to  certify  their  non-foreign
status.

     The United  States  Treasury  issued its final  regulations  regarding the
withholding and information  reporting rules discussed  above. In general,  the
final  regulations do not alter the  substantive  withholding  and  information
reporting  requirements but unify current certification  procedures and clarify
reliance  standards.  The final  regulations  were generally made effective for
payments made on or after January 1, 2001, subject to certain transition rules.
Prospective  investors  should consult their own tax advisors  concerning these
final  regulations  and the  potential  effect on their  ownership of
common shares.


TAXATION OF TAX-EXEMPT ENTITIES


     In general,  a tax-exempt entity that is a shareholder will not be subject
to tax on  distributions  or gain realized on the sale of shares.  A tax-exempt
entity may be subject to unrelated  business  taxable income,  however,  to the
extent that it has financed  the  acquisition  of its shares with  "acquisition
indebtedness"  within the meaning of the Internal  Revenue Code. In determining
the number of  shareholders a REIT has for purposes of the "50% test" described
above under "-- REIT Qualification,"  generally,  any shares held by tax-exempt
employees' pension and profit sharing trusts which qualify under Section 401(a)
of the Internal  Revenue Code and are exempt from tax under  Section  501(a) of
the Internal Revenue Code ("qualified trusts") will be treated as held directly
by its beneficiaries in proportion to their interests in the trust and will not
be treated as held by the trust.


     A qualified  trust owning more than 10% of a REIT may be required to treat
a percentage of dividends  from the REIT as unrelated  business  taxable income
("UBTI").  The  percentage  is  determined  by dividing the REIT's gross income
(less direct  expenses  related  thereto)  derived  from an unrelated  trade or
business for the year (determined as if the REIT were a qualified trust) by the
gross income (less direct expenses related thereto) of the REIT for the year in
which the  dividends  are paid.  However,  if this  percentage is less than 5%,
dividends  are not  treated as UBTI.  These  UBTI rules  apply only if the REIT
qualifies  as a REIT  because of the  "look-thru"  rule with respect to the 50%
test  discussed  above and if the trust is  "predominantly  held" by  qualified
trusts.  A REIT is  predominantly  held by  qualified  trusts  if at least  one
pension trust owns more than 25% of the value of the REIT or a group of pension
trusts each owning more than 10% of the value of the REIT collectively own more
than 50% of the value of the REIT.  We do not  currently  meet  either of these
requirements.


                                      106





     For social clubs,  voluntary employee benefit  associations,  supplemental
unemployment  benefit  trusts and qualified  group legal  services plans exempt
from federal  income  taxation under Sections  501(c)(7),  (c)(9),  (c)(17) and
(c)(20) of the Internal Revenue Code,  respectively,  income from an investment
in our capital stock will  constitute  UBTI unless the  organization is able to
deduct an amount  properly set aside or placed in reserve for certain  purposes
so as to offset the UBTI  generated  by the  investment  in our capital  stock.
These  prospective  investors should consult their own tax advisors  concerning
the "set aside" and reserve requirements.


TAXATION OF FOREIGN INVESTORS

     The  rules  governing   federal  income  taxation  of  nonresident   alien
individuals,  foreign  corporations,  foreign  partnerships  and other  foreign
shareholders  are  complex and no attempt  will be made herein to provide  more
than a summary of such rules. Prospective non-U.S.  shareholders should consult
with their own tax advisors to determine the impact of federal, state and local
income  tax laws with  regard  to an  investment  in  shares  of common  stock,
including any reporting  requirements,  as well as the tax treatment of such an
investment under the laws of their home country.

     Dividends that are not attributable to gain from any sales or exchanges we
make of United States real property  interests and which we do not designate as
capital gain dividends  will be treated as dividends of ordinary  income to the
extent  that  they are made out of our  current  or  accumulated  earnings  and
profits.  Those dividends ordinarily will be subject to a withholding tax equal
to 30% of the gross  amount of the  dividend  unless an  applicable  tax treaty
reduces or eliminates that tax.  However,  if income from the investment in the
shares of common stock is treated as  effectively  connected  with the non-U.S.
shareholder's  conduct  of a United  States  trade or  business,  the  non-U.S.
shareholder  generally will be subject to a tax at graduated rates, in the same
manner as U.S. shareholders are taxed with respect to those dividends,  and may
also be subject to the 30% branch profits tax in the case of a shareholder that
is a foreign  corporation.  For  withholding  tax  purposes,  we are  currently
required  to  treat  all  distributions  as if  made  out  of our  current  and
accumulated  earnings and profits and thus we intend to withhold at the rate of
30%, or a reduced treaty rate if applicable,  on the amount of any distribution
(other than  distributions  designated  as capital  gain  dividends)  made to a
non-U.S.  shareholder  unless (1) the  non-U.S.  shareholder  files an IRS Form
W-8BEN  claiming  that  a  lower  treaty  rate  applies  or  (2)  the  non-U.S.
shareholder  files an IRS Form W-8ECI claiming that the dividend is effectively
connected income.

     Under  the  final   regulations,   which  were  generally   effective  for
distributions  on or after  January 1, 2001, we are not required to withhold at
the 30% rate on  distributions  we  reasonably  estimate to be in excess of our
current  and  accumulated  earnings  and  profits.  Dividends  in excess of our
current and  accumulated  earnings and profits are not taxable to a shareholder
to the extent that they do not exceed the adjusted  basis of the  shareholder's
shares,  but rather  will reduce the  adjusted  basis of those  shares.  To the
extent  that  those   dividends   exceed  the  adjusted  basis  of  a  non-U.S.
shareholder's  shares,  they will give rise to tax  liability  if the  non-U.S.
shareholder  would  otherwise  be  subject  to tax on any gain from the sale or
disposition of his shares,  as described  below.  If it cannot be determined at
the time a dividend  is paid  whether  or not a  dividend  will be in excess of
current and accumulated  earnings and profits,  the dividend will be subject to
such  withholding.  We do not  make  quarterly  estimates  of that  portion  of
dividends  that are in excess of earnings  and profits,  and, as a result,  all
dividends  will  be  subject  to  such  withholding.   However,   the  non-U.S.
shareholder may seek a refund of those amounts from the IRS.


     For any  year in  which  we  qualify  as a REIT,  distributions  that  are
attributable to gain from our sales or exchanges of United States real property
interests will be taxed to a non-U.S.  shareholder  under the provisions of the
Foreign  Investment  in  Real  Property  Tax Act of  1980,  commonly  known  as
"FIRPTA." Under FIRPTA, those dividends are taxed to a non-U.S.  shareholder as
if the gain were effectively connected with a United States business.  Non-U.S.



                                      107




shareholders would thus be taxed at the normal capital gain rates applicable to
U.S.  shareholders subject to applicable  alternative minimum tax and a special
alternative  minimum tax in the case of nonresident  alien  individuals.  Also,
dividends  subject to FIRPTA may be subject to a 30% branch  profits tax in the
hands of a corporate non-U.S.  shareholder not entitled to treaty exemption. We
are required by the Internal Revenue Code and applicable  Treasury  Regulations
to withhold  35% of any  dividend  that could be  designated  as a capital gain
dividend in connection with the sale of a United States real property interest.
This  amount is  creditable  against  the  non-U.S.  shareholder's  FIRPTA  tax
liability.

     Gain recognized by a non-U.S.  shareholder upon a sale of shares generally
will not be taxed  under  FIRPTA if we are a  "domestically  controlled  REIT,"
defined  generally as a REIT in which at all times  during a specified  testing
period less than 50% in value of the shares was held  directly or indirectly by
foreign  persons.  It is currently  anticipated that we will be a "domestically
controlled  REIT,"  and  therefore  the sale of shares  will not be  subject to
taxation  under  FIRPTA.  Because  the shares of common  stock will be publicly
traded,  however, no assurance can be given that we will remain a "domestically
controlled  REIT."  However,  gain not  subject to FIRPTA  will be taxable to a
non-U.S.  shareholder  if (1)  investment  in the  shares  of  common  stock is
effectively  connected with the non-U.S.  shareholder's  United States trade or
business,  in which case the non-U.S.  shareholder  will be subject to the same
treatment  as U.S.  shareholders  with  respect to that  gain,  and may also be
subject  to the 30%  branch  profits  tax in the case of a  corporate  non-U.S.
shareholder, or (2) the non-U.S.  shareholder is a nonresident alien individual
who was  present in the United  States for 183 days or more  during the taxable
year in which case the  nonresident  alien  individual will be subject to a 30%
withholding  tax  on  the  individual's   capital  gains.  If  we  were  not  a
domestically  controlled REIT, whether or not a non-U.S.  shareholder's sale of
shares  would be subject to tax under FIRPTA would depend on whether or not the
shares of common  stock  were  regularly  traded on an  established  securities
market  (such  as the  American  Stock  Exchange)  and on the  size of  selling
non-U.S.  shareholder's interest in our capital shares. If the gain on the sale
of shares were to be subject to taxation under FIRPTA, the non-U.S. shareholder
will be subject to the same treatment as U.S. shareholders with respect to that
gain (subject to applicable  alternative  minimum tax and a special alternative
minimum  tax in the case of  nonresident  alien  individuals  and the  possible
application of the 30% branch profits tax in the case of foreign  corporations)
and the purchaser of our shares of common stock may be required to withhold 10%
of the gross purchase price.


JOBS AND GROWTH TAX ACT

     On May 28, 2003,  the  President of the United  States signed into law the
Jobs and Growth Tax Relief  Reconciliation  Act of 2003,  referred to herein as
the Jobs and Growth Tax Act.  The Jobs and Growth Tax Act  reduces  the maximum
individual tax rate for long-term  capital gains generally from 20% to 15% (for
sales  occurring  after May 6, 2003 through  December 31,  2008).  The Jobs and
Growth Tax Act also taxes  "qualified  dividend  income" of  individuals as net
capital gain, thus reducing the maximum  individual tax rate for such dividends
to 15% (for tax years from 2003  through  2008).  "Qualified  dividend  income"
generally  includes  dividends  received  from  regular  corporations  and from
certain  "qualified  foreign  corporations,"  provided  certain  required stock
holding periods are met.

     Under the Jobs and Growth Tax Act, REIT dividends (other than capital gain
dividends)  generally  are not  qualifying  dividend  income and continue to be
taxed at  ordinary  rates.  Dividends  received  from a REIT will be  treated as
qualified  dividend  income,  however,  to  the  extent  the  REIT  itself  has
qualifying dividend income for the taxable year in which the dividend was paid,
such as dividends from taxable REIT subsidiaries, and designates such dividends
as qualifying  for such capital gains rate tax treatment.  Qualifying  dividend
income of a REIT for this  purpose  also  includes the sum of (i) the excess of
the REIT's "real estate  investment  trust  taxable  income" for the  preceding
year, which would typically include any income that the REIT did not distribute
to stockholders,  over the tax payable by the REIT on such income, and (ii) the
excess of the income of the REIT for the preceding year subject to the built-in
gain tax on certain assets acquired from C corporations,  including as a result
of the  conversion  of a C corporation  to a REIT,  over the tax payable by the
REIT on any such income in the preceding year.



                                      108





     Assuming that we distribute all of our taxable income to our stockholders,
our  distributions  generally  will not be eligible for the new 15% tax rate on
dividends for individual  taxpayers except to the extent attributable to income
on which we have paid tax as  discussed  above or to  dividends  received by us
from non-REIT corporations such as taxable REIT subsidiaries.  As a result, our
ordinary  REIT  distributions  generally  will be taxed at the higher tax rates
applicable to ordinary income.

     Without future  congressional  action,  the maximum individual tax rate on
long-term capital gains will return to 20% in 2009, and the maximum  individual
tax rate on dividends will move to 35% in 2009 and 39.6% in 2011.



STATE AND LOCAL TAXES

     We, and our  shareholders,  may be subject to state or local  taxation  in
various  state  or  local  jurisdictions,  including  those in which it or they
transact  business or reside.  Consequently,  prospective  shareholders  should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in our capital shares.


                                      109



                          CERTAIN ERISA CONSIDERATIONS


     Each  prospective  investor that is (i) an ERISA Plan,  (ii) a plan within
the meaning of Section  4975(e)(1) of the Internal  Revenue Code  (including an
IRA and a Keogh Plan) or (iii) a person  investing  assets of any ERISA Plan or
plan whose assets are deemed to include plan assets should consider the matters
described below in determining  whether to invest in our capital  shares.  Such
ERISA Plans, plans and persons are referred to herein as "Plans."


GENERAL FIDUCIARY RULES

     Investments  by ERISA Plans and persons whose assets are deemed to include
plan assets are subject to ERISA's general  fiduciary  requirements,  including
the  requirements  of  investment  prudence and  diversification,  requirements
respecting the delegation of investment  authority and the requirement  that an
ERISA Plan's investment be made in accordance with the documents  governing the
Plan. Plan  fiduciaries  must give  appropriate  consideration  to, among other
things,  the role that an  investment  in our capital  shares has in the Plan's
investment portfolio, taking into account the Plan's purposes, the risk of loss
and the potential return in respect of such investment,  the composition of the
Plan's  portfolio,  the  liquidity  and current  return of the total  portfolio
relative  to the  anticipated  cash flow needs of the Plan,  and the  projected
return of the portfolio relative to the Plan's funding  objectives.  Keogh Plan
and IRA  investors  should also  consider  whether an investment in our capital
shares is appropriate for their Keogh Plans or IRAs.

PLAN ASSETS


     Regulations  issued  by the U.S.  Department  of Labor  (the  "Plan  Asset
Regulations")  describe what  constitutes  the assets of a Plan for purposes of
various  provisions of ERISA and Section 4975 of the Internal Revenue Code when
a Plan makes an equity  investment  in an entity such as an  investment  in our
capital  shares.  The U.S.  Department  of Labor has  generally  stated that an
investment  by a plan in  securities  (within the  meaning of section  3(20) of
ERISA) of a  corporation  or  partnership  will  not,  solely by reason of such
investment,  be considered to be an investment in the underlying assets of such
corporation  or  partnership  so as to make  such  assets of the  entity  "plan
assets" and thereby make a subsequent transaction between the party in interest
and the corporation or partnership a prohibited  transaction  under Section 406
of ERISA.  The Plan Asset  Regulations  provide  that the assets of entities in
which retirement plans make equity investments will be treated as "plan assets"
unless  such  investments  are  (1)  in  publicly  offered  securities,  (2) in
securities  offered by an investment  company  registered  under the Investment
Company Act of 1940,  or (3) within one of the other  specific  exemptions  set
forth in the Plan Asset Regulations.  Since we are not a registered  investment
company,  the exemption contained in the Plan Asset Regulations which may apply
to an  investment  in our  capital  shares is that it may be an  investment  in
"publicly offered  securities," defined generally as interests which are freely
transferable,  widely-held  and  registered  with the  Securities  and Exchange
Commission  or an  investment  in which equity  participation  by "benefit plan
investors" is not significant.  The Plan Asset Regulations  provide that equity
participation in an entity by benefit plan investors is "significant" if at any
time  25% or more of the  value  of any  class of  equity  interest  is held by
benefit plan  investors.  The term "benefit plan  investors" is broadly defined
for this  purpose to include  any  employee  pension or welfare  benefit  plan,
whether or not subject to ERISA,  any plan  described in Section  4975(e)(1) of
the Internal Revenue Code and any entity whose  underlying  assets include plan
assets  by  reason  of  plan  investment  in the  entity.  We may  have  equity
participation in this offering by "benefit plan investors" that is significant,
as  defined  above.  Therefore,  we may  not  qualify  for  the  exemption  for
investments  in which equity  participation  by benefit  plan  investors is not
significant.



                                      110




PLAN ASSET REGULATIONS - PUBLICLY OFFERED SECURITIES EXEMPTION

     As  noted  above,  if  a  retirement  plan  acquires   "publicly   offered
securities,"  the assets of the issuer of the  securities  are not deemed to be
plan  assets  under the Plan Asset  Regulations.  The  definition  of  publicly
offered securities requires that such securities must be "widely-held," "freely
transferable" and must satisfy certain registration  requirements under federal
securities laws. Although we should satisfy the registration requirements under
this definition,  the determinations of whether a security is "widely-held" and
"freely  transferable"  are inherently  factual  matters.  Under the Plan Asset
Regulations,  a class of securities will be  "widely-held" if it is held by 100
or more persons. We anticipate that this requirement will be met; however, even
if  the  shares  are  deemed  to  be  widely-held,  the  "freely  transferable"
requirement  must also be satisfied in order to qualify for this exemption.  We
intend to satisfy  the freely  transferable  requirement  set forth in the Plan
Asset Regulations with respect to our shares.  Because of the factual nature of
such a  determination,  however,  and the lack of  further  guidance  as to the
meaning of the term "freely  transferable,"  there can be no assurance  that we
will, in fact, qualify for this exemption.

PROHIBITED TRANSACTIONS


     ERISA generally prohibits a fiduciary from causing an ERISA Plan to engage
in a broad  range of  transactions  involving  the assets of the ERISA Plan and
persons  having a specified  relationship  to the Plan  ("parties in interest")
unless a statutory or administrative  exemption applies.  Similar  prohibitions
are contained in Section 4975 of the Internal  Revenue Code and generally apply
with respect to ERISA Plans,  Keogh Plans, IRAs, and other Plans. An excise tax
may be imposed pursuant to Section 4975 of the Internal Revenue Code on persons
having a specified relationship with a Plan ("disqualified persons") in respect
of  prohibited  transactions  involving  the  assets  of  the  Plan.  Generally
speaking,  parties in interest  for  purposes  of ERISA  would be  disqualified
persons under Section 4975 of the Internal Revenue Code.

     If our assets are  treated for  purposes of ERISA and Section  4975 of the
Internal  Revenue  Code as the assets of the Plans that  invest in our  capital
shares due to the fact that we fail to satisfy the publicly offered  securities
exception, certain transactions that we might enter into in the ordinary course
of our business might constitute "prohibited  transactions" under ERISA and the
Internal Revenue Code, thereby potentially  subjecting fiduciaries of the Plans
to personal  liability  and civil  penalties and  potentially  resulting in the
imposition of an excise tax under Section 4975 of the Internal  Revenue Code on
the  disqualified  person  that is party to the  transaction  with us  unless a
statutory  or  administrative  exemption  exist  and  the  plan  satisfies  all
conditions for such exemptive relief.


     There are five class  exemptions  issued by the  Department  of Labor that
could apply in the event of a prohibited transaction. These Department of Labor
Prohibited Transaction Class Exemptions apply to:

          o    plan asset transactions determined by independent qualified
               professional asset managers (PTE 84-14),

          o    certain transactions involving bank collective investment funds
               (PTE 91-38),

          o    certain transactions involving insurance company pooled separate
               accounts (PTE 90-1),

          o    certain transactions involving insurance company general
               accounts (PTE 95-60), and

          o    plan asset transactions determined by in-house asset manager
               (PTE 96-23).

         However, there is no assurance that these exemptions or any other
exemption will apply, even if all of the conditions specified are satisfied.


                                      111




GOVERNMENTAL PLANS

     Although  federal,  state and  local  governmental  pension  plans are not
subject to ERISA,  applicable  provisions of federal and state law may restrict
the type of  investments  such a plan may make or  otherwise  have an impact on
such a plan's ability to invest in our capital shares.  Accordingly,  state and
local  governmental  pension  plans  considering  an  investment in our capital
shares should consult with their counsel regarding their proposed investment in
our capital shares.

SPECIAL CONSIDERATIONS FOR INSURANCE COMPANIES

     An insurance  company  considering an investment  should consider  whether
it's general  account may be deemed to include assets of the plans investing in
the general account, for example,  through the purchase of an annuity contract.
In John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510
U.S. 86 (1993),  the United  States  Supreme  Court held that assets held in an
insurance  company's  general  account  may be deemed to be plan  assets  under
certain circumstances. In that event, the insurance company might be treated as
a party in interest under such plans.  However, PTE 95-60 (described above) may
exempt  some or all of the  transactions  that could occur as the result of the
acquisition  of our capital  shares by an insurance  company  general  account.
Therefore,  insurance company investors should analyze whether John Hancock and
PTE  95-60 or any other  exemption  may have an  impact  on their  decision  to
purchase our capital shares.


     In addition,  the Small  Business Job  Protection  Act of 1996 added a new
Section  401(c) of ERISA  relating  to the  status of the  assets of  insurance
company general  accounts under ERISA and Section 4975 of the Internal  Revenue
Code.  Pursuant  to  Section  401(c),  the  Department  of Labor  issued  final
regulations  effective January 5, 2000 (the "General Account Regulations") with
respect to insurance  policies  issued on or before  December 31, 1998 that are
supported by an insurer's  general account.  As a result of these  regulations,
assets of an  insurance  company  general  account will not be treated as "plan
assets" for purposes of the  fiduciary  responsibility  provisions of ERISA and
Section 4975 of the Internal  Revenue Code to the extent such assets  relate to
contracts  issued to employee  benefit plans on or before December 31, 1998 and
the insurer  satisfies various  conditions.  The plan asset status of insurance
company  separate  accounts is unaffected by new Section  401(c) of ERISA,  and
separate  account assets  continue to be treated as the plan assets of any such
plan invested in a separate account.

     THE FOREGOING  DISCUSSION OF ERISA AND INTERNAL REVENUE CODE ISSUES SHOULD
NOT BE CONSTRUED AS LEGAL ADVICE. FIDUCIARIES OF PLANS SHOULD CONSULT THEIR OWN
COUNSEL WITH  RESPECT TO ISSUES  ARISING  UNDER ERISA AND THE INTERNAL  REVENUE
CODE AND MAKE THEIR OWN  INDEPENDENT  DECISION  REGARDING AN  INVESTMENT IN OUR
COMMON SHARES.



                                      112



                              PLAN OF DISTRIBUTION

GENERAL

     We are  offering  a maximum  of  4,000,000  shares to the  public  through
Participating  Dealers,  as defined  below.  The shares are being  offered at a
price of $10.00 per share on a "best efforts" basis, which means generally that
the  Participating  Dealers  will be required to use only their best efforts to
sell the shares and they have no firm  commitment or obligation to purchase any
of the shares.  We are also  offering  400,000  shares for sale pursuant to our
dividend reinvestment plan at a price of $10.00 per share. We reserve the right
in the future to reallocate additional shares to our dividend reinvestment plan
out of our public offering shares.  Therefore,  a total of 4,400,000 shares are
being registered in this offering.


     The offering of these shares will  terminate on or before August __, 2004.
However,  we  reserve  the right to extend  the  offering  until not later than
August  __,  2005  in  any  state  that  allows  us  to  extend  the  offering.



UNDERWRITING COMPENSATION AND TERMS


     Except as provided below, the  Participating  Dealers will receive selling
commissions  of 7.5% of the gross  offering  proceeds.  The Dealer Manager will
receive 2.5% of the gross offering proceeds in the form of a dealer manager fee
as compensation  for acting as the Dealer Manager and for expenses  incurred in
connection with marketing our shares.  We will not pay referral or similar fees
to  any  accountants,  attorneys  or  other  persons  in  connection  with  the
distribution  of the  shares.  Shareholders  who  elect to  participate  in the
dividend  reinvestment  plan will be  charged  selling  commissions  and dealer
manager fees on shares purchased pursuant to the dividend  reinvestment plan on
the same basis as  shareholders  purchasing  shares other than  pursuant to the
dividend reinvestment plan.

     The Dealer Manager will select other broker-dealers who are members of the
NASD  (Participating  Dealers) to sell our shares.  In the event of the sale of
shares by such  Participating  Dealers,  the Dealer  Manager  may  reallow  its
commissions in the amount of up to 7.5% of the gross offering  proceeds to such
Participating Dealers. In addition, the Dealer Manager may reallow a portion of
its dealer manager fee to  Participating  Dealers in the aggregate amount of up
to 1.0% of gross offering proceeds to be paid to such Participating  Dealers as
marketing fees, or to reimburse  representatives of such Participating  Dealers
the costs and expenses of attending our educational conferences and seminars.

     In   addition,   unless   otherwise   agreed  with  the  Dealer   Manager,
Participating  Dealers will be reimbursed by AmREIT for bona fide due diligence
expenses, not to exceed 0.5% of gross offering proceeds in the aggregate.


     Investors  may agree  with  their  broker-dealer  to reduce  the amount of
selling  commissions  payable  with respect to the sale of their shares down to
zero  (1) in the  event  that  the  investor  has  engaged  the  services  of a
registered investment advisor or other financial advisor with whom the investor
has  agreed to pay  compensation  for  investment  advisory  services  or other
financial  or  investment  advice,  or (2) in the event  that the  investor  is
investing  in a bank  trust  account  with  respect to which the  investor  has
delegated the decision-making  authority for investments made in the account to
a bank trust  department.  The net  proceeds  to AmREIT will not be affected by
reducing the commissions payable in connection with such transactions.

     Neither the Dealer Manager nor its affiliates  will  compensate any person
engaged as an investment  advisor by a potential  investor as an inducement for
such  investment  advisor  to advise  favorably  for an  investment  in AmREIT.


                                      113




SUBSCRIPTION PROCEDURES

     You should pay for your shares by check payable to "AmREIT." Subscriptions
will be effective only upon our acceptance,  and we reserve the right to reject
any  subscription  in whole or in part.  We may not accept a  subscription  for
shares  until at least  five  business  days  after the date you  receive  this
prospectus. You will receive a confirmation of your purchase. We will initially
deposit the  subscription  proceeds in an  interest-bearing  account with Wells
Fargo  Bank.  Subscribers  may not  withdraw  funds from the  account.  We will
withdraw funds from the account periodically for the acquisition of real estate
properties,  the payment of fees and expenses or other investments  approved by
our board of trust  managers.  We generally  admit  shareholders to AmREIT on a
daily basis.

     Except  for  purchases  pursuant  to our  dividend  reinvestment  plan  or
reinvestment  plans  of  other  public  real  estate  programs,   all  accepted
subscriptions  will be for  whole  shares  and for not  less  than  500  shares
($5,000) for  non-qualified  accounts,  or 300 shares  ($3,000)  for  qualified
accounts. See "Suitability Standards." Except in Maine, Minnesota, Nebraska and
Washington,  investors who have satisfied the minimum purchase  requirement and
have purchased  units or shares in AmREIT  programs or units or shares in other
public real estate programs may purchase less than the minimum number of shares
discussed above,  provided that such investors purchase a minimum of 2.5 shares
($25). After investors have satisfied the minimum purchase requirement, minimum
additional purchases must be in increments of at least 2.5 shares ($25), except
for purchases made pursuant to our dividend  reinvestment  plan or reinvestment
plans of other public real estate programs.


     The proceeds of this offering will be used only for the purposes set forth
in the "Estimated Use of Proceeds"  section of this  prospectus.  Subscriptions
will be  accepted  or  rejected  within 30 days of  receipt by AmREIT  and,  if
rejected,  all funds shall be returned to the  rejected  subscribers  within 10
business  days.  The Dealer  Manager  and each  Participating  Dealer who sells
shares on behalf of AmREIT  have the  responsibility  to make every  reasonable
effort to determine that the purchase of shares is appropriate for the investor
and  that  the  requisite  suitability  standards  are  met.  See  "Suitability
Standards." In making this determination, the Participating Dealer will rely on
relevant information provided by the investor,  including information as to the
investor's age,  investment  objectives,  investment  experience,  income,  net
worth, financial situation, other investments, and other pertinent information.
Each investor should be aware that the Participating Dealer will be responsible
for determining suitability.


     The Dealer Manager or each Participating  Dealer shall maintain records of
the information  used to determine that an investment in shares is suitable and
appropriate for an investor.  These records are required to be maintained for a
period of at least six years.


                                      114




                          SUPPLEMENTAL SALES MATERIAL

     In addition to this  prospectus,  we may utilize certain sales material in
connection with the offering of the shares,  although only when  accompanied by
or preceded by the delivery of this prospectus. In certain jurisdictions,  some
or all of such sales  material may not be available.  This material may include
information relating to this offering, our past performance, property brochures
and articles and publications  concerning real estate.  In addition,  the sales
material may contain certain quotes from various publications without obtaining
the consent of the author or the  publication for use of the quoted material in
the sales material.

     The offering of shares is made only by means of this prospectus.  Although
the information  contained in such sales material will not conflict with any of
the information contained in this prospectus, such material does not purport to
be  complete,  and should not be  considered a part of this  prospectus  or the
registration  statement of which this  prospectus is a part, or as incorporated
by reference in this  prospectus or said  registration  statement or as forming
the basis of the offering of the shares.

                                    EXPERTS


GENERAL


     The consolidated  financial statements and related consolidated  financial
statement  schedule  of AmREIT as of and for the year ended  December  31, 2002
have been audited by KPMG LLP, independent  auditors, as stated in their report
appearing herein, and have been so included in reliance upon the report of such
firm given upon their authority in accounting and auditing.

     The consolidated  financial statements and related consolidated  financial
statement  schedule  of AmREIT as of and for the year ended  December  31, 2001
have been audited by Deloitte & Touche LLP, independent  auditors, as stated in
their reports appearing herein,  and have been so included in reliance upon the
report of such firm given upon their  authority  as experts in  accounting  and
auditing.

CHANGE IN ACCOUNTANTS


     In December 2002, AmREIT changed its independent  public  accountants from
Deloitte & Touche LLP to KPMG LLP.  The change was made by the audit  committee
of our board.  In  connection  with making this change,  management  sought and
received  proposals  from three  independent  public  accounting  firms.  These
proposals  were  submitted to the audit  committee,  which selected KPMG LLP as
AmREIT's new auditors.

     Deloitte  &  Touche's  reports  on  the  AmREIT's  consolidated  financial
statements for the latest two fiscal years ended December 31, 2001 and December
31, 2000 did not contain an adverse  opinion or  disclaimer of opinion and were
not qualified as to uncertainty,  audit scope or accounting principles.  During
AmREIT's  fiscal  years  ended  December  31,  2001 and  December  31, 2000 and
subsequent interim periods preceding the dismissal, there were no disagreements
with  Deloitte & Touche on any matter of  accounting  principles  or practices,
financial   statement   disclosure  or  auditing  scope  or  procedure,   which
disagreement,  if not resolved to the satisfaction of Deloitte & Touche,  would
have caused it to make reference to the subject matter of the  disagreement  in
connection  with its reports.  During the two most recent  fiscal years and the
subsequent  interim period through  December 12, 2002, there were no reportable
events.

     On December 12, 2002, AmREIT engaged KPMG LLP to audit AmREIT's  financial
statements  for the year ending  December  31, 2002.  During  AmREIT's two most
recent  fiscal years ended  December  31, 2001 and  December 31, 2000,  and the
subsequent  interim  period through  December 12, 2002,  AmREIT did not consult
with  KPMG  LLP  regarding  any of the  matters  or  events  set  forth in Item
304(a)(2)(i) or (ii) of Regulation S-K



                                      115



                                 LEGAL OPINIONS


     The  legality of the shares being  offered  hereby has been passed upon by
Locke  Liddell & Sapp LLP,  Dallas,  Texas.  The  statements  under the caption
"Federal Income Tax  Consequences" as they relate to federal income tax matters
have been  reviewed by Locke  Liddell & Sapp LLC, and Locke  Liddell & Sapp LLP
has opined as to certain  income tax matters  relating to an  investment in the
company. Locke Liddell & Sapp LLP has represented affiliates of AmREIT in other
matters and may continue to do so in the future.


                             ADDITIONAL INFORMATION


     We have filed with the SEC, Washington,  D.C., a registration statement on
Form S-11 under the  Securities  Act of 1933,  as amended,  with respect to the
shares offered  pursuant to this  prospectus.  This prospectus does not contain
all the  information set forth in the  registration  statement and the exhibits
related thereto filed with the SEC,  reference to which is hereby made.  Copies
of the registration statement and exhibits related thereto, as well as periodic
reports and  information  filed by AmREIT may be obtained  upon  payment of the
fees  prescribed  by the SEC,  or may be  examined  at the  offices  of the SEC
without  charge,  at the public  reference  facility  in  Washington,  D.C.  at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,  D.C. 20549. In
addition,  the SEC  maintains a Web site at  http://www.sec.gov  that  contains
reports,  proxy and  information  statements  and other  information  regarding
registrants that file electronically with the SEC.



                                    GLOSSARY




     The following are definitions of certain terms used in this prospectus:

     "Affiliate" means (1) any person or entity directly or indirectly  through
one or more intermediaries controlling,  controlled by, or under common control
with another person or entity;  (2) any person or entity directly or indirectly
owning,  controlling,  or  holding  with  power  to  vote  10% or  more  of the
outstanding  voting  securities of another  person or entity;  (3) any officer,
director,  partner,  or trustee of such person or entity; (4) any person 10% or
more of whose  outstanding  voting securities are directly or indirectly owned,
controlled or held,  with power to vote, by such other person;  and (5) if such
other person or entity is an officer, director, partner, or trustee of a person
or entity,  the person or entity  for which such  person or entity  acts in any
such capacity.

     "AmREIT" means AmREIT,  a Texas real estate  investment  trust, and unless
otherwise  indicated  to the  contrary,  the  Predecessor  Corporation  and all
subsidiaries of AmREIT.

     "AmREIT  Decision  Logic" means a system of analysis for properties  being
reviewed by AmREIT,  consisting of 25 specific factors,  including  demographic
studies, traffic flow review, environmental review, site planning and financial
analysis.

     "ARIC"  means  AmREIT  Realty  Investment   Corporation,   a  wholly-owned
subsidiary of AmREIT.



                                      116





     "Board of Trust Managers" means the Trust Managers of AmREIT.

     "Bylaws" means the bylaws of AmREIT.

     "Class A Common Shares" means the Class A Common  Shares,  par value $0.01
per share, of AmREIT.

     "Class B Common Shares" means the Class B Common  Shares,  par value $0.01
per share, of AmREIT.

     "Class C Common Shares" means the Class C Common  Shares,  par value $0.01
per share, of AmREIT.

     "Common  Shares"  means any class or series of common shares of beneficial
interest, par value $0.01, of AmREIT.

     "Credit  Facility"  means AmREIT's $20 million  unsecured  credit facility
with Wells Fargo Bank, N.A., as lender.

     "CTL" means single tenant, free standing, credit tenant leased properties.

     "Dealer Manager" means AmREIT Securities Corp., a wholly-owned  subsidiary
of AmREIT.

     "Dividend  Reinvestment Plan" means the Dividend Reinvestment Plan, in the
form attached hereto as Exhibit .

     "ERISA"  means the Employee  Retirement  Income  Security Act of 1974,  as
amended.

     "ERISA  Plan"  means  a  pension,  profit-sharing,  retirement,  or  other
employee benefit plan subject to ERISA.

     "FCP" means multi-tenant frontage commercial properties.

     "FFO" means Funds from Operations.

     "FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980, as
amended

     "Former Advisor" means American Asset Advisors Realty  Corporation,  which
was  wholly-owned by H. Kerr Taylor,  AmREIT's  Chairman of the Board and Chief
Executive Officer.

     "Funds IX, X and XI" means,  collectively,  AAA Net Realty Fund IX,  Ltd.,
AAA Net Realty Fund X, Ltd. and AAA Net Realty Fund XI, Ltd.

     "Internal  Revenue  Code"  means the  Internal  Revenue  Code of 1986,  as
amended.

     "Interested  Shareholder" means any person who beneficially owns, directly
or indirectly, 10% or more of the voting power of AmREIT's shares.



                                      117





     "IRAs" means individual retirement accounts.

     "IRS" means the Internal Revenue Service.

     "Joint   Ventures"   means  the  joint  venture  or  general   partnership
arrangements  in which AmREIT is a  co-venturer  or general  partner  which are
established to acquire properties.

     "NAREIT" means the National Association of Real Estate Investment Trusts.

     "NASAA  Guidelines"  means the Statement of Policy  Regarding  Real Estate
Programs of the North  American  Securities  Administrators  Association,  Inc.
adopted on October 9 and 12, 1988, effective January 1, 1989, as amended.

     "NASD" means the National Association of Securities Dealers, Inc.

     "Net  Asset  Value"  means  the  value  of  AmREIT's  total  assets  (less
intangibles)  based on market  capitalization  rates and  current  year  rental
income,  as  determined  by the  Board  of  Trust  Managers,  before  deducting
depreciation or other non-cash reserves, less total liabilities,  calculated at
the end of each quarter on a basis consistently applied.

     "Net Lease"  generally means a property lease pursuant to which the tenant
is responsible for property costs associated with ongoing operations, including
repairs, maintenance, property taxes, utilities and insurance.

     "Offering  Expenses"  means  any and all costs and  expenses,  other  than
Selling   Commissions,   the  marketing  support  fee,  due  diligence  expense
reimbursements,  and the fee payable to the Dealer Manager  incurred by AmREIT,
or any Affiliate,  in connection  with the  qualification  and  registration of
AmREIT  and the  marketing  and  distribution  of  shares,  including,  without
limitation,  the  following:  legal,  accounting,  and escrow  fees;  printing,
amending, supplementing, mailing, and distributing costs; filing, registration,
and qualification  fees and taxes; fax and telephone costs; and all advertising
and   marketing   expenses,   including  the  costs  related  to  investor  and
broker-dealer  sales  meetings.   The  Offering  Expenses  paid  by  AmREIT  in
connection with the offering,  together with the 7.5% Selling Commissions,  the
marketing  support  fee, due  diligence  expense  reimbursements,  and 2.5% fee
payable to the Dealer  Manager,  incurred  by AmREIT will not exceed 12% of the
proceeds raised in connection with this offering.

     "Ownership  Limit"  means,  with  respect to Common  Shares and  Preferred
Shares,  the percent  limitation  placed on the  ownership of Common Shares and
Preferred Shares by any one person.  As of the initial date of this prospectus,
the Ownership  Limit is 9.0% of the  outstanding  Common Shares and 9.9% of the
outstanding Preferred Shares.

     "Participants"  means those  shareholders  who elect to participate in the
Dividend Reinvestment Plan.

     "Participating Dealers" means those broker-dealers that are members of the
NASD, or that are exempt from broker-dealer  registration,  and that, in either
case,  enter  into  participating  broker or other  agreements  with the Dealer
Manager to sell shares.



                                      118





     "Partnerships" means the ten real estate limited partnerships under common
management that are Affiliates of AmREIT.

     "Plan"  means ERISA Plans,  IRAs,  Keogh  plans,  stock bonus  plans,  and
certain other plans.

     "Plan Asset Regulations"  means regulations issued by the U.S.  Department
of Labor  describing  what  constitutes  the assets of a Plan for  purposes  of
various provisions of ERISA.

     "Predecessor Corporation" means AmREIT, Inc., a Maryland corporation.

     "Preferred  Shares"  means  any class or  series  of  preferred  shares of
beneficial interest,  par value $0.01 per share of AmREIT that may be issued in
accordance with the terms of our articles of incorporation and applicable law.

     "Prospectus"  means  the  final  prospectus   included  in  the  Company's
registration  statement filed with the SEC,  pursuant to which the Company will
offer  Class C Common  Shares  to the  public,  as the same may be  amended  or
supplemented  from time to time after the  effective  date of the  registration
statement.

     "Qualified Plans" means qualified pension, profit-sharing, and share bonus
plans, including Keogh plans and IRAs.

     "Reinvestment  Agent"  means the  independent  agent,  which  currently is
_________, for Participants in the Dividend Reinvestment Plan.

     "Reinvestment  Proceeds"  means net  proceeds  available  from the sale of
shares under the Dividend Reinvestment Plan to redeem shares.

     "REIT" means real estate investment trust, as defined pursuant to Sections
856 through 860 of the Internal Revenue Code.

     "SEC" means the Securities and Exchange Commission.

     "Selling   Commissions"   means  any  and  all   commissions   payable  to
underwriters,  managing dealers, or other broker-dealers in connection with the
sale of shares as described in this prospectus,  including, without limitation,
commissions payable to the Participating Dealers.

     "Subscription   Agreement'  means  the  Subscription   Agreement  and  the
Subscription  Agreement Signature Page, in the forms attached hereto as Exhibit
..

     "TRA" means the Texas Real Estate Investment Trust Act, as amended.


     "Trust Manager" means a member of the board of trust managers of AmREIT.


     "UBTI" means unrelated business taxable income, as that term is defined in
Sections 511 through 514 of the Internal Revenue Code.



                                     119









                       CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

                        AND FINANCIAL STATEMENT SCHEDULE
                      FOR THE YEAR ENDED DECEMBER 31, 2002

                            AMREIT AND SUBSIDIARIES











                            AMREIT AND SUBSIDIARIES
                         INDEX TO FINANCIAL STATEMENTS



                                                                                                                   Page
FINANCIAL STATEMENTS FOR THE
  THREE MONTHS ENDED MARCH 31, 2003 AND 2002:
                                                                                                                
     Consolidated Balance Sheets as of March 31, 2003 (unaudited)
        and December 31, 2002....................................................................................
     Consolidated Statements of Operations for the three months
        ended March 31, 2003 and 2002 (unaudited)................................................................
     Consolidated Statements of Shareholders' Equity for the three
        months ended March 31, 2003 and 2002 (unaudited).........................................................
     Consolidated Statements of Cash Flows for the three months
        ended March 31, 2003 and 2002 (unaudited)................................................................
     Notes to Consolidated Financial Statements for the three months
        ended March 31, 2003 and 2002............................................................................



FINANCIAL STATEMENTS FOR THE YEARS
  ENDED DECEMBER 31, 2002 AND 2001:

     Independent Auditors' Report................................................................................
     Independent Auditors' Report................................................................................
     Consolidated Balance Sheet, December 31, 2002...............................................................
     Consolidated Statements of Operations for the Years Ended
        December 31, 2002 and 2001...............................................................................
     Consolidated Statements of Shareholders' Equity
        for the Years Ended December 31, 2002 and 2001...........................................................
     Consolidated Statements of Cash Flows for the Years Ended
        December 31, 2002 and 2001...............................................................................
     Notes to Consolidated Financial Statements for the Years Ended
        December 31, 2002 and 2001...............................................................................


FINANCIAL STATEMENT SCHEDULE:

     Schedule III Consolidated Real Estate Owned and Accumulated
        Depreciation for the Year Ended December 31, 2002........................................................





All other financial statement schedules are omitted as the required information
is either inapplicable or is included in the financial statements or related
notes.




                           AMREIT AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   March 31,
                                  (unaudited)



 ASSETS                                                                                               2003
                                                                                             
 Property:
   Land                                                                                         $21,631,162
   Buildings                                                                                     28,765,695
   Tenant improvements                                                                              239,486
   Furniture, fixtures and equipment                                                                211,465
                                                                                                 __________
                                                                                                 50,847,808
                                                                                                 __________
   Accumulated depreciation                                                                      (2,327,147)
                                                                                                 __________
     Total property, net                                                                         48,520,661
                                                                                                 __________

 Net investment in direct financing leases                                                       23,388,264

 Cash and cash equivalents                                                                          825,560
 Accounts receivable                                                                                135,639
 Accounts receivable - related party                                                                124,843
 Escrow deposits                                                                                     45,176
 Prepaid expenses, net                                                                              424,619

 Other assets:
   Preacquisition costs                                                                              28,478
   Loan acquisition cost, net of $92,981 in accumulated amortization                                242,171
   Accrued rental income                                                                            409,581
   Intangible lease cost, net of $31,524 in accumulated amortization                                226,075
   Investment in non-consolidated affiliates                                                        711,106
                                                                                                 __________
     Total other assets                                                                           1,617,411
                                                                                                 __________
 TOTAL ASSETS                                                                                   $75,082,173
                                                                                                 ==========
 LIABILITIES AND SHAREHOLDERS' EQUITY
 Liabilities:
   Notes payable                                                                                $35,852,721
   Accounts payable                                                                                 578,295
   Accounts payable - related party                                                                 172,137
   Security deposit                                                                                  41,731
   Prepaid rent                                                                                       6,177
                                                                                                 __________
     TOTAL LIABILITIES                                                                           36,651,061
                                                                                                 __________

 Minority interest                                                                                  782,440

 Shareholders' equity:
   Preferred shares, $.01 par value, 10,000,000 shares authorized, none issued
     Class A Common shares, $.01 par value, 50,000,000 shares authorized,
     2,869,187 shares issued                                                                         28,692
   Class B Common shares, $.01 par value, 3,000,000 shares authorized,
     2,432,729 shares issued                                                                         24,328
   Capital in excess of par value                                                                47,182,617
   Accumulated distributions in excess of earnings                                               (8,728,632)
   Deferred compensation                                                                           (298,244)
   Cost of treasury shares, 90,322 shares                                                          (560,089)
                                                                                                 __________
     TOTAL SHAREHOLDERS' EQUITY                                                                  37,648,672
                                                                                                 __________
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                     $75,082,173
                                                                                                 ==========




 See Notes to Condensed Consolidated Financial Statements.




                            AMREIT AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (unaudited)


                                                                             Quarter ended March 31,
                                                                               2003           2002
                                                                                     
 Revenues:
   Rental income from operating leases                                     $1,232,740      $ 706,740
   Earned income from direct financing leases                                 598,720        191,182
   Service fees and other income                                              210,997        480,032
   Management fees                                                             57,631         91,130
   Income from non-consolidated affiliates                                     40,305        282,042
   Interest income                                                              1,839          1,014
                                                                            _________      _________
     Total revenues                                                         2,142,232      1,752,140
                                                                            _________      _________
 Expenses:
   General operating and administrative                                       774,686        778,982
   Legal and professional                                                     169,177        194,506
   Interest                                                                   551,441        253,648
   Depreciation and amortization                                              222,303        126,848
                                                                            _________      _________
     Total expenses                                                         1,717,607      1,353,984
                                                                            _________      _________
 Income before federal income taxes and minority
   interest in net income of consolidated joint ventures                      424,625        398,156

 Federal income tax benefit (expense) for taxable REIT subsidiary              73,000        (84,000)

 Minority interest in net income of consolidated joint ventures               (39,788)      (131,845)
                                                                            _________      _________

 Net income                                                                   457,837        182,311
 Distributions paid to class B shareholders                                  (452,543)           -
                                                                            _________      _________
 Net income available to class A shareholders                              $    5,294     $  182,311
                                                                            =========      =========


 Net income per common share - basic                                       $     .002     $     .078
                                                                            =========      =========
 Weighted avergage common shares used to compute
   net income per share, basic                                              2,768,253      2,351,687
                                                                            =========      =========




  See Notes to Condensed Consolidated Financial Statements.







                            AMREIT AND SUBSIDIARIES
                STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
                                  (unaudited)



                                                                 Quarter ended March 31,
                                                                   2003           2002
                                                                        
 Cash flows from operating activities:
   Net income                                                  $  457,837     $  182,311
   Adjustments to reconcile net income to net cash
       provided by operating activities:
       Depreciation and amortization                              229,697        126,848
       Amortization of deferred compensation                       59,928          5,152
       Minority interest in net income of consolidated join        39,788        131,845
       Decrease in accounts receivable                             38,020        187,944
       (Increase) decrease in accounts receivable- related        (55,909)       297,894
       Decrease in prepaid expenses, net                           14,077         44,836
       Cash receipts from direct financing leases
         more (less) than income recognized                        17,060         (4,260)
       Increase in accrued rental income                          (49,519)        (2,225)
       Decrease in other assets                                    83,091         23,711
       Decrease in accounts payable                              (547,924)      (671,656)
       Decrease in accounts payable- related party                (33,986)             -
                                                                 _________      _________
     Net cash provided by operating activities                    252,160        322,400
                                                                _________      _________
 Cash flows from investing activities:
   Improvements to real estate                                   (155,763)      (300,005)
   Acquisitions of real estate                                 (2,688,157)             -
   Additions to furniture, fixtures and equipment                 (24,040)        (3,938)
   (Investment in) distributions from joint ventures             (161,771)       380,846
   Increase in preacquisition costs                               (26,713)       (12,912)
                                                                _________      _________
     Net cash (used in) provided by investing activities       (3,056,444)        63,991
                                                                _________      _________
 Cash flows from financing activities:
   Proceeds from notes payable                                  2,367,799        369,952
   Payments of notes payable                                     (101,163)       (14,776)
   Loan acquisition costs                                               -         21,730
   Purchase of treasury shares                                   (315,719)             -
   Common dividends paid                                         (759,622)      (161,540)
   Distributions to minority interests                            (68,319)      (149,572)
                                                                _________      _________
     Net cash provided by financing activities                  1,122,976         65,794
                                                                _________      _________
 Net (decrease) increase in cash and cash equivalents          (1,681,308)       452,185
 Cash and cash equivalents at January 1                         2,506,868        227,117
                                                                _________      _________
 Cash and cash equivalents at March 31                         $  825,560     $  679,302
                                                                =========      =========

   Supplemental schedule of cash flow information:
     Cash paid during the year for:
       Interest                                                   524,189        236,439
       Income taxes                                                31,103              -



 See Notes to Condensed Consolidated Financial Statements.





                            AMREIT AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
                                  (Unaudited)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying unaudited condensed consolidated financial statements
     have been prepared in accordance with the instructions to Form 10-QSB and
     include all of the disclosures required by generally accepted accounting
     principles. The condensed consolidated financial statements reflect all
     normal and recurring adjustments, which are, in the opinion of management,
     necessary to present a fair statement of results for the three-month
     periods ended March 31, 2003 and 2002.

     The consolidated financial statements of AmREIT contained herein should be
     read in conjunction with the consolidated financial statements included in
     the Company's annual report on Form 10-KSB for the year ended December 31,
     2002.

     DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

     AmREIT, formerly AmREIT, Inc. or American Asset Advisers Trust, Inc. (the
     "Company"), was organized in the state of Maryland in August 1993, is a
     real estate investment trust ("REIT") based in Houston, Texas and is
     listed on the American Stock Exchange (AMY). AmREIT was re-organized in
     the state of Texas on December 22, 2002, and is a sponsor of real estate
     direct participation programs to the financial planning community. For
     more than 18 years, the Company has established a track record of
     investing in commercial real estate leased to parent companies in the
     retail, financial services and banking, medical and restaurant sectors.
     AmREIT's real estate team focuses on development, management, brokerage
     and ownership of freestanding credit tenant leased ("CTL") and frontage
     shopping centers ("FSC") that are located contiguous to major
     thoroughfares and traffic generators. AmREIT's customer list includes
     national and regional tenants such as: Walgreens, Goodyear Tire,
     Washington Mutual, IHOP, McDonald's, Herman Hospital, Radio Shack,
     Coldwell Banker, Guaranty Federal, Bennigan's, Chili's, Texas Children's
     Pediatric Associates, Discount Tire, tc.

     AmREIT owns a real estate portfolio that consists of 47 properties located
     in 18 states. Its properties include single-tenant; free standing credit
     tenant leased projects and multi-tenant frontage projects. The single
     tenant projects are located from coast to coast and are primarily leased
     to corporate tenants where the lease is the direct obligation of the
     parent companies. In so doing, the dependability of the lease payments are
     based on the strength and viability of the entire company, not just that
     location. The multi-tenant projects are situated primarily throughout
     Texas. Supporting the real estate portfolio is an operating company
     subsidiary of AmREIT that provides a complete range of services including
     development, construction management, property management, brokerage and
     leasing.

     On July 23, 2002, the Company completed a merger with three of its
     affiliated partnerships, AAA Net Realty Fund IX, Ltd., AAA Net Realty Fund
     X, Ltd., and AAA Net Realty Fund XI, Ltd. With the merger of the
     affiliated partnerships, AmREIT increased its real estate assets by
     approximately $24.3 million and issued approximately 2.6 million Class B
     common shares to the limited partners in the affiliated partnerships.
     Approximately $760 thousand in 8 year, interest only, subordinated notes
     were issued to limited partners of the affiliated partnerships who
     dissented against the merger. The acquired properties are unencumbered,
     single tenant, free standing properties on lease to national and regional
     tenants, where the lease is the direct obligation of the parent company.
     The following selected unaudited pro forma consolidated statement of
     operations for AmREIT and subsidiaries gives effect to the merger with its
     three affiliated partnerships, which assumes that the merger occurred on
     January 1, 2002. Additionally, we have presented a summary of assets
     acquired and liabilities assumed as of the date of the merger, July 23,
     2002.







                 Pro Forma Consolidated Statement of Operations
                      For the Three Months Ended March 31,
                                  (Unaudited)



                                                                                          2002
Revenues
                                                                               
         Rental income and earned income                                          $    1,519,368
         Other income                                                                    774,183
                                                                                       _________
         Total Revenues                                                                2,293,551
                                                                                       _________
Total Expense                                                                          1,522,994
                                                                                       _________
Proforma Income Before Minority Interest in Net Income of Consolidated
Joint Ventures                                                                           770,557

Federal Income Tax Benefit from Non-Qualified Subsidiary                                 (84,000)

Minority Interest in Net Income of Consolidated Joint Ventures                          (131,845)
                                                                                        ________
Pro Forma Net Income                                                              $      554,712





               Summary of Assets Acquired and Liabilities Assumed
                              As of July 23, 2002,
                                  (Unaudited)




Assets
                                                                               
         Buildings                                                                $   16,330,088
         Land                                                                          7,560,231
         Accounts receivable                                                           1,105,612
         Prepaid expenses                                                                 15,757
                                                                                      __________
         TOTAL ASSETS                                                             $   25,011,688
                                                                                      ==========
Liabilities                                                                       $      132,630

Shareholders' equity
         Class B common stock                                                     $   24,879,058
                                                                                      __________

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                                  $   25,011,688
                                                                                      ==========










     BASIS OF CONSOLIDATION

     The consolidated financial statements include the accounts of AmREIT, and
     its wholly or majority owned subsidiaries. All significant intercompany
     accounts and transactions have been eliminated in consolidation.

     NEW ACCOUNTING STANDARDS

     In November 2002, the FASB issued Interpretation No. 45, Guarantor's
     Accounting and Disclosure Requirements for Guarantees, Including Indirect
     Guarantees of Indebtedness to Others, an interpretation of FASB Statements
     No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This
     Interpretation elaborates on the disclosures to be made by a guarantor in
     its interim and annual financial statements about its obligations under
     guarantees issued. The Interpretation also clarifies that a guarantor is
     required to recognize, at inception of a guarantee, a liability for the
     fair value of the obligation undertaken. The disclosure requirements are
     effective for financial statements of interim or annual periods ending
     after December 15, 2002. The initial recognition and measurement
     provisions of the Interpretation are applicable to guarantees issued or
     modified after December 31, 2002 and did not have a material effect on the
     Company's consolidated financial statements.

     In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
     Compensation - Transition and Disclosure, an amendment of FASB Statement
     No. 123. This Statement amends FASB Statement No. 123, Accounting for
     Stock-Based Compensation, to provide alternative methods of transition for
     a voluntary change to the fair value method of accounting for stock-based
     employee compensation. In addition, this Statement amends the disclosure
     requirements of Statement No. 123 to require prominent disclosures in both
     annual and interim financial statements. Certain of the disclosure
     modifications are required for fiscal years ending after December 15,
     2002, however, these disclosure modifications are not applicable to the
     Company as the Company does not have stock based compensation other than
     restricted stock grants. Therefore adoption of SFAS 148 did not have a
     material impact on our consolidated financial position, results of
     operations, or cash flows.

     In January 2003, the FASB issued Interpretation No. 46, Consolidation of
     Variable Interest Entities, an interpretation of ARB No. 51. This
     Interpretation addresses the consolidation by business enterprises of
     variable interest entities as defined in the Interpretation. The
     Interpretation applies immediately to variable interests in variable
     interest entities created after January 31, 2003, and to variable
     interests in variable interest entities obtained after January 31, 2003.
     The application of this Interpretation did not have a material effect on
     the Company's consolidated financial statements. The Interpretation
     requires certain disclosures in financial statements issued after January
     31, 2003 if it is reasonably possible that the Company will consolidate or
     disclose information about variable interest entities when the
     Interpretation becomes effective.

     RECLASSIFICATION

     Certain amounts in the interim unaudited 2002 condensed consolidated
     financial statements have been reclassified to conform to the presentation
     used in the interim unaudited 2003 condensed consolidated financial
     statements.








2.   NOTES PAYABLE

     In November 1998, the Company entered into an unsecured credit facility
     (the "Credit Facility"), which is being used to provide funds for the
     acquisition of properties and working capital, and repaid all amounts
     outstanding under the Company's prior credit facility. Under the Credit
     Facility, which had an original term of one year, and has been extended
     through June 2003, the Company may borrow up to $20 million subject to the
     value of unencumbered assets. The Lender has given AmREIT a commitment to
     extent the Credit Facility for a period of 15 months from the date of
     execution. The Company and Lender are currently working through the
     documentation of the Credit Facility and expect that it will be finalized
     prior to June. The Credit Facility contains covenants which, among other
     restrictions, require the Company to maintain a minimum net worth, a
     maximum leverage ratio, specified interest coverage and fixed charge
     coverage ratios and allow the lender to approve all distributions. At
     March 31, 2003, Company was in compliance with all applicable financial
     covenants. The Credit Facility bears interest at an annual rate of LIBOR
     plus a spread of 2.00% (3.30% as of March 31, 2003). As of March 31, 2003,
     $14.1 million was outstanding under the Credit Facility. Thus the
     Company has approximately $5.9 million available under its line of
     credit, subject to use of proceeds by the lender.

3.   MAJOR TENANTS

     There were no significant changes in the tenant make-up from year end
     December 31, 2002.

4. EARNINGS PER SHARE

     Basic earnings per share has been computed by dividing net income by the
     weighted average number of class A common shares outstanding. Diluted
     earnings per share has been computed by dividing net income (as adjusted)
     by the weighted average number of class A common shares outstanding plus
     dilutive potential common shares.

     The following table presents information necessary to calculate basic and
     diluted earnings per share for the periods indicated:







                                                                                For the Three Months Ended March 31,
                                                                                      2003              2002
                                                                                              
     BASIC EARNINGS PER SHARE

         Weighted average class A common shares outstanding                        2,768,253         2,351,687
                                                                                   =========         =========
                  Basic earnings per share                                        $     .002        $     .078
                                                                                   =========         =========

     EARNINGS FOR BASIC COMPUTATION
         Net income available to class A common shareholders (basic earnings
                  per share computation)                                          $    5,294        $  182,311
                                                                                   =========         =========












INDEPENDENT AUDITORS' REPORT

To the Board of Trust Managers
AmREIT:

We have audited the accompanying consolidated balance sheet of AmREIT and
subsidiaries (the "Company") as of December 31, 2002, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the year ended December 31, 2002. In connection with our audit of the
consolidated financial statements, we have also audited the related financial
statement schedule. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statements and financial statement
schedule based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AmREIT and
subsidiaries as of December 31, 2002, and the results of their operations and
their cash flows for the year ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.





KPMG LLP

Houston, Texas
March 31, 2003







INDEPENDENT AUDITORS' REPORT

To the Board of Trust Managers
AmREIT

We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of AmREIT (formerly AmREIT, Inc.) and
subsidiaries (the "Company") for the year ended December 31, 2001.  These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements
based on our audit.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, AmREIT and subsidiaries results of operations and cash
flows for the year ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Houston, Texas
March 15, 2002






                            AMREIT AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEET
                               December 31, 2002




                                                                                                  2002
 ASSETS
                                                                                          
Property:
   Land                                                                                      $18,945,607
   Buildings                                                                                  28,652,858
   Furniture, fixtures and equipment                                                             381,383
                                                                                              __________
                                                                                              47,979,848
   Accumulated depreciation                                                                   (2,136,376)
                                                                                              __________
     Total property, net                                                                      45,843,472

 Net investment in direct financing leases                                                    23,405,324

 Cash and cash equivalents                                                                     2,506,868
 Accounts receivable                                                                             173,659
 Accounts receivable - related party                                                              68,934
 Escrow deposits                                                                                 120,466
 Prepaid expenses, net                                                                           438,696

 Other assets:
   Preacquisition costs                                                                            1,765
   Loan acquisition cost, net of $85,579 in accumulated amortization                             249,572
   Accrued rental income                                                                         360,062
   Intangible lease cost                                                                         257,600
   Investment in non-consolidated affiliates                                                     549,335
                                                                                              __________
     Total other assets                                                                        1,418,334
                                                                                              __________
 TOTAL ASSETS                                                                                $73,975,753
                                                                                             ===========

 LIABILITIES AND SHAREHOLDERS' EQUITY
 Liabilities:
   Notes payable                                                                             $33,586,085
   Accounts payable                                                                            1,126,219
   Accounts payable - related party                                                              206,123
   Security deposit                                                                               33,930
   Prepaid rent                                                                                    6,177
                                                                                             ___________
     TOTAL LIABILITIES                                                                        34,958,534
                                                                                             ___________
 Minority interest                                                                               810,971

 Shareholders' equity:
   Preferred stock, $.01 par value, 10,001,000 shares authorized, none issued                          -
   Class A Common stock, $.01 par value, 100,010,000 shares authorized,
     2,772,340 shares issued and outstanding                                                      27,723
   Class B Common stock, $.01 par value, 3,000,000 shares authorized,
     2,464,207 shares issued and outstanding                                                      24,642
   Capital in excess of par value                                                             47,183,271
   Accumulated distributions in excess of earnings                                            (8,426,846)
   Deferred compensation                                                                        (205,353)
   Cost of treasury stock, 65,379 shares                                                        (397,189)
                                                                                             ___________
     TOTAL SHAREHOLDERS' EQUITY                                                               38,206,248
                                                                                             ___________
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                  $73,975,753
                                                                                             ===========



 See Notes to Consolidated Financial Statements.










                            AMREIT AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS




                                                                                  Years ended December 31,
                                                                                  2002                2001
                                                                                           
Revenues:
   Rental income from operating leases                                       $ 3,687,094         $   2,648,237
   Earned income from direct financing leases                                  1,807,117               637,537
   Service fees and other income                                               2,041,999             2,033,008
   Management fees                                                               279,910               342,349
   Income from non-consolidated affiliates                                       416,904                20,743
   (Loss) gain on sale of property                                               (47,553)              254,013
   Interest income                                                                 4,206                10,555
                                                                               _________             _________
     Total revenues                                                            8,189,677             5,946,442
                                                                               _________             _________
 Expenses:
   General operating and administrative                                        2,801,946             1,953,285
   Legal and professional                                                      1,332,188             1,002,776
   Interest                                                                    1,774,973             1,063,574
   Depreciation                                                                  666,307               464,308
   Deferred merger costs                                                       1,904,370                     -
                                                                               _________             _________
     Total expenses                                                            8,479,784             4,483,943
                                                                               _________             _________
 (Loss) income before federal income taxes and minority
   interest in net income of consolidated joint ventures                        (290,107)            1,462,499

 Federal income tax expense for taxable REIT subsidiary                           60,656               144,420

 Minority interest in net income of consolidated joint ventures                 (308,010)             (527,571)
                                                                              __________             _________
 Net (loss) income                                                              (658,773)              790,508

 Distributions paid to Class B shareholders                                     (865,293)                    -
                                                                              __________             _________
 Net (loss) income available to Class A shareholders                         $(1,524,066)           $  790,508
                                                                              ==========             =========
 Net (loss) income per common share, basic and diluted                             (0.62)                 0.34
                                                                              ==========             =========
 Common shares used to compute net (loss) and income
   per share, basic and diluted                                                2,469,725             2,354,572
                                                                              ==========             =========


  See Notes to Consolidated Financial Statements.








                         AMREIT AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    Years ended December 31, 2002 and 2001





                                                                                                            Capital in
                                                                            Common Shares                    excess of
                                                                               Number          Amount        par value
                                                                                                  

 Balance at December 31, 2000                                                  2,384,117     $ 23,841      $ 21,655,867

  Net income                                                                           -            -                 -

  Repurchase of common shares, Class A (24,723 shares)                                 -            -                 -

  Distributions                                                                        -            -                 -
                                                                               _________       ______        __________

 Balance at December 31, 2001                                                  2,384,117       23,841        21,655,867
                                                                               _________       ______        __________

  Net loss                                                                             -            -                 -

  Issuance of common shares Class A                                              388,200        3,882         2,057,755

  Issuance of common shares Class B, net of 124,750 that
      converted to Class A                                                     2,464,207       24,642        23,469,649

  Issuance of restricted shares Class A                                                -            -                 -

  Repurchase of common shares Class A (46,069 shares)                                  -            -                 -

   Distributions                                                                       -            -                 -
                                                                               _________       ______        __________

 Balance at December 31, 2002                                                  5,236,524      $52,365       $47,183,271
                                                                               =========       ======        ==========









                                                              Accumulated
                                                             distributions        Defered          Cost of
                                                              in excess of      Compensation       treasury
                                                                earnings         Obligation         shares           Total
                                                                                                   
Balance at December 31, 2000                                 $ (6,223,523)       $         -     $ (127,467)     $ 15,328,718

Net income                                                        790,508                  -              -           790,508

Repurchase of common shares Class A (24,723 shares)                     -                  -       (160,703)         (160,703)

Distributions                                                    (604,742)                 -              -          (604,742)
                                                                _________          _________       ________        __________

Balance at December 31, 2001                                   (6,037,757)                 -       (288,170)       15,353,781
                                                                _________          _________       ________        __________

  Net loss                                                       (658,773)                 -              -          (658,773)

  Issuance of common shares, Class A                                    -                  -              -         2,061,637

  Issuance of common shares, Class B, net of 124,750 that
        converted to Class A                                            -                  -              -        23,494,291

  Issuance of restricted shares Class A                                 -           (205,353)       185,119           (20,234)

  Repurchase of common shares Class A (46,069 shares)                   -                  -       (294,138)         (294,138)

   Distributions                                               (1,730,316)                 -              -        (1,730,316)
                                                                _________            _______        _______        __________
Balance at December 31, 2002                                  $(8,426,846)         $ (205,353)    $(397,189)      $38,206,248
                                                                =========            ========       =======        ==========


See Notes to Consolidated Financial Statements.









                         AMREIT AND SUBSIDIARIES
                     STATEMENTS OF CONSOLIDATED CASH FLOWS



                                                                                                   Years ended December 31,
                                                                                                    2002              2001
                                                                                                           
 Cash flows from operating activities:
   Net (loss) income                                                                            $  (658,773)       $  790,508
   Adjustments to reconcile net (loss) income to net cash
       provided by operating activities:
       Loss (gain) on sale of property                                                               47,553          (254,013)
       Depreciation and amortization                                                                723,607           481,265
       Increase in minority interest in net income of consolidated
        joint ventures                                                                              308,010           527,571
       Deferred merger costs                                                                      1,904,370                 -
       Decrease (increase) in accounts receivable                                                 1,155,875           (89,921)
       Decrease (increase)in accounts receivable - related party                                    378,494          (298,521)
       Increase in prepaid expenses, net                                                           (170,028)         (128,324)
       (Decrease) increase in accounts payable                                                     (365,018)          821,168
       Increase in accounts payable- related party                                                  181,123            15,524
       Cash receipts from direct financing leases
         less than income recognized                                                                282,805           (38,581)
       Decrease (increase) in accrued rental income                                                  32,095          (102,757)
       Increase in prepaid rent                                                                       6,177                 -
       Increase in other assets                                                                     (49,114)          (81,545)
       Increase in deferred compensation                                                            (48,086)                -
                                                                                                  _________         _________
     Net cash provided by operating activities                                                    3,729,090         1,642,374
                                                                                                  _________         _________
 Cash flows from investing activities:
   Improvements to real estate                                                                     (623,124)         (432,276)
   Acquisitions of real estate                                                                  (18,951,523)       (3,445,279)
   Additions to furniture, fixtures and equipment                                                   (25,131)          (37,061)
   Distributions from (investment in) joint ventures                                                431,604          (729,958)
   Proceeds from sale of property                                                                 3,692,544         2,520,259
   Decrease (increase) in preacquisition costs                                                      207,435          (208,576)
                                                                                                 __________         _________
     Net cash used in investing activities                                                      (15,268,195)       (2,332,891)
                                                                                                 __________         _________
 Cash flows from financing activities:
   Proceeds from notes payable                                                                   19,253,403         8,038,500
   Payments of notes payable                                                                     (3,399,277)       (6,539,134)
   Loan acquisition costs                                                                           (38,035)         (169,579)
   Issuance of treasury stock                                                                       185,119                 -
   Purchase of treasury stock                                                                      (294,138)         (160,703)
   Issuance of common stock                                                                        (517,857)                -
   Retirement of common stock                                                                      (106,500)                -
   Common dividends paid                                                                         (1,730,316)         (604,742)
   Contributions from minority interests                                                            809,971                 -
   Distributions to minority interests                                                             (343,514)         (582,575)
                                                                                                 __________       ___________
     Net cash provided by (used in) financing activities                                         13,818,856           (18,233)
                                                                                                 __________       ___________
 Net increase (decrease) in cash and cash equivalents                                             2,279,751          (708,750)
 Cash and cash equivalents at January 1                                                             227,117           935,867
                                                                                                 __________       ___________
 Cash and cash equivalents at December 31                                                       $ 2,506,868      $    227,117
                                                                                                 ==========       ===========





   Supplemental schedule of noncash investing and financing activities
   On July 23, 2002, the Company merged with three of its affiliated
   partnerships, AAA Net Realty Fund IX, Ltd., AAA Net Realty Fund X, Ltd. and
   AAA Net Realty Fund XI, Ltd. In conjunction with the merger, the Company
   acquired $23,890,319 worth of property and issued 2,589,179 shares of Class
   B common stock.



   Supplemental schedule of cash flow information: Cash paid during the year
     for:
                                                                                               
       Interest                                                                                   1,691,927         1,063,574
       Income taxes                                                                                 133,841                 -




 See Notes to Consolidated Financial Statements.









                           AMREIT AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

AmREIT, ("AmREIT" or the "Company") formally AmREIT, Inc., which was
incorporated in the state of Maryland in August 1993, is a real estate
investment trust ("REIT") based in Houston, Texas and is listed on the
American Stock Exchange (AMY). AmREIT was organized in the state of Texas on
December 22, 2002 and is a pre-eminent sponsor of real estate direct
participation programs to the financial planning community. For more than 17
years, the Company has established a track record of investing in commercial
real estate leased to parent companies in the retail, financial services and
banking, medical and restaurant sectors. AmREIT's real estate team focuses on
development, management, brokerage and ownership of freestanding credit tenant
leased ("CTL") and frontage shopping centers ("FSC") that are located
contiguous to major thoroughfares and traffic generators. AmREIT's customer
list includes national and regional tenants such as: Walgreens, Goodyear Tire,
Washington Mutual, IHOP, McDonald's, Herman Hospital, Radio Shack, Coldwell
Banker, Guaranty Federal, Bennigan's, Chili's, Texas Children's Pediatric
Associates, Discount Tire, etc.

AmREIT owns a real estate portfolio that consists of over 46 properties located
in 18 states. Its properties include single-tenant; free standing credit tenant
leased projects and multi-tenant frontage projects. The single tenant projects
are located from coast to coast and are primarily leased to corporate tenants
where the lease is the direct obligation of the parent companies. In so doing,
the dependability of the lease payments are based on the strength and viability
of the entire company, not just that location. The multi-tenant projects are
situated primarily throughout Texas. Supporting the real estate portfolio is an
operating company subsidiary of AmREIT that provides a complete range of
services including development, construction management, property management,
brokerage and leasing.

Through AmREIT's direct participation programs, it creates new investment
entities that buy and develop commercial real estate with proceeds raised from
third-party investors. AmREIT has extensive experience and long-term
relationships in the commercial real estate market - the basis of its ability
to sponsor real estate investment opportunities while creating fee income and
carried interests for AmREIT and its shareholders.

On July 23, 2002, the Company completed a merger with three of its affiliated
partnerships, AAA Net Realty Fund IX, Ltd., AAA Net Realty Fund X, Ltd., and
AAA Net Realty Fund XI, Ltd. With the merger of the affiliated partnerships,
AmREIT increased its real estate assets by approximately $24.3 million and
issued approximately 2.6 million Class B common shares to the limited
partners in the affiliated partnerships. Approximately $760 thousand in 8 year,
interest only, subordinated notes were issued to limited partners of the
affiliated partnerships who dissented against the merger. The acquired
properties are unencumbered, single tenant, free standing properties on lease
to national and regional tenants, where the lease is the direct obligation of
the parent company. This merger transaction triggered a payment under the
deferred consideration agreement between AmREIT and H. Kerr Taylor, President
and Chief Executive Officer. The deferred consideration agreement was approved
by the shareholders in 1998 as part of the sale of Mr. Taylor's advisory
company to AmREIT. In the agreement, Mr. Taylor would receive additional class
A common shares, in exchange for the sale of his advisory company, as AmREIT








issued additional capital. Mr. Taylor was issued approximately 302 thousand
Class A common shares, which resulted in a deferred merger expense of $1.9
million in the third quarter 2002. Under the deferred consideration agreement,
approximately 384 thousand shares remain to be issued to Mr. Taylor in the
event the Company issues additional shares prior to June 4, 2004, the
expiration date of the agreement.

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of AmREIT, and its
wholly or majority owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.

BASIS OF ACCOUNTING

The financial records of the Company are maintained on the accrual basis of
accounting whereby revenues are recognized when earned and expenses are
recorded when incurred.

CASH AND CASH EQUIVALENTS

For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents. Cash and cash
equivalents consist of demand deposits at commercial banks and money market
funds.


PROPERTY

Property is leased to others, primarily on a net lease basis, whereby the
operating expenses related to the properties, including property taxes,
insurance and common area maintenance are the responsibility of the tenant. The
leases are accounted for under the operating method or the direct financing
method in accordance with generally accepted accounting principles. Under the
operating lease method, the properties are recorded at cost. Rental income is
recognized ratably over the life of the lease and depreciation is charged based
upon the estimated useful life of the property. Under the direct financing
lease method, properties are recorded at their net investment. Unearned income
is deferred and amortized to income over the life of the lease so as to produce
a constant periodic rate of return.

Expenditures related to the development of real estate are carried at cost plus
capitalized carrying charges, acquisition costs and development costs. Carrying
charges, primarily interest and loan acquisition costs, and direct and indirect
development costs related to buildings under construction are capitalized as
part of construction in progress. The Company capitalizes acquisition costs
once the acquisition of the property becomes probable. Prior to that time, the
Company expenses these costs as acquisition expense.

Management reviews its properties for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets, including
accrued rental income, may not be recoverable through operations. Management
determines whether an impairment in value occurred by comparing the estimated
future cash flows (undiscounted and without interest charges), including the
residual value of the property, with the carrying cost of the individual
property. If impairment is indicated, a loss will be recorded for the amount by
which the carrying value of the asset exceeds its fair value.







DEPRECIATION

Buildings are depreciated using the straight-line method over an estimated
useful life of 39 years. Leasehold estate properties, where the Company owns
the building and improvements but not the related ground, therefore there is no
residual value beyond the lease, are depreciated over the life of the lease.

INVESTMENT IN NON-CONSOLIDATED AFFILIATES

AmREIT invested $250 thousand as a limited partner and $1,000 as a general
partner in AmREIT Opportunity Fund, Ltd. ("AOF"), which is accounted for using
the equity method. The limited partners have the right to remove and replace
the general partner by a vote of the limited partners owning two-thirds of the
outstanding units. AmREIT currently owns a 10.5% limited partner interest in
AOF. AOF was formed to develop, own, manage, and hold for investment and, or
resell property and to make or invest in loans for the development or
construction of property. Liquidation of AOF commenced in July of 2002. Based
on the general partner's analysis of owned real estate as of December 31, 2002,
none of the assets owned or in liquidation by AOF are impaired.

AmREIT invested $200 thousand as a limited partner and $1,000 as a general
partner in AmREIT Income & Growth Fund, Ltd. ("AIG") that is accounted for
using the equity method. The limited partners have the right to remove and
replace the general partner by a vote of the limited partners owning a majority
of the outstanding units. AmREIT currently owns an approximately 3.9% limited
partner interest in AIG. AIG was formed to develop, own, manage, and hold for
investment and, or resell property and to make or invest in loans for the
development or construction of property.

AmREIT invested $70 thousand as a limited partner in AmREIT CDP #27, LP that is
accounted for using the equity method. AmREIT CDP #27, LP was formed to acquire
commercial real property and to develop, operate, lease, manage, and or sell
real property. AmREIT CDP #27, LP purchased two IHOP properties in 2001 located
in Memphis, Tennessee and Tupelo, Mississippi. The Memphis, Tennessee property
was sold for a profit in the first quarter of 2002.

ARIC invested $122 thousand as a limited partner in AmREIT CDP SPE #33, Ltd.
that is accounted for using the equity method. AmREIT CDP SPE #33, Ltd. was
formed to acquire commercial real property and to develop, operate, lease,
manage, and or sell real property. In December 2001, AmREIT CDP #33, Ltd.
purchased three IHOP leasehold estate properties located in Houston, Texas,
Orem, Utah, and Hagerstown, Maryland.

AmREIT  invested  $330  thousand as a member in AmREIT CDP #31,  LLC ("CDP 31")
that is  accounted  for using the equity  method.  CDP 31 was formed to acquire
commercial real property and to develop,  operate,  lease,  manage, and or sell
real  property.  CDP 31  purchased  two  IHOP  properties  in 2001  located  in
Cookeville, Tennessee and Scottsdale, Arizona. Both properties were sold during
the  first  quarter  2002,  and CDP 31 does  not own any  real  property  as of
December 31, 2002.


OTHER ASSETS


Other assets include loan acquisition costs, net of accumulated amortization,
of $250 thousand. Loan acquisitions costs are incurred in obtaining property
financing and are amortized to interest expense on the effective interest
method over the term of the debt agreements. Accumulated amortization related
to loan acquisition costs as of December 31, 2002 totaled $86 thousand.







DEFERRED COMPENSATION

Deferred compensation includes stock grants to employees as a form of long term
compensation. The stock grants vest over a period of time not to exceed four
years. This allows the Company to align the interest of its employees with the
interest of our shareholders. As the stock grants vest, the Company will
amortize the vested portion to compensation expense. The expense will be
calculated by taking the number of shares vested multiplied by the market price
per share as determined on the vesting dates.

Effective  January 1, 2003,  AmREIT  will adopt SFAS No. 148,  "Accounting  for
Stock-Based  Compensation  - Transition  and  Disclosure - an Amendment of FASB
Statement No. 123".

STOCK ISSUANCE COSTS

Issuance costs incurred in the raising of capital through the sale of common
stock are treated as a reduction of shareholders' equity.

REVENUE RECOGNITION

Properties are primarily leased on a net lease basis. Revenue is recognized on
a straight-line basis over the terms of the individual leases. Service fees are
recognized when earned.

FEDERAL INCOME TAXES


AmREIT is qualified as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, and is, therefore, not subject to Federal income
taxes to the extent of dividends paid, provided it meets all conditions
specified by the Internal Revenue Code for retaining its REIT status, including
the requirement that at least 90% of its real estate investment trust taxable
income is distributed by March 15 of the following year.

AmREIT Realty Investment Corporation ("ARIC"), a wholly owned subsidiary of
AmREIT, is treated as a taxable REIT subsidiary for Federal income tax
purposes. As such, ARIC and its consolidated subsidiaries have recorded a
Federal income tax expense at December 31, 2002 of $61 thousand, which
represents the Federal income tax obligations on the consolidated taxable REIT
subsidiary's taxable net income.  Additionally, in 2002, a deferred tax
liability of $28 thousand was established to record the taxes on certain
real estate assets of ARIC.


EARNINGS PER SHARE

Basic earnings per share has been computed by dividing net income to class A
common shareholders by the weighted average number of class A common shares
outstanding. Diluted earnings per share has been computed by dividing net
income (as adjusted) by the weighted average number of common shares
outstanding plus the weighted average number of dilutive potential common
shares.

The following table presents information necessary to calculate basic and
diluted earnings per share for the periods indicated:



                                                                                   For the Years Ended December 31,

BASIC AND DILUTED EARNINGS PER SHARE                                                  2002               2001
                                                                                                  
  Weighted average common shares outstanding (in thousands)                          2,470              2,355

  Basic and diluted (loss)/earnings per share *                                     $(0.62)             $0.34
                                                                                    -------              -----

  EARNINGS FOR BASIC AND DILUTED COMPUTATION

  (Loss) earnings to Class A common shareholders (in thousands) *                  $(1,524)              $791
                                                                                     ======              ====




 * For 2002, the loss of $1.524 million includes the charge taken against
earnings during the third quarter of $1.9 million, which was the market value
of the Class A common shares issued to H. Kerr Taylor, President & CEO, related
to the sale of his advisory company to AmREIT in 1998. The charge was for the
deferred merger cost due from this sale that was triggered by the issuance of
additional common stock as part of the merger with AmREIT's affiliated
partnerships during the third quarter of 2002.






USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS


The Company's consolidated financial instruments consist primarily of cash,
cash equivalents, accounts receivable and accounts and notes payable. The
carrying value of cash, cash equivalents, accounts receivable and accounts
payable are representative of their respective fair values due to the
short-term maturity of these instruments. The Company's total debt obligations
are $33.6 million, of which $13.42 million has variable rate terms and
therefore, the fair value is representative of its carry value.  Approximately
$20.18 million has fixed rate terms, of which approximately $15.5 million was
entered into during 2002.  Based on the dates that the debt obligations were
entered into and the pricing on current debt obligations, the Company believes
that the fair value of its fixed rate debt obligations is materially
representative of its carry value.



NEW ACCOUNTING STANDARDS

On June 29, 2001, SFAS No. 141, "Business Combinations" was approved by the
Financial Accounting Standards Board ("FASB"). SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Goodwill and certain intangible assets will remain on the
balance sheet and not be amortized. On an annual basis, and when there is
reason to suspect that their values have been diminished or impaired, these
assets must be tested for impairment, and write-downs may be necessary. The
Company implemented SFAS No. 141 on July 1, 2001. The adoption of this
Statement had no effect on the Company's consolidated financial position or
results of operations.

On June 29, 2001,  SFAS No. 142,  "Goodwill and Other  Intangible  Assets " was
approved by the FASB.  SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only  approach.  Amortization of goodwill,
including  goodwill  recorded in past  business  combinations,  will cease upon
adoption of this statement.  The Company implemented SFAS No. 142 on January 1,
2002.  The  adoption  of SFAS No.  142 did not have a  material  impact  on our
consolidated financial position, results of operations, or cash flows.







In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", which is effective for fiscal years beginning after June 15,
2002. SFAS No. 143 addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The adoption of SFAS No. 143 did not have a material
impact on our consolidated financial position, results of operations, or cash
flows.

On January 1, 2002, the company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses accounting
and reporting for the impairment or disposal of a segment of a business. More
specifically, this statement broadens the presentation of discontinued
operations to include a component of an entity whose operations and cash flows
can be clearly distinguished, opertionally and for financial reporting
purposes, from the rest of the entity. The adoption of SFAS No. 144 did not
have a material impact on our consolidated financial position, results of
operations, or cash flows.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107
and a rescission of FASB Interpretation No. 34. This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees issued. The
Interpretation also clarifies that a guarantor is required to recognize, at
inception of a guarantee, a liability for the fair value of the obligation
undertaken. The disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15, 2002. The initial
recognition and measurement provisions of the Interpretation are applicable to
guarantees issued or modified after December 31, 2002 and are not expected to
have a material effect on the Company's consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements. Certain of the disclosure modifications are required for
fiscal years ending after December 15, 2002, however, these disclosure
modifications are not applicable to the Company and adoption of SFAS 148 is not
anticipated to have a material impact on our consolidated financial position,
results of operations, or cash flows.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51. This
Interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
immediately to variable interests in variable interest entities created after
January 31, 2003, and to variable interests in variable interest entities
obtained after January 31, 2003. The application of this Interpretation is not
expected to have a material effect on the Company's financial statements. The
Interpretation requires certain disclosures in financial statements issued
after January 31, 2003 if it is reasonably possible that the Company will
consolidate or disclose information about variable interest entities when the
Interpretation becomes effective.

Reclassification


Certain amounts in the 2001 consolidated financial statements have been
reclassified to conform to the presentation used in the 2002 consolidated
financial statements.










2. OPERATING LEASES



A summary of minimum future rentals to be received, exclusive of any renewals,
under noncancellable operating leases in existence at December 31, 2002 is as
follows:






                                             
                           2003                      4,342,650
                           2004                      4,260,343
                           2005                      4,015,934
                           2006                      3,994,020
                           2007                      3,754,100
                           2008-2027                15,285,089
                                                    ----------
                                                   $35,652,136





3. NET INVESTMENT IN DIRECT FINANCING LEASES


The Company's net investment in its direct financing leases at December 31,
2002 included:


                                                
 Minimum lease payments receivable                $ 61,306,182
 Unguaranteed residual value                         3,858,403
 Less: Unearned income                             (41,759,261)
                                                   ------------
                                                  $ 23,405,324



A summary of minimum future rentals, exclusive of any renewals, under the
noncancellable direct financing leases follows:


                                             
                           2003                      2,444,944
                           2004                      2,453,682
                           2005                      2,462,421
                           2006                      2,471,778
                           2007                      2,605,857
                           2008 - 2027              48,867,500
                                                   -----------


                                    Total          $61,306,182
                                                   ===========





4. INVESTMENT IN NON-CONSOLIDATED AFFILIATES



AmREIT owns  interests in 5 limited liability companies or limited
partnerships,  which are accounted  for under the  equity  method  since
AmREIT  exercises  significant influence. Our interests in these joint ventures
and limited partnerships range from 2% to 40%, which are primarily  single and
multi-tenant net lease retail real estate assets.  Combined condensed financial
information of these ventures (at 100%) is summarized as follows:











                               Combined Balance Sheet                                              December 31, 2002
Assets
                                                                                             
          Property, net                                                                               $  8,698,634
          Cash                                                                                           4,172,585
          Other assets                                                                                   2,456,268
                                                                                                     -------------
          TOTAL ASSETS                                                                                 $15,327,487
                                                                                                       ===========

Liabilities and partners' capital
          Notes payable                                                                               $  3,859,810
          Other liabilities                                                                                493,454
          Partners capital                                                                              10,974,223
                                                                                                      ------------
          TOTAL LIABILITIES AND PARTNERS' CAPITAL                                                      $15,327,487
                                                                                                       ===========



                          Combined Statement of Operations


                                                                                               2002                   2001
                                                                                                         

Total Revenue                                                                            $   2,624,850           $    582,001

Expense
          Interest                                                                             358,672                 83,110
          Depreciation and amortization                                                        189,066                 71,640
          Other                                                                                188,834                188,598
                                                                                        --------------              ---------
          TOTAL EXPENSE                                                                        736,572                343,348
                                                                                        --------------              ---------

          NET INCOME                                                                     $   1,888,278           $    238,653
                                                                                         =============           ============





5. NOTES PAYABLE


In November 1998, the Company entered into an unsecured credit facility (the
"Credit Facility"), which is being used to provide funds for the acquisition of
properties and working capital, and repaid all amounts outstanding under the
Company's prior credit facility. Under the Credit Facility, which had an
original term of one year, and has been extended through April 2003, the
Company may borrow up to $20 million subject to the value of unencumbered
assets. The Company is negotiating with the Lender for an extension of the
Credit Facility, which would extend the maturity of the Credit Facility beyond
December 31, 2003.  The Credit Facility contains covenants, which among other
restrictions, require the Company to maintain a minimum net worth and a maximum
leverage ratio. As of December 31, 2002, the Lender had waived these financial
covenants. The Credit Facility bears interest at an annual rate of LIBOR plus a
spread of 2.0% (3.4375% as of December 31, 2002). On December 31, 2002, $11.76
million was outstanding under the Credit Facility. Thus the Company has
approximately $8.24 million available under its line of credit subject to use
of proceeds by the lender.

In March 1999, the Company entered into a ten-year mortgage note, amortized
over 30 years, for $1 million with $968 thousand being outstanding at December
31, 2002. The interest rate is fixed at 8.375% with payments of principal and
interest due monthly. The note matures April 1, 2009 and as of December 31,
2002 the Company is in compliance with all terms of the agreement. The note is
collateralized by a first lien mortgage on property with an aggregate carrying
value of $1.179 million, net of $107 thousand of accumulated depreciation.









In February 2001, the Company entered into a ten-year mortgage note, amortized
over 20 years, for $1.35 million with $1.3 million being outstanding at
December 31, 2002. The interest rate is fixed at 8.25% with payments of
principal and interest due monthly. The note matures February 28, 2011 and as
of December 31, 2002 the Company is in compliance with all terms of the
agreement. The note is collateralized by a first lien mortgage on property,
which is accounted for as a direct financing lease with a net investment in
direct financing lease of $1 million and land of $741 thousand.

In October 2001, the Company entered into a ten-year mortgage note amortized
over 30 years, for $2.4 million with $2.378 million being outstanding at
December 31, 2002. The interest rate is fixed at 7.60% with payments of
principal and interest due monthly. The note matures November 1, 2011 and as of
December 31, 2002 the Company is in compliance with all terms of the agreement.
The note is collateralized by a first lien mortgage on property with an
aggregate carrying value of $3.967 million, net of $330 thousand of accumulated
depreciation.


In October 2001, the Company entered into a note payable for $1.658 million
with $1.658 million being outstanding at December 31, 2002. The interest rate
is equal to the thirty day LIBOR rate plus 280 basis points, but in no event
lower than 6.75%, which equated to 6.75% at December 31, 2002. The note matures
November 1, 2004 and as of December 31, 2002 the Company is in compliance with
all terms of the agreement. The note is collateralized by a first lien mortgage
on property, which is accounted for as a direct financing lease with a net
investment in direct financing lease of $1.33 million and land of $564
thousand.


Beginning in April 2002, AAA CTL Notes, Ltd., a majority owned subsidiary of
AmREIT, began entering into non-recourse ten-year mortgages, amortized over 20
years, related to the purchase of seventeen IHOP properties. The following
table summarizes the terms of loan agreements and the property collateralizing
the non-recourse notes. As of December 31, 2002 the Company is in compliance
with all terms of the agreement. The non-recourse notes have
cross-collateralization and default provisions with each other.














                                                   Loan amount at                                     Net investment in
           Location               Original loan     December 31,     Fixed                             direct financing
                                     amount             2002        interest     Date loan                 lease
                                 (in thousands)    (in thousands)     rate        matures              (in thousands)
                                                                                       
  Shawnee, KS                            $ 751             $ 741     7.82%      May 1, 2012                      $ 889
  El Paso, TX                              760               751     7.82%      May 1, 2012                        897
  Beaverton, OR                            887               876     7.82%      May 1, 2012                      1,046
  Rochester, NY                            951               939     7.82%      May 1, 2012                      1,136
  Baton Rouge, LA                        1,250             1,235     7.82%      May 1, 2012                      1,460
  Charlottesville, VA                      630               622     7.82%      May 1, 2012                        749
  Albuquerque, NM                          767               747     7.82%      May 1, 2012                        887
  Springfield, MO                        1,030             1,019     7.82%     June 1, 2012                      1,208
  Salem, OR                                621               614     7.82%     June 1, 2012                        732
  Roanoke, VA                              712               706     7.89%    July 1,  2012                        845
  Alexandria, LA                           716               711     7.89%     Aug. 1, 2012                        855
  Centerville, UT                        1,242             1,233     7.89%     Aug. 1, 2012                      1,078
  Memphis, TN                            1,342             1,333     7.89%     Aug. 1, 2012                      1,088
  La Verne, CA                             745               741     7.89%    Sept. 1, 2012                        998
  El Paso, TX                              894               890     7.89%    Sept. 1, 2012                      1,156
  Memphis, TN                              777               773     7.89%    Sept. 1, 2012                      1,062
  Parker, CO                               835               831     7.89%    Sept. 1, 2012                      1,112

                               ----------------- -----------------                                  --------------------
            Total                      $14,910           $14,762                                               $17,198
                               ================= =================                                  ====================





In July of 2002, the Company issued thirteen, 8 year subordinated, 5.47%
interest-only notes totaling $760 thousand, maturing July 2010. The notes,
which are callable by the Company at par plus accrued interest, were issued to
partners who dissented against the Company's merger with three affiliated
public partnerships.

Aggregate annual maturity of the notes payable for each of the following five
years ending December 31 are as follows:




                (in thousands)
                                                  
                  2003                                  $     12,172
                  2004                                           447
                  2005                                           483
                  2006                                           522
                  2007                                           565
                  Thereafter                                  19,397
                                                        ------------
                                                        $     33,586









6. MAJOR TENANTS



The following schedule summarizes rental income by lessee for 2002 and 2001 (in
thousands):


                                                                                   2002        2001
                                                                                        



International House of Pancakes                                                 $ 1,784       $ 510
Footstar, Inc.                                                                      735         713
OfficeMax, Inc.                                                                     509         518
Wherehouse Entertainment                                                            381         378
Hollywood Entertainment Corp.                                                       273         273
Sugar Land Imaging Affiliates Ltd.                                                  264         217
Mattress Giant, Inc.                                                                168         106
Washington Mutual                                                                   158         158
Radio Shack                                                                         109         109
Golden Corral (4)                                                                   167           0
Texas Children's Pediatrics (2)                                                     137           0
Don Pablos                                                                           78          79
One Care Health Industries, Inc. (1)                                                 57         204
Comp USA (4)                                                                        123           0
Baptist Memorial Hospital (4)                                                       102           0
TGI Friday's (4)                                                                     83           0
Dr. Pucillo (4)                                                                      87           0
Pier 1                                                                               62           0
America's Favorite Chicken Co. (3) (4)                                               55          21
Blockbuster (4)                                                                      42           0
Waldenbooks (4)                                                                      38           0
Jack in the Box (4)                                                                  34           0
Goodyear (4)                                                                         25           0
Skewers                                                                              18           0
Hope Rehab                                                                            5           0
                                                                                -------     -------


Total                                                                           $ 5,494     $ 3,286
                                                                                =======     =======




(1)      One Care Health Industries, Inc. was a tenant at Copperfield Medical
         Plaza. In April of 2002, AmREIT negotiated a lease buy out agreement
         with One Care for approximately $190 thousand. As a result, AmREIT
         immediately released approximately 75% of the available space to Texas
         Children's Pediatrics and the Company has negotiated a lease for
         balance of the space.
(2)      Texas Children's Pediatrics entered into a long-term lease with
         AmREIT, beginning in May 2002, at Copperfield Medical Plaza. The lease
         was entered into as a result of the negotiated lease buy out by AmREIT
         and One Care Health Industries, Inc.
(3)      The America's Favorite Chicken Co. restaurant located in Atlanta
         was sold by AmREIT during the first quarter 2001.
(4)      Properties were purchased from three affiliated partnerships in
         July 2002.


7. FEDERAL INCOME TAXES

The differences between net income for financial reporting purposes and taxable
income before distribution deductions relate primarily to temporary
differences, merger costs and potential acquisition costs which are expensed
for financial reporting purposes.

For income tax purposes, distributions paid to shareholders consist of ordinary
income, capital gains and return of capital as follows (in thousands):




                                                      2002                         2001
                                                    --------                     --------
                                                                           
Ordinary income                                     $      -                     $      6
Return of capital                                      1,730                          143
Capital gain                                               -                          456
                                                    --------                     --------
                                                    $  1,730                     $    605
                                                    ========                     ========










8.   RELATED PARTY TRANSACTIONS

See Note 4 regarding investments in non-consolidated affiliates.

On July 23, 2002, the Company completed a merger with three of its affiliated
partnerships, AAA Net Realty Fund IX, Ltd., AAA Net Realty Fund X, Ltd., and
AAA Net Realty Fund XI, Ltd. AmREIT accounted for this merger as a purchase,
whereby the assets of the partnerships have been recorded at fair market value.
AmREIT increased its real estate assets by approximately $24.3 million and
issued approximately 2.6 million shares of Class B common stock to the limited
partners in the affiliated partnerships as a result of the merger.
Approximately $760 thousand in 8 year, 5.47% interest only, subordinated notes
were issued to limited partners of the affiliated partnerships who dissented to
the merger. The acquired properties are unencumbered, single tenant, free
standing properties on lease to national and regional tenants, where the lease
is the direct obligation of the parent company. A deferred merger expense
stemmed from stock issued to H. Kerr Taylor, President and Chief Executive
Officer, based on a deferred consideration that was approved by the
stockholders in 1998. Mr. Taylor was issued 302 thousand shares of Class A
common stock, which resulted in a $1.9 million charge to earnings in the third
quarter 2002. As the Company raises additional equity, Mr. Taylor is eligible
to receive up to an additional 384 thousand shares of Class A common stock
pursuant to the deferred consideration agreement approved by the stockholders
in 1998 related to the sale of Mr. Taylor's advisory company to AmREIT.


The Company provides property acquisition, leasing, administrative and
management services for ten affiliated real estate limited partnerships that
are under common management (the "Partnerships"). The president and director of
the Company owns between 45% and 100% of the stock of the companies that serve
as the general partner of the Partnerships. Service fees of $245 thousand and
$335 thousand were paid by the Partnerships to the Company for 2002 and 2001
respectively.


As a sponsor of real estate investment opportunities to the NASD financial
planning broker dealer community, the Company maintains a 1% general partner
interest in the investment funds that it sponsors. The funds are typically
structured such that the limited partners receive 99% of the available cash
flow until 100% of their original invested capital has been returned and a
preferred return has been met. Once this has happened, then the general partner
begins sharing in the available cash flow at various promoted levels. The
Company also assigns a portion of this general partner interest in these
investment funds to its employees as long term, contingent compensation. In so
doing, the Company believes that it will align the interest of management with
that of the shareholders, while at the same time allowing for a competitive
compensation structure in order to attract and retain key management positions
without increasing the overhead burden.

On March 20, 2002, the Company formed AAA CTL Notes, Ltd. ("AAA"), a majority
owned subsidiary which is consolidated in the financial statements of AmREIT,
through which the Company purchased fifteen IHOP leasehold estate properties
and two IHOP fee simple properties.


Locke Liddell and Sapp, LLP acts as the Company's corporate attorneys. Bryan
Goolsby is the managing director of Locke Liddell and Sapp LLP and is a member
of the Company's board of trust managers. During 2002 and 2001, the Company
paid Locke Liddell and Sapp LLP approximately $777 thousand and $133 thousand,
respectively, for legal services rendered.








9. PROPERTY ACQUISITIONS AND DISPOSITIONS

During the third quarter, the Company purchased seventeen IHOP restaurant
properties. Fifteen of the properties are leasehold estate properties, whereby
the Company owns the physical improvements, but does not own the underlying
land. Two of the properties were purchased in fee simple. The total purchase
price was $17.25 million. The properties were purchased utilizing $2.34 million
cash and $14.91 million non-recourse, 10-year debt with an average
interest rate of 7.85%. Each lease agreement extends for a period of 18-25
years, however, the tenant has the ability to extend the primary term of the
lease for two to three additional terms of five years each. Additionally, each
lease is subject to a corresponding ground lease with the same term of 18-25
years and two to three additional terms of five years each. The Company
recorded $1.18 million in rental income during 2002 from properties acquired
in this transaction.

On July 23, 2002, the Company completed a merger with three of its affiliated
partnerships, AAA Net Realty Fund IX, Ltd., AAA Net Realty Fund X, Ltd., and
AAA Net Realty Fund XI, Ltd., which was accounted for as an acquisition. With
the merger of the affiliated partnerships, AmREIT increased its real estate
assets by approximately $24.3 million and issued approximately 2.6 million
shares of Class B common stock to the limited partners in the affiliated
partnerships. The class B common shares are not listed on an exchange and
there is currently no available trading market for the class B common shares.
The class B common shares do not have voting rights, receive a fixed 8%
cumulative and preferred dividend, and are convertible into the class A common
shares on a one-for-one basis at any time, at the holder's option.
Approximately $760 thousand in 8 year, interest only, subordinated notes were
issued to limited partners of the affiliated partnerships who dissented against
the merger. The acquired properties are unencumbered, single tenant, free
standing properties on lease to national and regional tenants, where the lease
is the direct obligation of the parent company.

The following selected unaudited pro forma consolidated statement of operations
for AmREIT and subsidiaries gives effect to the merger with its three
affiliated partnerships, which assumes that the merger occurred on January 1,
2002 and January 1, 2001, respectively. Additionally, we have presented a
summary of assets acquired and liabilities assumed as of the date of the
merger, July 23, 2002.


                 Pro Forma Consolidated Statement of Operations
                    For the Twelve Months Ended December 31,
                                  (Unaudited)




                                                                                      2002                           2001
                                                                                                      
Revenues
         Rental income and earned income                                        $    6,399,475                 $    5,012,747
         Other income                                                                2,542,974                      2,459,287
                                                                                   -----------                    -----------
         Total Revenues                                                              8,942,449                      7,472,034
                                                                                   -----------                    -----------

Total Expense                                                                        8,806,471                      6,811,762
                                                                                   -----------                    -----------

Proforma  Income  Before  Minority  Interest  in  Net  Income  of
Consolidated Joint Ventures                                                            135,978                        660,272

Federal Income Tax Expense from Non-Qualified Subsidiary                               (20,524)                      (144,420)
                                                                                  ------------                   ------------
Minority Interest in Net Income of Consolidated Joint Ventures                         (46,419)                             -

Pro Forma Net Income                                                            $       69,035                 $      515,852

Distributions to Class B Shareholders                                               (1,822,262)                    (1,915,992)
                                                                                  ____________                   ____________
Net (Loss) available to Class A Shareholders                                        (1,753,227)                    (1,400,140)

Pro Forma Basic and Diluted (Loss)Per Share                                     $        (0.65)                 $       (0.52)
                                                                                  ============                   ============

Pro Forma Weighted Average Common Shares Outstanding                                 2,691,580                      2,706,961











               Summary of Assets Acquired and Liabilities Assumed
                              As of July 23, 2002,
                                  (Unaudited)




Assets
                                                                              
         Buildings                                                                  $  16,330,088
         Land                                                                           7,560,231
         Accounts receivable                                                            1,105,612
         Prepaid expenses                                                                  15,757
                                                                                    -------------
         TOTAL ASSETS                                                               $  25,011,688
                                                                                    =============

Liabilities                                                                         $     132,630

Shareholders' equity
         Class B common stock                                                       $  24,879,058
                                                                                    -------------


         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                 $  25,011,688
                                                                                    =============




10. COMMITMENT


The Company has a one-year lease agreement for its office facilities through
December 31, 2003. Rental expense for the years ended December 31, 2002 and
2001 was $77 thousand and $71 thousand, respectively.









                             AmREIT and subsidiaries
 SCHEDULE III - Consolidated Real Estate Owned and Accumulated Depreciation For
                        the year ended December 31, 2002





                                                                                                                     Cost at
                   Property                        Encum-                                          Improve-       Close of Year
                 Description                      brances         Building           Land            ments           Building
                                                                                                 
Properties Invested in
Under Operating Leases

Radio Shack Retail Store, Texas                $        -      $    788,330    $     337,856     $       -      $       788,330
Blockbuster Music Store, Missouri              $        -      $  1,247,461    $     534,483     $       -      $     1,247,461
OneCare Health Industries, Inc., Texas         $        -      $  1,436,615    $     534,086     $       -      $     1,436,615
Blockbuster Music Store, Kansas                $        -      $  1,382,846    $     592,648     $       -      $     1,382,846
Just For Feet Store, Arizona                   $        -      $        -      $   1,214,046     $       -      $           -
Bank United, Woodlands, Texas                  $        -      $        -      $     562,846     $       -      $           -
Bank United, Houston, Texas                    $        -      $        -      $     851,973     $       -      $           -
Just For Feet Store, Louisiana                 $        -      $  2,254,537    $     966,230     $       -      $     2,254,537
Hollywood Video Store, Louisiana               $        -      $    784,123    $     443,544     $       -      $       784,123
Hollywood Video Store, Mississippi             $        -      $    835,854    $     450,000     $       -      $       835,854
OfficeMax, Delaware                            $        -      $  1,978,313    $     870,480     $       -      $     1,978,313
Lake Woodlands Plaza                           $        -      $  2,832,540    $   1,369,065     $       -      $     2,832,540
Sugar Land Plaza                               $        -      $  2,902,157    $   1,280,043     $       -      $     2,902,157
Don Pablo's, Georgia                           $        -      $        -      $     773,800     $       -      $           -
IHOP, Topeka                                   $        -      $        -      $     450,984     $       -      $           -
IHOP, Sugarland                                $        -      $        -      $     740,882     $       -      $           -
IHOP, St. Peters                               $        -      $        -      $     564,096     $       -      $           -
Jack in the Box                                $        -      $    504,230    $     216,099     $       -      $       504,230
Baptist Memorial Health                        $        -      $  1,456,017    $     624,006     $       -      $     1,456,017
Payless Shoe Source                            $        -      $    498,098    $     212,907     $       -      $       498,098
Golden Corral                                  $        -      $  1,097,215    $     725,552     $       -      $     1,097,215
Golden Corral                                  $        -      $  1,297,851    $     556,221     $       -      $     1,297,851
TGI Friday's                                   $        -      $  1,453,769    $     623,043     $       -      $     1,453,769
Goodyear Tire                                  $        -      $    376,172    $     161,217     $       -      $       376,172
Guitar Center                                  $        -      $  1,782,470    $     763,917     $       -      $     1,782,470
Popeye's                                       $        -      $    778,771    $     333,758     $       -      $       778,771
Dr. Pucillo                                    $        -      $  1,276,836    $     547,214     $       -      $     1,276,836
Blockbuster Video                              $        -      $    688,091    $     294,896     $       -      $       688,091
Pier One Imports                               $        -      $  1,000,562    $     422,722     $       -      $     1,000,562
IHOP, Memphis                                  $        -      $        -      $     469,502     $       -      $           -
IHOP, Centerville                              $        -      $        -      $     457,492     $       -      $           -
                                               ________________________________________________________________________________

      Total                                    $        -      $ 28,652,858    $  18,945,608     $       -      $    28,652,858
===============================================================================================================================
Properties Invested in Under
Direct Financing Lease

Just For Feet Store, Arizona                   $        -      $  2,848,151    $         -       $       -      $     2,848,151
IHOP, Topeka                                   $        -      $    993,774    $         -       $       -      $       993,774
IHOP, Sugarland                                $        -      $    999,517    $         -       $       -      $       999,517
IHOP, St. Peters                               $        -      $  1,331,121    $         -       $       -      $     1,331,121
IHOP, Albuquerque                              $        -      $    886,692    $         -       $       -      $       886,692
IHOP, Baton Rouge                              $        -      $  1,460,170    $         -       $       -      $     1,460,170
IHOP, Beaverton                                $        -      $  1,045,672    $         -       $       -      $     1,045,672
IHOP, Charlottesville                          $        -      $    748,859    $         -       $       -      $       748,859
IHOP, El Paso #1934                            $        -      $    896,644    $         -       $       -      $       896,644
IHOP, Roanoke                                  $        -      $    845,051    $         -       $       -      $       845,051
IHOP, Rochester                                $        -      $  1,135,950    $         -       $       -      $     1,135,950
IHOP, Salem                                    $        -      $    731,642    $         -       $       -      $       731,642
IHOP, Shawnee                                  $        -      $    889,229    $         -       $       -      $       889,229
IHOP, Springfield                              $        -      $  1,207,602    $         -       $       -      $     1,207,602
IHOP, Alexandria                               $        -      $    854,837    $         -       $       -      $       854,837
IHOP, Centerville                              $        -      $  1,077,649    $         -       $       -      $     1,077,649
IHOP, Memphis #4462                            $        -      $  1,088,114    $         -       $       -      $     1,088,114
IHOP, La Verne                                 $        -      $    997,980    $         -       $       -      $       997,980
IHOP, El Paso #1938                            $        -      $  1,156,194    $         -       $       -      $     1,156,194
IHOP, Memphis #4482                            $        -      $  1,098,749    $         -       $       -      $     1,098,749
IHOP, Parker                                   $        -      $  1,111,727    $         -       $       -      $     1,111,727
                                               ________________________________________________________________________________
      Total                                    $        -      $ 23,405,324    $         -       $       -      $    23,405,324
===============================================================================================================================









                                                                                                     Life on Which
                                                                                                      Depreciation
                                               Cost at                                              in Latest Income
                                             Close of Year  Accumulated       Date of      Date        Statement
                                                 Land       Depreciation   Construction  Acquired      is Computed
                                                                                      
Properties Invested in
Under Operating Leases

Radio Shack Retail Store, Texas              $    337,856    $   172,606        N/A      06-15-94        39 Years
Blockbuster Music Store, Missouri            $    534,483    $   138,644        N/A      11-14-94        39 Years
OneCare Health Industries, Inc., Texas       $    534,086    $   236,890        N/A      09-26-95        39 Years
Blockbuster Music Store, Kansas              $    592,648    $   128,969        N/A      09-12-95        39 Years
Just For Feet Store, Arizona                 $  1,214,046            N/A        N/A      09-11-96             N/A
Bank United, Woodlands, Texas                $    562,846            N/A        N/A      09-23-96             N/A
Bank United, Houston, Texas                  $    851,973            N/A        N/A      12-11-96             N/A
Just For Feet Store, Louisiana               $    966,230    $   165,360        N/A      06-09-97        39 Years
Hollywood Video Store, Louisiana             $    443,544    $    75,635        N/A      10-31-97        39 Years
Hollywood Video Store, Mississippi           $    450,000    $   107,161        N/A      12-30-97        39 Years
OfficeMax, Delaware                          $    870,480    $   232,494        N/A       4-14-98        39 Years
Lake Woodlands Plaza                         $  1,369,065    $   288,585        N/A        6-3-98        39 Years
Sugar Land Plaza                             $  1,280,043    $   330,195        N/A        7-1-98        39 Years
Don Pablo's, Georgia                         $    773,800            N/A        N/A      12-18-98             N/A
IHOP, Topeka                                 $    450,984            N/A        N/A       9-30-99             N/A
IHOP, Sugarland                              $    740,882            N/A        N/A       9-22-99             N/A
IHOP, St. Peters                             $    564,096            N/A        N/A      11-30-01             N/A
Jack in the Box                              $    216,099    $     6,003        N/A       7-23-02        39 Years
Baptist Memorial Health                      $    624,006    $    17,453        N/A       7-23-02        39 Years
Payless Shoe Source                          $    212,907    $     5,866        N/A       7-23-02        39 Years
Golden Corral                                $    725,552    $    13,109        N/A       7-23-02        39 Years
Golden Corral                                $    556,221    $    15,474        N/A       7-23-02        39 Years
TGI Friday's                                 $    623,043    $    17,098        N/A       7-23-02        39 Years
Goodyear Tire                                $    161,217    $     4,498        N/A       7-23-02        39 Years
Guitar Center                                $    763,917    $    21,336        N/A       7-23-02        39 Years
Popeye's                                     $    333,758    $     9,351        N/A       7-23-02        39 Years
Dr. Pucillo                                  $    547,214    $    15,251        N/A       7-23-02        39 Years
Blockbuster Video                            $    294,896    $     8,174        N/A       7-23-02        39 Years
Pier One Imports                             $    422,722    $    12,000        N/A       7-23-02        39 Years
IHOP, Memphis                                $    469,502            N/A        N/A       7-26-02             N/A
IHOP, Centerville                            $    457,492            N/A        N/A       7-25-02             N/A
                                             ____________________________________________________________________

      Total                                  $ 18,945,608    $ 2,022,152
========================================================================
Properties Invested in Under
Direct Financing Lease

Just For Feet Store, Arizona                 $        -           (1)           N/A      09-11-96             N/A
IHOP, Topeka                                 $        -           (1)           N/A       9-30-99             N/A
IHOP, Sugarland                              $        -           (1)           N/A       9-22-99             N/A
IHOP, St. Peters                             $        -           (1)           N/A      11-30-01             N/A
IHOP, Albuquerque                            $        -           (1)           N/A       4-23-02             N/A
IHOP, Baton Rouge                            $        -           (1)           N/A       4-23-02             N/A
IHOP, Beaverton                              $        -           (1)           N/A       4-16-02             N/A
IHOP, Charlottesville                        $        -           (1)           N/A       4-23-02             N/A
IHOP, El Paso #1934                          $        -           (1)           N/A       4-16-02             N/A
IHOP, Roanoke                                $        -           (1)           N/A       6-21-02             N/A
IHOP, Rochester                              $        -           (1)           N/A       4-16-02             N/A
IHOP, Salem                                  $        -           (1)           N/A       5-17-02             N/A
IHOP, Shawnee                                $        -           (1)           N/A       4-16-02             N/A
IHOP, Springfield                            $        -           (1)           N/A       5-17-02             N/A
IHOP, Alexandria                             $        -           (1)           N/A       7-18-02             N/A
IHOP, Centerville                            $        -           (1)           N/A       7-25-02             N/A
IHOP, Memphis #4462                          $        -           (1)           N/A       7-26-02             N/A
IHOP, La Verne                               $        -           (1)           N/A       8-23-02             N/A
IHOP, El Paso #1938                          $        -           (1)           N/A       8-23-02             N/A
IHOP, Memphis #4482                          $        -           (1)           N/A       8-23-02             N/A
IHOP, Parker                                 $        -           (1)           N/A       8-23-02             N/A
                                             ____________________________________________________________________
      Total                                  $        -           (1)
=================================================================================================================




(1) The portion of the lease relating to the building of this property has been
recorded as a direct financing lease for financial reporting purposes.
Consequently, depreciation is not applicable.







(2) Transactions in real estate and accumulated depreciation during 2002, 2001
and 2000 for operating lease properties are summarized as follows:


                                                                Accumulated
                                                    Cost        Depreciation
                                                         
Balance at December 31, 1999                     29,861,678       1,123,790
Acquisitions / additions                             33,430               -
Depreciation expense                                      -         435,259
                                                 __________       _________
Balance at December 31, 2000                     29,895,108       1,559,049
Acquisitions / additions                          1,351,201               -
Disposals                                          (797,237)              -
Depreciation expense                                      -         439,652
                                                 __________       _________
Balance at December 31, 2001                   $ 30,449,072    $  1,998,701
Acquisitions / additions                       $ 20,024,562    $          -
Disposals                                      $ (2,875,168)   $   (238,591)
Depreciation expense                           $          -    $    262,042
                                                 __________       _________
Balance at December 31, 2002                   $ 47,598,466    $  2,022,152



(3) The aggregate cost of all properties for Federal Income Tax purposes is
$71,261,389 at December 31, 2002.




(AMREIT LOGO)

                                                      SPECIAL INSTRUCTIONS:


                              CLASS C COMMON SHARES
                      SUBSCRIPTION AGREEMENT SIGNATURE PAGE
                  See pages of the Prospectus for instructions




                                                                                               
1. INVESTMENT
                                                                          MAKE INVESTMENT CHECKS PAYABLE TO:
                                                                                          AMREIT
--------------                          ----------------            [ ] Initial Investment - Qualified Plans (min. $3,000)
 # of Shares                            Total $ Invested            [ ] Initial Investment - Non-Qualified Plans (min. $5,000)
            (# Shares x $10 = $ Invested)                           [ ] Additional Investment (increments of $10.00)
     Minimum purchase $1,000 or 100 Shares

2. ADDITIONAL INVESTMENTS


         I have received and reviewed the prospectus and understand that this investment is considered illiquid, not
convertible into the AmREIT class A shares for a period of seven years. I further understand that AmREIT's class A
shares are publicly traded on the American Stock Exchange.

                                    --------                                    --------
                                    Initials                                    Initials

3. TYPE OF OWNERSHIP


[ ] IRA                                                             [ ] Joint Tenants With Right of Survivorship
    (Enter Custodial Information under section 4)                   [ ] Community Property
[ ] Keogh                                                           [ ] Tenants in Common ____________________
[ ] Qualified Pension Plan                                          [ ] Custodian: A Custodian for _______under
[ ] Qualified Profit Sharing Plan                                   the Uniform Gift to Minors Act or the
[ ] Trust / Trust Type:___________________________________          Uniform Transfers to Minors Act of the State of ______________
    (Please specify, i.e. Family. Living, Revocable, etc.)          [ ] Other ____________________________________
[ ] Individual

4. REGISTRATION NAME AND ADDRESS


Please print name(s) in which Shares are to be registered. INCLUDE TRUST OR CUSTODIAL NAME IF APPLICABLE. AMREIT DOES
NOT PROVIDE CUSTODIAL SERVICES; THEREFORE, IF THIS IS A CUSTODIAL ACCOUNT, A CUSTODIAN MUST BE SELECTED AND INDICATED
BELOW.

[ ] Mr   [ ] Mrs   [ ] Ms   [ ] PhD   [ ] DDS   [ ] Other ______________               Taxpayer Identification Number

                                                                                       [ ][ ] - [ ][ ][ ][ ][ ][ ][ ]
----------------------------------------------------------
                                                                                       Social Security Number

                                                                                       [ ][ ][ ] - [ ][ ] - [ ][ ][ ][ ]
----------------------------------------------------------

Street Address
               --------------------------------------------------------------------------------------------------------

City                                    State                                   Zip Code
     -------------------------------         --------------------------------            ------------------------------

Home Phone
Number
                -----------------------------------

Birth Date
                -----------------------------------

Email Address                                           (E-mail addresses will not be sold or distributed and will only be used for
                -----------------------------------     corporate communication.)


5. INVESTOR NAME AND ADDRESS


[ ]  Check here if investor information is the same as registration information,
and skip to section 6.


[ ] Mr   [ ] Mrs   [ ] Ms   [ ] PhD   [ ] DDS   [ ] Other                              Taxpayer Identification Number

Name
                                                                                       [ ] [ ] - [ ][ ][ ][ ][ ][ ][ ]
----------------------------------------------------------
                                                                                       Social Security Number

                                                                                       [ ][ ][ ] - [ ][ ] - [ ][ ][ ][ ]

Street Address or P.O. Box
                           --------------------------------------------------------------------------------------------

City                                    State                                   Zip Code
     -------------------------------         --------------------------------            ------------------------------

Home Phone
Number                                                   Email Address
                -----------------------------------                   -----------------------------------
Birth Date                                               (E-mail addresses will not be sold or distributed and will only be
                -----------------------------------       used for corporate communication.)



-----------------------------------------------------------------------------------------------------------------------
                                            (REVERSE SIDE MUST BE COMPLETED)



                                                                                               
6 REGISTRATION NAME AND ADDRESS

Please separately initial each of the representations below. In order to induce AmREIT to accept this subscription, I
hereby represent and warrant to you as follows:

(a)  I have received the Prospectus.                                                    -------------           -------------
                                                                                          Initials                 Initials

(b)  I (i) either have a net worth (exclusive of home, home furnishings, and
     automobiles) of at least $150,000, or have a net worth (as described above)
     of at least $45,000 and had during the last tax year, or estimate that I
     will have during the current tax year, a minimum annual gross income of            -------------           -------------
     $45,000; and (ii) if the state of my primary residence imposes a higher              Initials                 Initials
     suitability standard, I meet the higher suitability requirements imposed by
     my state of primary residence as set forth in the Prospectus under
     "Suitability Standards".

(c)  This investment represents approximately  ____% of my net worth, and allows        -------------           -------------
     the appropriate liquid net worth to meet my current needs.                           Initials                 Initials

(d)  I acknowledge that the shares are not liquid.                                      -------------           -------------
                                                                                          Initials                 Initials

I declare that the information supplied above is true and correct and may be relied upon by AmREIT in connection with my
investment in AmREIT. Under penalties of perjury, by signing this Signature Page, I hereby certify that (a) I have
provided herein my correct Taxpayer Identification Number, and (b) I am not subject to back-up withholding as a result
of a failure to report all interest or dividends, or the Internal Revenue Service has notified me that I am no longer
subject to back-up withholding.



---------------------------------     ---------------------------------------        ------------------------------
Signature of Investor or Trustee      Signature of Joint Owner, if applicable        Date


                             (MUST BE SIGNED BY TRUSTEE(S) IF IRA, KEOGH OR QUALIFIED PLAN)


7 DIVIDENDS (YOU MUST CHECK ONE OF THE FOLLOWING)

NOTE: AmREIT DOES NOT PROVIDE CUSTODIAL SERVICES. IF THIS IS A CUSTODIAL ACCOUNT, PLEASE ENSURE THAT YOU HAVE COMPLETED
SECTION 4 APPROPRIATELY AND INDICATED THE NAME OF THE CUSTODIAN.


[ ]  I prefer to participate in the Dividend Reinvestment Plan and have completed the enclosed DRIP enrolment form

[ ]  I prefer to direct dividends to a party other than the registered owner per my instructions below

[ ]  I prefer dividends to be deposited directly into the following account:    Checking  _______    Savings  _______
     (If you wish to have your dividends deposited via electronic deposits,
     please complete the attached electronic deposit form and include the
     appropriate voided check or deposit slip)

     Institution                                                                Account
     Name                                                                       Number
                    -----------------------------------------------------                  ----------------------------

     Name on
     Account
                    ---------------------------------------------------------------------------------------------------

     Street Address
     or P.O. Box
                    ---------------------------------------------------------------------------------------------------


                    --------------------------------------        --------------           ----------------------------
     City                                                   State                 Zip Code


[ ]  I prefer dividends be paid to me at my address listed under Section 4


8 BROKER DEALER (TO BE COMPLETED BY REGISTERED REPRESENTATIVE)


THE BROKER-DEALER OR AUTHORIZED REPRESENTATIVE MUST SIGN BELOW to complete order. Broker-Dealer or authorized
representative warrants that it is a duly licensed Broker-Dealer or authorized representative and may lawfully offer
Shares in the state designated as the investor's address or the state in which the sale was made, if different. The
Broker-Dealer or authorized representative warrants that he has reasonable grounds to believe this investment is
suitable for the subscriber and that he has informed subscriber of all aspects of liquidity and marketability of this
investment.


Broker Dealer
Name
               --------------------------------------------------------------------------------------------------------

BD Address
               --------------------------------------------------------------------------------------------------------

City                                    State                                   Zip Code
               ---------------------         --------------------------------             -----------------------------

Reg. Rep.                                                                    Phone Number
               --------------------------------------------------------------             -----------------------------

Rep Address
               --------------------------------------------------------------------------------------------------------

City                                    State                                   Zip Code
               ---------------------         --------------------------------             -----------------------------

Email Address                                           (E-mail addresses will not be sold or distributed and will only be used for
               ------------------------------------     corporate communication.)


-------------------------------------------------               --------------------------------------------------------
Registered Representative Signature                             Broker-Dealer Signature, if required


        Please Mail completed Subscription Agreement (with all signatures) and personal check(s) made payable to
                                                         AmREIT

                                     8 Greenway Plaza, Suite 824, Houston, TX 77046
                                                     1-800-888-4400







                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION


                                                                               
              SEC Registration Fee.........................................          $  4,048
              NASD Filing Fee *............................................          $  4,900
              Legal fees and expenses *....................................          $200,000
              Accounting fees and expenses *...............................          $ 40,000
              Printing, engraving and mailing expenses *...................          $150,000
              Blue Sky Fees and Expenses *.................................          $      -
              Miscellaneous (including solicitation costs)*................          $251,000
                                                                                     --------
                                                              TOTAL*                 $659,948



              *Estimated

ITEM 32. SALES TO SPECIAL PARTIES

         Not Applicable.

ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES

         Not Applicable.

ITEM 34. INDEMNIFICATION OF TRUST MANAGERS AND OFFICERS

     AmREIT's  Declaration  of Trust  provides that the liability of each trust
manager  for  monetary  damages  shall  be  eliminated  to the  fullest  extent
permitted  by  applicable  law. In general,  under  current  Texas law, a trust
manager is liable to the trust  only for  liabilities  arising  from such trust
manager's own willful  misfeasance or willful  malfeasance or gross negligence.
The  Declaration of Trust also provides that no amendment  thereto may limit or
eliminate this limitation of liability with respect to event occurring prior to
the effective date of such amendment.

     AmREIT's Declaration of Trust provides that the trust manages and officers
shall be  indemnified  to the  maximum  extent  permitted  by Texas law.  Under
current  Texas  law,  the trust  will  indemnify  a person  who was,  is, or is
threatened to be made a named  defendant or respondent in a proceeding  because
the person is or was a trust  manager or officer if it is  determined  that the
person (i) conducted  himself in good faith; (ii) reasonably  believed:  (a) in
the case of conduct in his official  capacity as a trust  manager or officer of
the real  estate  investment  trust,  that his  conduct  was in the real estate
investment trust's best interests; and (b) in all other cases, that his conduct
was at least not opposed to the real estate investment  trust's best interests;
and (iii) in the case of any criminal  proceeding,  had no reasonable  cause to
believe  that his conduct was  unlawful.  Except to the extent  provided in the
following  sentence,  a trust manager or officer may not be indemnified  (i) in
respect of a  proceeding  in which the person is found liable on the basis that
personal  benefit was  improperly  received by him,  whether or not the benefit
resulted  from an action taken in the person's  official  capacity;  or (ii) in
which  the  person  is  found  liable  to the  real  estate  investment  trust.
Notwithstanding  the foregoing,  a person may be indemnified against judgments,
penalties  (including  excise  and  similar  taxes),  fines,  settlements,  and
reasonable  expenses  actually  incurred by the person in  connection  with the
proceeding;  provided  that if the  person is found  liable to the real  estate
investment  trust or is found  liable on the basis that  personal  benefit  was
improperly received by the person, the indemnification (i) is limited to

                                    II-1



reasonable expenses actually incurred by the person in connection with the
proceeding, and (ii) shall not be made in respect of any proceeding in which
the person shall have been found liable for willful or intentional misconduct
in the performance of his duty to the real estate investment trust. In
addition, the Company's Declaration of Trust and Bylaws require it to payor
reimburse, in advance of the final disposition of a proceeding, reasonable
expenses incurred by a present or former director or officer made a party to a
proceeding by reason of his status as a trust manager or officer, provided that
the Company shall have received (i) a written affirmation by the trust manager
or officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the Company as authorized by the Bylaws and
(ii) a written undertaking by or on his behalf to repay the amount paid or
reimbursed by the Company if it shall ultimately be determined that the
standard of conduct was not met. The Company's Declaration of Trust and Bylaws
also permit the Company to provide indemnification, payment or reimbursement of
expenses to any employee or agent of the Company in such capacity. Any
indemnification, payment or reimbursement of the expenses permitted by the
Declaration of Trust and Bylaws shall be furnished in accordance with the
procedures provided for indemnification and payment or reimbursement of
expenses under Texas Real Estate Investment Trust Act for trust managers.

ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED

         Not applicable.

ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS

         (A)      FINANCIAL STATEMENTS.

              AmREIT Financial Statements for the Year Ended December 31, 2002
                  Independent Auditor's Report
                  Consolidated Balance Sheet, December 31, 2002
                  Consolidated Statements of Operations for the Years Ended
                    December 31, 2002 and 2001
                  Consolidated Statements of Shareholders' Equity for the Years
                    Ended December 31, 2002 and 2001
                  Consolidated Statements of Cash Flows for the Years Ended
                    December 31, 2002 and 2001
                  Notes to Consolidated Financial Statements for the Years
                    Ended December 31, 2002 and 2001




         (B)      EXHIBITS (SEE EXHIBIT INDEX).


        EXHIBIT NO.   EXHIBIT
                
            1.1       Form of Dealer Manager Agreement
            3.1       Amended and Restated Declaration of Trust (incorporated by reference to
                      Exhibit 3.1 to the Registrant's Form 10-KSB for the fiscal year ended
                      December 31, 2002)
            3.2       Bylaws (incorporated by reference to Exhibit 3.2 to the Registrant's Form 10-KSB
                      for the fiscal year ended December 31, 2002)
            3.3       Form of Statement of Designation for class C common shares
            4.1       Form of Subscription Agreement and Subscription Agreement Signature Page
                      (included as Exhibit A to the Prospectus)
            5.1       Opinion of Locke Liddell & Sapp LLP regarding legality of the securities
            8.1       Opinion of Locke Liddell & Sapp LLP regarding tax matters
           10.1       Amended and Restated Revolving Credit Agreement, effective August 1, 2000,
                      by and among the Registrant, certain lenders named therein and Wells Fargo
                      Bank, as Agent (incorporated by reference to Exhibit 10.1 of the Registrant's
                      Form 10-KSB for the quarter end September 30, 2000.
           21.1       Subsidiaries of the Registrant
           23.1       Consent of Locke Liddell & Sapp LLP (included in Exhibits 5.1 and 8.1)
           23.2       Consent of KPMG LLP
           23.3       Consent of Deloitte & Touche LLP
        ----------------





                                      II-2



ITEM 37. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

         (1) To file, during any period in which offers or sales are being
made, a post effective amendment to this Registration Statement:

               (i)  To include any prospectus required by section 10(a)(3) of
         the Securities Act of 1933;

               (ii) To reflect in the prospectus any facts or events arising
         after the effective date of the Registration Statement (or the most
         recent post-effective amendment thereof) which, individually or in the
         aggregate, represent a fundamental change in the information set forth
         in the Registration Statement. Notwithstanding the foregoing, any
         increase or decrease in volume of securities offered (if the total
         dollar value of securities offered would not exceed that which was
         registered) and any deviation from the low or high end of the
         estimated maximum offering range may be reflected in the form of
         prospectus filed with the Commission pursuant to Rule 424(b) if, in
         the aggregate, the changes in volume and price represent no more than
         a 20 percent change in the maximum aggregate offering price set forth
         in the "Calculation of Registration Fee" table in the effective
         registration statement; and

               (iii) To include any material information with respect to the
         plan of distribution not previously disclosed in the Registration
         Statement or any material change to such information in the
         Registration Statement;

provided, however, that paragraphs (i) and (ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration Statement.

         (2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

         (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.

         (4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (5) Insofar as indemnification for liabilities arising under the
Securities  Act of  1933  may be  permitted  to  trust  managers,  officers  and
controlling persons of the Registrant pursuant to the foregoing  provisions,  or
otherwise, the Registrant has been advised that in the opinion of the Securities
and  Exchange  Commission  such  indemnification  is  against  public  policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for  indemnification  against  such  liabilities  (other than the payment by the
Registrant  of  expenses  incurred  or  paid  by a  trust  officer,  officer  or
controlling  person of the Registrant in the  successful  defense of any action,
suit or proceeding)  is asserted by such trust  officer,  officer or controlling
person in connection with the securities being registered,  the Registrant will,
unless in the opinion of its counsel the matter has been settled by  controlling
precedent,  submit to a court of appropriate  jurisdiction  the question whether
such  indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

                                      II-3



                             SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies  that it has  reasonable  grounds to believe that it meets all of the
requirements  for filing on Form S-11 and has duly caused this  Amendment No. 1
to the  Registration  Statement  on Form S-11 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 7th day of August, 2003.


                             AMREIT
                            (Registrant)


                             By:          /s/  H. Kerr Taylor
                             ------------------------------------------
                             Name:        H. Kerr Taylor
                             Title:       President and Chief Executive Officer


     Pursuant  to  the  requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in the
capacities and on the dates indicated.


                    Signature                                        Title                             Date
                    ---------                                        -----                             ----
                                                                                        
                                                   President, Chief Executive Officer            August 7, 2003
/s/ H. Kerr Taylor                                 and Chairman of the Board
----------------------------------------------     (Principal Executive Officer)
H. Kerr Taylor


                                                   Executive Vice President
/s/ Chad C. Braun                                  and Chief Financial Officer                   August 7, 2003
----------------------------------------------     (Principal Financial Officer)
Chad C. Braun



  *                                                 Trust Manager                                 August 7, 2003
----------------------------------------------
Robert S. Cartwright



  *                                                 Trust Manager                                August 7, 2003
----------------------------------------------
G. Steven Dawson



  *                                                 Trust Manager                                August 7, 2003
----------------------------------------------
Bryan L. Goolsby



  *                                                 Trust Manager                                August 7, 2003
----------------------------------------------
Philip W. Taggart



----------------------------------------------
 * Signed by Chad C. Braun as Attorney in Fact

                                   II-4








                                 EXHIBIT INDEX


  EXHIBIT NO.   EXHIBIT
             
      1.1       Form of Dealer Manager Agreement
      3.1       Amended and Restated Declaration of Trust (incorporated by
                reference to Exhibit 3.1 to the Registrant's Form 10-KSB for the
                fiscal year ended December 31, 2002)
      3.2       Bylaws (incorporated by reference to Exhibit 3.2 to the
                Registrant's  Form 10-KSB for the fiscal year ended December
                31, 2002)
      3.3       Form of Statement of Designation for class C common shares
      4.1       Form of Subscription Agreement and Subscription Agreement
                Signature Page (included as Exhibit A to the Prospectus)
      5.1       Opinion of Locke Liddell & Sapp LLP regarding legality of the
                securities
      8.1       Opinion of Locke Liddell & Sapp LLP regarding tax matters
     10.1       Amendment and Restated Revolving Credit Agreement, effective
                August 1, 2000, by and among the Registrant, certain lenders
                named therein and Wells Fargo Bank, as Agent (incorporated by
                reference to Exhibit 10.1 of the Registrant's Form 10-KSB for
                the quarter end September 30, 2000
     21.1       Subsidiaries of the Registrant
     23.1       Consent of Locke Liddell & Sapp LLP (included in Exhibits 5.1
                and 8.1)
     23.2       Consent of KPMG LLP
     23.3       Consent of Deloitte & Touche LLP








                                      II-5



                                                               EXHIBIT 1.1

                                    FORM OF
                            DEALER MANAGER AGREEMENT

                                     AmREIT

              Up to 4,400,000 Class C Common Shares / $44,000,000

                            DEALER MANAGER AGREEMENT

                             _______________, 2003

AmREIT Securities Company
8 Greenway Plaza, Suite 824
Houston, Texas 77046

Ladies and Gentlemen:

     AmREIT,  a  Texas  real  estate  investment  trust  (the  "Company"),   is
registering for public sale a maximum of 4,400,000 shares of its Class C common
shares of beneficial interest, $.01 par value per share (the "Offering"), to be
issued  and sold for an  aggregate  purchase  price of  $44,000,000  (4,000,000
shares to be offered to the public and 400,000 shares to be offered pursuant to
the Company's  dividend  reinvestment  plan,  collectively  the "Shares").  The
Shares are to be sold for a per share cash  purchase  price of $10.00,  and the
minimum  purchase  by any one person  shall be 100 Shares  except as  otherwise
indicated in the  Prospectus  (as defined below) or in any letter or memorandum
from the Company to AmREIT Securities Company (the "Dealer Manager"). Terms not
defined herein shall have the same meaning as in the Prospectus. The Shares are
being registered with the SEC (as defined herein). In connection therewith, the
Company hereby agrees with you, the Dealer Manager, as follows:

1.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company  represents and warrants to the Dealer Manager and each dealer
with whom the Dealer  Manager  has  entered  into or will enter into a Selected
Dealer  Agreement in the form  attached to this  Agreement as Exhibit "A" (said
dealers being hereinafter referred to as the "Dealers") that:

     1.1.  A  registration  statement  with  respect  to the  Company  has been
prepared by the  Company in  accordance  with  applicable  requirements  of the
Securities Act of 1933, as amended (the  "Securities  Act"), and the applicable
rules and  regulations  (the "Rules and  Regulations")  of the  Securities  and
Exchange  Commission (the "SEC") promulgated  thereunder,  covering the Shares.
Said  registration  statement,  which  includes a preliminary  prospectus,  was
initially  filed with the SEC on April 21,  2003.  Copies of such  registration
statement  and each  amendment  thereto  have been or will be  delivered to the
Dealer Manager.  (The registration  statement and prospectus contained therein,
as finally  amended  and  revised  at the  effective  date of the  registration
statement,  are  respectively  hereinafter  referred  to as  the  "Registration
Statement" and the  "Prospectus,"  except that if the Prospectus first filed by
the Company  pursuant to Rule 424(b) under the Securities Act shall differ from
the Prospectus,  the term "Prospectus"  shall also include the Prospectus filed
pursuant to Rule 424(b).)

     1.2. The Company has been duly and validly  organized and formed under the
laws of the  state of  Texas,  with the  power and  authority  to  conduct  its
business as described in the Prospectus.

     1.3. The Registration  Statement and Prospectus comply with the Securities
Act and the Rules and Regulations  and do not contain any untrue  statements of
material facts or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading;  provided,
however,  that the foregoing  provisions of this Section 1.3 will not extend to
such  statements  contained  in or omitted from the  Registration  Statement or
Prospectus as are primarily  within the knowledge of the Dealer  Manager or any
of the Dealers and are based upon  information  furnished by the Dealer Manager
in writing to the Company specifically for inclusion therein.


                                       1




     1.4. The Company  intends to use the funds  received  from the sale of the
Shares as set forth in the Prospectus.

     1.5.  No  consent,   approval,   authorization   or  other  order  of  any
governmental authority is required in connection with the execution or delivery
by the Company of this Agreement or the issuance and sale by the Company of the
Shares,  except such as may be required  under the Securities Act or applicable
state securities laws.

     1.6.  There  are no  actions,  suits or  proceedings  pending  or,  to the
knowledge of the Company, threatened against the Company at law or in equity or
before or by any federal or state commission, regulatory body or administrative
agency or other  governmental  body,  domestic  or  foreign,  which will have a
material adverse effect on the business or property of the Company.

     1.7. The execution and delivery of this Agreement, the consummation of the
transactions  herein  contemplated  and  compliance  with  the  terms  of  this
Agreement by the Company will not conflict  with or  constitute a default under
any  charter,  by-law,  indenture,   mortgage,  deed  of  trust,  lease,  rule,
regulation,  writ,  injunction  or  decree  of  any  government,   governmental
instrumentality  or court,  domestic or foreign,  having  jurisdiction over the
Company,  except to the extent that the  enforceability of the indemnity and/or
contribution provisions contained in Section 4 of this Agreement may be limited
under applicable securities laws.

     1.8. The Company has full legal right,  power and  authority to enter into
this Agreement and to perform the transactions  contemplated hereby,  except to
the  extent  that  the  enforceability  of the  indemnity  and/or  contribution
provisions  contained  in  Section 4 of this  Agreement  may be  limited  under
applicable securities laws.

     1.9. At the time of the issuance of the Shares,  the Shares will have been
duly  authorized and validly issued and, upon payment  therefor,  will be fully
paid and nonassessable and will conform to the description thereof contained in
the Prospectus.

2. COVENANTS OF THE COMPANY

         The Company covenants and agrees with the Dealer Manager that:

     2.1.  It will,  at no expense to the Dealer  Manager,  furnish  the Dealer
Manager  with such  number of  printed  copies of the  Registration  Statement,
including  all  amendments  and  exhibits  thereto,  as the Dealer  Manager may
reasonably  request. It will similarly furnish to the Dealer Manager and others
designated  by the Dealer  Manager as many  copies as the  Dealer  Manager  may
reasonably  request in  connection  with the offering of the Shares of: (a) the
Prospectus  in  preliminary  and final form and every form of  supplemental  or
amended  prospectus;  (b)  this  Agreement;  and (c) any  other  printed  sales
literature or other materials  (provided that the use of said sales  literature
and other  materials  has been first  approved  for use by the  Company and all
appropriate regulatory agencies).

     2.2. It will  furnish  such proper  information  and execute and file such
documents as may be  necessary  for the Company to qualify the Shares for offer
and sale under the securities laws of such  jurisdictions as the Dealer Manager
may  reasonably  designate and will file and make in each year such  statements
and reports as may be required.  The Company will furnish to the Dealer Manager
a copy of such  papers  filed  by the  Company  in  connection  with  any  such
qualification.

     2.3.  It will:  (a) use  commercially  reasonable  efforts  to  cause  the
Registration Statement to become effective;  (b) furnish copies of any proposed
amendment or  supplement  of the  Registration  Statement or  Prospectus to the
Dealer  Manager;  (c) file every  amendment or supplement  to the  Registration
Statement or the Prospectus  that may be required by the SEC; and (d) if at any
time the SEC shall issue any stop order  suspending  the  effectiveness  of the
Registration  Statement,  it will use commercially reasonable efforts to obtain
the lifting of such order at the earliest possible time.

                                       2




     2.4. If at any time when a Prospectus  is required to be  delivered  under
the  Securities  Act any event  occurs as a result of which,  in the opinion of
either  the  Company  or the  Dealer  Manager,  the  Prospectus  or  any  other
prospectus then in effect would include an untrue  statement of a material fact
or, in view of the circumstances  under which they were made, omit to state any
material fact  necessary to make the  statements  therein not  misleading,  the
Company will promptly notify the Dealer Manager thereof (unless the information
shall  have  been  received  from  the  Dealer  Manager)  and will  effect  the
preparation of an amended or  supplemental  prospectus  which will correct such
statement or omission.  The Company will then promptly  prepare such amended or
supplemental  prospectus or prospectuses as may be necessary to comply with the
requirements of Section 10 of the Securities Act.

3. OBLIGATIONS AND COMPENSATION OF DEALER MANAGER

     3.1.  The  Company  hereby  appoints  the Dealer  Manager as its agent and
principal  distributor  for the  purpose of selling for cash up to a maximum of
4,400,000  Shares  through  the  Dealers,  all of whom  shall be members of the
National Association of Securities Dealers,  Inc. ("NASD").  The Dealer Manager
may also sell Shares for cash  directly to its own clients and customers at the
public  offering  price and subject to the terms and  conditions  stated in the
Prospectus.  The Dealer Manager hereby accepts such agency and  distributorship
and  agrees  to use its best  efforts  to sell the  Shares  on said  terms  and
conditions. The Dealer Manager represents to the Company that it is a member of
the NASD and that it and its  employees and  representatives  have all required
licenses and registrations to act under this Agreement.

     3.2. Promptly after the effective date of the Registration Statement,  the
Dealer  Manager and the Dealers  shall  commence the offering of the Shares for
cash to the  public in  jurisdictions  in which the Shares  are  registered  or
qualified for sale or in which such offering is otherwise permitted. The Dealer
Manager and the Dealers will  suspend or terminate  offering of the Shares upon
request of the  Company at any time and will  resume  offering  the Shares upon
subsequent request of the Company.

     3.3.  Except as  provided  in the "Plan of  Distribution"  section  of the
Prospectus,  as compensation  for the services  rendered by the Dealer Manager,
the Company agrees that it will pay to the Dealer Manager  selling  commissions
in the amount of 7.5% of the gross  proceeds  of the Shares  sold plus a dealer
manager fee in the amount of 2.5% of the gross proceeds of the Shares sold.

     The  Company  will not be liable or  responsible  to any Dealer for direct
payment  of  commissions  to such  Dealer,  it being  the  sole  and  exclusive
responsibility  of the Dealer  Manager for payment of  commissions  to Dealers.
Notwithstanding  the above, at its discretion,  the Company may act as agent of
the Dealer  Manager by making  direct  payment of  commissions  to such Dealers
without incurring any liability therefor.

     3.4. The Dealer  Manager  represents  and warrants to the Company and each
person  and firm that signs the  Registration  Statement  that the  information
under  the  caption  "Plan of  Distribution"  in the  Prospectus  and all other
information furnished to the Company by the Dealer Manager in writing expressly
for  use  in  the  Registration  Statement,  any  preliminary  prospectus,  the
Prospectus,  or any amendment or supplement thereto does not contain any untrue
statement of a material  fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.

4. INDEMNIFICATION

     4.1.  The Company  will  indemnify  and hold  harmless the Dealers and the
Dealer  Manager,  their  officers and  directors  and each person,  if any, who
controls such Dealer or Dealer  Manager within the meaning of Section 15 of the


                                       3




Securities  Act (other than the Company)  from and against any losses,  claims,
damages or  liabilities,  joint or  several,  to which  such  Dealers or Dealer
Manager,  their officers and directors,  or such controlling  person may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or  liabilities  (or  actions in respect  thereof)  arise out of or are
based upon (a) any untrue  statement or alleged untrue  statement of a material
fact contained (i) in any Registration Statement (including the Prospectus as a
part thereof) or any  post-effective  amendment thereto or in the Prospectus or
any  amendment  or  supplement  to the  Prospectus  or  (ii)  in any  blue  sky
application  or  other  document  executed  by the  Company  or on  its  behalf
specifically  for the purpose of  qualifying  any or all of the Shares for sale
under the securities laws of any jurisdiction or based upon written information
furnished  by  the  Company  under  the  securities   laws  thereof  (any  such
application,  document  or  information  being  hereinafter  called a "Blue Sky
Application"),  or (b)  the  omission  or  alleged  omission  to  state  in the
Registration  Statement  (including  the  Prospectus  as a part thereof) or any
post-effective amendment thereof or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the  statements  therein not
misleading,  or (c) any untrue  statement  or  alleged  untrue  statement  of a
material fact  contained in any  preliminary  prospectus,  if used prior to the
effective  date of the  Registration  Statement,  or in the  Prospectus  or any
amendment or supplement to the  Prospectus or the omission or alleged  omission
to state therein a material fact required to be stated  therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made,  not  misleading.  The Company  will  reimburse  each Dealer or
Dealer Manager,  its officers and directors and each such  controlling  person,
for any legal or other  expenses  reasonably  incurred by such Dealer or Dealer
Manager,  its officers  and  directors  and each such  controlling  person,  in
connection with investigating or defending such loss, claim, damage,  liability
or action; provided that the Company will not be liable in any such case to the
extent  that any such loss,  claim,  damage or  liability  arises out of, or is
based upon an untrue  statement  or alleged  untrue  statement  or  omission or
alleged  omission  made  in  reliance  upon  and  in  conformity  with  written
information  furnished  (x) to the Company by the Dealer  Manager or (y) to the
Company or the Dealer  Manager by or on behalf of any Dealer  specifically  for
use in the preparation of the Registration Statement or any such post-effective
amendment  thereof,  any such  Blue  Sky  Application  or any such  preliminary
prospectus  or the  Prospectus  or any such  amendment  thereof  or  supplement
thereto;  and further  provided that the Company will not be liable in any such
case if it is determined that such Dealer or the Dealer Manager was at fault in
connection with the loss, claim, damage, liability or action.

     4.2. The Dealer  Manager will  indemnify and hold harmless the Company and
each  person or firm  which has  signed  the  Registration  Statement  and each
person,  if any, who  controls the Company  within the meaning of Section 15 of
the Securities Act, from and against any losses, claims, damages or liabilities
to which any of the aforesaid parties may become subject,  under the Securities
Act or otherwise,  insofar as such losses,  claims,  damages or liabilities (or
actions  in  respect  thereof)  arise out of or are based  upon (a) any  untrue
statement  of a  material  fact  contained  (i) in the  Registration  Statement
(including  the Prospectus as a part thereof) or any  post-effective  amendment
thereof or (ii) any Blue Sky  Application,  or (b) the omission to state in the
Registration  Statement  (including  the  Prospectus  as a part thereof) or any
post-effective amendment thereof or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the  statements  therein not
misleading,  or (c) any untrue  statement  or  alleged  untrue  statement  of a
material fact  contained in any  preliminary  prospectus,  if used prior to the
effective date of the Registration Statement,  or in the Prospectus,  or in any
amendment or  supplement  to the  Prospectus or the omission to state therein a
material fact  required to be stated  therein or necessary in order to make the
statements therein in the light of the circumstances under which they were made
not  misleading in each case to the extent,  but only to the extent,  that such
untrue statement or omission referenced in (a), (b) and (c) of this Section 4.2
was made in reliance upon and in conformity with written information  furnished
to the Company by or on behalf of the Dealer Manager  specifically for use with
reference  to the  Dealer  Manager  in  the  preparation  of  the  Registration
Statement or any such  post-effective  amendments  thereof or any such Blue Sky
Application  or any such  preliminary  prospectus or the Prospectus or any such
amendment thereof or supplement  thereto,  or (d) any unauthorized use of sales
materials or use of unauthorized verbal  representations  concerning the Shares
by the Dealer Manager. The Dealer Manager will reimburse the aforesaid parties,
in  connection  with  investigation  or  defending  such loss,  claim,  damage,
liability  or action.  This  indemnity  agreement  will be in  addition  to any
liability which the Dealer Manager may otherwise have.


                                       4




     4.3. Each Dealer  severally  will indemnify and hold harmless the Company,
the Dealer Manager and each of their trust managers or directors, each of their
officers who has signed any of the Registration  Statements and each person, if
any,  who  controls  the Company and the Dealer  Manager  within the meaning of
Section 15 of the Securities Act from and against any losses,  claims,  damages
or liabilities to which the Company,  the Dealer Manager,  any such director or
officer, or controlling person may become subject,  under the Securities Act or
otherwise,  insofar as such losses,  claims, damages or liabilities (or actions
in respect  thereof) arise out of or are based upon (a) any untrue statement or
alleged untrue  statement of a material fact contained (i) in the  Registration
Statement  (including the  Prospectus as a part thereof) or any  post-effective
amendment  thereof or (ii) in any Blue Sky Application,  or (b) the omission or
alleged  omission  to  state  in  the  Registration  Statement  (including  the
Prospectus as a part thereof or any post-effective  amendment thereof or in any
Blue Sky Application a material fact required to be stated therein or necessary
to make the statements  therein not misleading,  or (c) any untrue statement or
alleged  untrue  statement  of a material  fact  contained  in any  preliminary
prospectus,  if used prior to the effective date of the Registration Statement,
or in the  Prospectus,  or in any amendment or supplement to the  Prospectus or
the omission or alleged  omission to state  therein a material fact required to
be stated therein or necessary in order to make the statements  therein, in the
light of the  circumstances  under which they were made, not misleading in each
case to the extent,  but only to the  extent,  that such  untrue  statement  or
alleged untrue statement or omission or alleged omission referenced in (a), (b)
and (c) of this Section 4.3 was made in reliance  upon and in  conformity  with
written  information  furnished  to the Company or the Dealer  Manager by or on
behalf of such Dealer specifically for use with reference to such Dealer in the
preparation of the Registration Statement or any such post-effective amendments
thereof or any such Blue Sky Application or any such preliminary  prospectus or
the Prospectus or any such amendment thereof or supplement  thereto, or (d) any
unauthorized   use  of  sales   materials   or  use  of   unauthorized   verbal
representations   concerning   the   Shares   by  such   Dealer   or   Dealer's
representations  or agents in violation  of Section VII of the Selected  Dealer
Agreement or  otherwise.  Each such Dealer will  reimburse  the Company and the
Dealer Manager and any such directors or officers,  or controlling  person,  in
connection  with  investigating  or  defending  any such loss,  claim,  damage,
liability  or action.  This  indemnity  agreement  will be in  addition  to any
liability which such Dealer may otherwise have.

     4.4.  Promptly after receipt by an indemnified  party under this Section 4
of notice of the commencement of any action,  such indemnified party will, if a
claim in respect  thereof is to be made  against any  indemnifying  party under
this Section 4, notify in writing the  indemnifying  party of the  commencement
thereof and the  omission so to notify the  indemnifying  party will relieve it
from any  liability  under this Section 4 as to the  particular  item for which
indemnification is then being sought, but not from any other liability which it
may have to any  indemnified  party. In case any such action is brought against
any  indemnified   party,  and  it  notifies  an  indemnifying   party  of  the
commencement thereof, the indemnifying party will be entitled, to the extent it
may wish,  jointly with any other  indemnifying  party similarly  notified,  to
participate in the defense thereof,  with separate counsel.  Such participation
shall not relieve such  indemnifying  party of the  obligation to reimburse the
indemnified  party for reasonable legal and other expenses  (subject to Section
4.5) incurred by such indemnified  party in defending  itself,  except for such
expenses  incurred after the indemnifying  party has deposited funds sufficient
to effect  the  settlement,  with  prejudice,  of the claim in respect of which
indemnity  is sought.  Any such  indemnifying  party shall not be liable to any
such  indemnified  party on  account of any  settlement  of any claim or action
effected without the consent of such indemnifying party.

     4.5. The  indemnifying  party shall pay all legal fees and expenses of the
indemnified party in the defense of such claims or actions; provided,  however,
that the indemnifying party shall not be obliged to pay legal expenses and fees
to more than one law firm in  connection  with the  defense of  similar  claims
arising out of the same alleged  acts or  omissions  giving rise to such claims
notwithstanding  that such  actions or claims are  alleged or brought by one or
more parties against more than one indemnified party. If such claims or actions
are  alleged or  brought  against  more than one  indemnified  party,  then the
indemnifying  party shall only be obliged to reimburse the expenses and fees of
the one law firm  that has  been  selected  by a  majority  of the  indemnified
parties  against  which  such  action is  finally  brought;  and in the event a
majority of such  indemnified  parties is unable to agree on which law firm for
which expenses or fees will be reimbursable  by the  indemnifying  party,  then
payment  shall  be  made  to the  first  law  firm of  record  representing  an
indemnified party against the action or claim. Such law firm shall be paid only
to the extent of services performed by such law firm and no reimbursement shall
be payable to such law firm on account of legal  services  performed by another
law firm.

                                       5




     4.6.  The  indemnity  agreements  contained in this Section 4 shall remain
operative and in full force and effect regardless of (a) any investigation made
by or on behalf of any Dealer, or any person controlling any Dealer or by or on
behalf of the Company,  the Dealer  Manager or any officer,  trust  managers or
director thereof, or by or on behalf of the Company or the Dealer Manager,  (b)
delivery of any Shares and payment  therefor,  and (c) any  termination of this
Agreement.  A  successor  of  any  Dealer  or of any of  the  parties  to  this
Agreement,  as the  case may be,  shall  be  entitled  to the  benefits  of the
indemnity agreements contained in this Section 4.

5. SURVIVAL OF PROVISIONS

     The respective  agreements,  representations and warranties of the Company
and the Dealer Manager set forth in this Agreement  shall remain  operative and
in full force and effect  regardless of (a) any  termination of this Agreement,
(b) any investigation  made by or on behalf of the Dealer Manager or any Dealer
or any person  controlling  the Dealer Manager or any Dealer or by or on behalf
of the Company or any person controlling the Company, and (c) the acceptance of
any payment for the Shares.

6. APPLICABLE LAW

     This   Agreement   was  executed  and  delivered  in,  and  its  validity,
interpretation  and construction shall be governed by, the laws of the State of
Texas;  provided  however,  that causes of action for  violations of federal or
state securities laws shall not be governed by this Section.

7. COUNTERPARTS

     This  Agreement  may be  executed  in any  number  of  counterparts.  Each
counterpart,  when executed and delivered,  shall be an original contract,  but
all  counterparts,  when  taken  together,  shall  constitute  one and the same
Agreement.

8. SUCCESSORS AND AMENDMENT

     8.1. This Agreement  shall inure to the benefit of and be binding upon the
Dealer Manager and the Company and their respective successors. Nothing in this
Agreement  is intended or shall be  construed  to give to any other  person any
right, remedy or claim, except as otherwise  specifically provided herein. This
Agreement  shall inure to the benefit of the Dealers to the extent set forth in
Sections 1 and 4 hereof.

     8.2. This Agreement may be amended by the written  agreement of the Dealer
Manager and the Company.

9. TERM

     Any  party to this  Agreement  shall  have the  right  to  terminate  this
Agreement on 60 days' written notice.

10. CONFIRMATION

     The  Company  hereby  agrees and assumes the duty to confirm on its behalf
and on behalf of dealers or brokers who sell the Shares all orders for purchase
of Shares  accepted by the  Company.  Such  confirmations  will comply with the
rules  of the SEC and the NASD and will  comply  with  applicable  laws of such
other  jurisdictions  to the  extent  the  Company  is  advised of such laws in
writing by the Dealer Manager.


                                       6




11. SUITABILITY OF INVESTORS

     The Dealer Manager will offer Shares,  and in its agreements  with Dealers
will  require  that the  Dealers  offer  Shares,  only to persons  who meet the
financial  qualifications  set forth in the  Prospectus  or in any  suitability
letter or  memorandum  sent to it by the  Company  and will only make offers to
persons in the  states in which it is  advised  in writing  that the Shares are
qualified  for sale or that such  qualification  is not  required.  In offering
Shares, the Dealer Manager will, and in its agreements with Dealers, the Dealer
Manager  will,  require  that the  Dealer  comply  with the  provisions  of all
applicable  rules  and  regulations   relating  to  suitability  of  investors,
including without limitation, the provisions of Article III.C. of the Statement
of Policy  Regarding  Real  Estate  Investment  Trusts  of the  North  American
Securities Administrators Association, Inc.

12. SUBMISSION OF ORDERS

     12.1.  Those persons who purchase  Shares will be instructed by the Dealer
Manager or the  Dealer to make their  checks  payable to  "AmREIT."  The Dealer
Manager  and any  Dealer  receiving  a check not  conforming  to the  foregoing
instructions shall return such check directly to such subscriber not later than
the end of the next business day following its receipt.  Checks received by the
Dealer Manager or Dealer which conform to the foregoing  instructions  shall be
transmitted  for  deposit  pursuant  to one of the  methods  described  in this
Section 12.  Transmittal of received  investor funds will be made in accordance
with the following procedures.

     12.2.  Where,  pursuant  to a Dealer's  internal  supervisory  procedures,
internal  supervisory  review  is  conducted  at the  same  location  at  which
subscription documents and checks are received from subscribers, checks will be
transmitted  in care of the Dealer  Manager by the end of the next business day
following receipt by the Dealer for deposit to AmREIT.

     12.3. Where, pursuant to a Dealer's internal supervisory procedures, final
internal  supervisory review is conducted at a different location,  checks will
be  transmitted  by the end of the next business day  following  receipt by the
Dealer to the office of the Dealer  conducting such final internal  supervisory
review (the "Final Review Office"). The Final Review Office will in turn by the
end of the next  business day  following  receipt by the Final  Review  Office,
transmit such checks in care of the Dealer Manager for deposit to AmREIT.

     12.4.  Where the Dealer Manager is involved in the  distribution  process,
checks  will be  transmitted  by the Dealer  Manager  for deposit to Wells Real
Estate Investment  Trust, Inc. as soon as practicable,  but in any event by the
end of the second business day following receipt by the Dealer Manager.  Checks
of rejected subscribers will be promptly returned to such subscribers.

     If the foregoing  correctly sets forth our understanding,  please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us
as of the date first above written.

                               Very truly yours,

                               AmREIT


                           By:___________________________________________
                              H.  Kerr Taylor
                              President and Chief Executive Officer


Accepted and agreed as of the date first above written.

AmREIT Securities Company


By:_____________________________
   Chad C. Braun
   President




                                       7





                                  EXHIBIT "A"

                                     AmREIT

              Up to 4,400,000 Class C Common Shares / $44,000,000

                           SELECTED DEALER AGREEMENT

Ladies and Gentlemen:

     AmREIT Securities  Company,  as the dealer manager ("Dealer  Manager") for
AmREIT, a Texas real estate investment trust (the "Company"),  invites you (the
"Dealer")  to  participate  in the  distribution  of  shares  of  common  stock
("Shares") of the Company subject to the following terms:

     I.   DEALER MANAGEMENT AGREEMENT

     The Dealer  Manager and the Company have entered into that certain  Dealer
Manager  Agreement dated  ______________,  2003, in the form attached hereto as
Exhibit "A." By your acceptance of this  Agreement,  you will become one of the
Dealers  referred to in such Dealer Manager  Agreement  between the Company and
the Dealer  Manager  and will be entitled  and  subject to the  indemnification
provisions contained in such Dealer Manager Agreement,  including  specifically
the  provisions  of such Dealer  Manager  Agreement  (Section 4.3) wherein each
Dealer severally agrees to indemnify and hold harmless the Company,  the Dealer
Manager and each officer,  trust manager and director thereof, and each person,
if any, who controls the Company and the Dealer  Manager  within the meaning of
the Securities Act of 1933, as amended. Except as otherwise specifically stated
herein,  all terms used in this  Agreement  have the  meanings  provided in the
Dealer Manager Agreement.  The Shares are offered solely through broker-dealers
who are  members  of the  National  Association  of  Securities  Dealers,  Inc.
("NASD").

     The Dealer  hereby  agrees to use its best  efforts to sell the Shares for
cash on the terms and  conditions  stated in the  Prospectus.  Nothing  in this
Agreement  shall be deemed or construed to make the Dealer an employee,  agent,
representative  or  partner of the Dealer  Manager or of the  Company,  and the
Dealer is not  authorized  to act for the Dealer  Manager or the  Company or to
make any  representations on their behalf except as set forth in the Prospectus
and such  other  printed  information  furnished  to the  Dealer by the  Dealer
Manager  or  the   Company  to   supplement   the   Prospectus   ("supplemental
information").

     II.  SUBMISSION OF ORDERS

     Those persons who purchase Shares will be instructed by the Dealer to make
their checks  payable to "AmREIT." Any Dealer  receiving a check not conforming
to the  foregoing  instructions  shall  return  such  check  directly  to  such
subscriber  not  later  than the end of the next  business  day  following  its
receipt.  Checks  received  by  the  Dealer  which  conform  to  the  foregoing
instructions shall be transmitted for deposit pursuant to one of the methods in
this  Article  II.  Transmittal  of  received  investor  funds  will be made in
accordance with the following procedures:

     Where, pursuant to the Dealer's internal supervisory procedures,  internal
     supervisory review is conducted at the same location at which subscription
     documents  and  checks  are  received  from  subscribers,  checks  will be
     transmitted  in care of the Dealer Manager by the end of the next business
     day following receipt by the Dealer for deposit to AmREIT.

     Where, pursuant to the Dealer's internal supervisory procedures, final and
     internal  supervisory review is conducted at a different location,  checks
     will be transmitted by the end of the next business day following  receipt
     by the Dealer to the office of the Dealer  conducting  such final internal
     supervisory  review (the "Final Review  Office").  The Final Review Office
     will in turn by the end of the next business day following  receipt by the
     Final Review Office, transmit such checks for deposit to AmREIT.


                                      A-1




     III. PRICING

     Shares shall be offered to the public at the offering  price of $10.00 per
Share payable in cash.  Except as otherwise  indicated in the  Prospectus or in
any letter or memorandum sent to the Dealer by the Company or Dealer Manager, a
minimum  initial  purchase  of 100  Shares is  required.  Except  as  otherwise
indicated  in the  Prospectus,  additional  investments  may be made in cash in
minimal increments of at least 2.5 Shares. The Shares are nonassessable. Dealer
hereby agrees to place any order for the full purchase price.

     IV.  DEALERS' COMMISSIONS

     Except for discounts described in or as otherwise provided in the "Plan of
Distribution"  section  of the  Prospectus,  the  Dealer's  selling  commission
applicable to the total public offering price of Shares sold by Dealer which it
is authorized to sell hereunder is 7.5% of the gross proceeds of Shares sold by
it and accepted and confirmed by the Company,  which commission will be paid by
the Dealer Manager.  Additionally, a due diligence reimbursement of .50% of the
gross  proceeds of Shares sold by it and accepted and confirmed by the Company,
will be paid by the  Dealer  Manager.  For these  purposes,  a "sale of Shares"
shall occur if and only if a transaction has closed with a securities purchaser
pursuant to all applicable offering and subscription  documents and the Company
has thereafter  distributed  the commission to the Dealer Manager in connection
with such transaction.  The Dealer affirms that the Dealer Manager's  liability
for  commissions  payable  is limited  solely to the  proceeds  of  commissions
receivable  associated  therewith,  and the  Dealer  hereby  waives any and all
rights to  receive  payment  of  commissions  due until such time as the Dealer
Manager is in receipt of the commission from the Company.  In addition,  as set
forth in the  Prospectus,  the  Dealer  Manager  may,  in its sole  discretion,
reallow  out of its dealer  manager  fee a marketing  fee or  reimbursement  of
expenses in conjunction  with  educational  conferences and seminars of 1.0% of
the gross proceeds of Shares sold by the Dealer participating in the offering.

     The parties hereby agree that the foregoing commission is not in excess of
the usual and customary  distributors' or sellers'  commission  received in the
sale of  securities  similar  to the  Shares,  that  Dealer's  interest  in the
offering is limited to such  commission  from the Dealer  Manager and  Dealer's
indemnity  referred to in Section 4 of the Dealer Manager  Agreement,  and that
the  Company  is not  liable or  responsible  for the  direct  payment  of such
commission to the Dealer.

     V.   PAYMENT

     Payments of selling  commissions will be made by the Dealer Manager (or by
the Company as provided in the Dealer  Manager  Agreement)  to Dealer within 30
days of the receipt by the Dealer Manager of the gross commission payments from
the Company.

     VI.  RIGHT TO REJECT ORDERS OR CANCEL SALES

     All orders,  whether  initial or additional,  are subject to acceptance by
and shall  only  become  effective  upon  confirmation  by the  Company,  which
reserves  the  right  to  reject  any  order.   Orders  not  accompanied  by  a
Subscription Agreement Signature Page and the required check in payment for the
Shares may be  rejected.  Issuance and delivery of the Shares will be made only
after  actual  receipt  of  payment  therefor.  If any  check is not paid  upon
presentment,  or if the Company is not in actual receipt of clearinghouse funds
or cash,  certified or  cashier's  check or the  equivalent  in payment for the
Shares  within 15 days of sale,  the Company  reserves  the right to cancel the
sale without notice.  In the event an order is rejected,  canceled or rescinded
for any  reason,  the  Dealer  agrees  to  return  to the  Dealer  Manager  any
commission theretofore paid with respect to such order.


                                      A-2




     VII. PROSPECTUS AND SUPPLEMENTAL INFORMATION

     The Dealer is not  authorized or permitted to give, and will not give, any
information  or make any  representation  concerning  the Shares  except as set
forth in the Prospectus and supplemental  information.  The Dealer Manager will
supply the Dealer with reasonable quantities of the Prospectus, any supplements
thereto and any amended  Prospectus,  as well as any supplemental  information,
for delivery to investors, and the Dealer will deliver a copy of the Prospectus
and all supplements thereto and any amended Prospectus to each investor to whom
an offer is made prior to or simultaneously  with the first  solicitation of an
offer to sell the Shares to an  investor.  The Dealer  agrees  that it will not
send  or give  any  supplements  thereto  and any  amended  Prospectus  to that
investor  unless  it  has  previously  sent  or  given  a  Prospectus  and  all
supplements  thereto  and  any  amended  Prospectus  to  that  investor  or has
simultaneously  sent or given a Prospectus and all supplements  thereto and any
amended Prospectus with such supplemental  information.  The Dealer agrees that
it will not show or give to any investor or  prospective  investor or reproduce
any  material  or writing  which is  supplied  to it by the Dealer  Manager and
marked "dealer only" or otherwise  bearing a legend  denoting that it is not to
be used in  connection  with the sale of Shares to members of the  public.  The
Dealer  agrees  that it will not use in  connection  with the  offer or sale of
Shares any material or writing which relates to another company  supplied to it
by the Company or the Dealer  Manager  bearing a legend  which states that such
material may not be used in connection with the offer or sale of any securities
other than the Company to which it relates.  Dealer further agrees that it will
not use in  connection  with  the  offer or sale of  Shares  any  materials  or
writings which have not been previously  approved by the Dealer  Manager.  Each
Dealer  agrees,  if the Dealer  Manager so  requests,  to furnish a copy of any
revised  preliminary  Prospectus to each person to whom it has furnished a copy
of any previous preliminary Prospectus,  and further agrees that it will itself
mail or otherwise deliver all preliminary and final  Prospectuses  required for
compliance with the provisions of Rule 15c2-8 under the Securities Exchange Act
of 1934,  as amended.  Regardless of the  termination  of this  Agreement,  the
Dealer will deliver a Prospectus in  transactions in the Shares for a period of
90 days from the effective  date of the  Registration  Statement or such longer
period as may be required by the Securities Exchange Act of 1934. On becoming a
Dealer,  and in offering and selling  Shares,  Dealer agrees to comply with all
the applicable requirements under the Securities Act of 1933 and the Securities
Exchange Act of 1934.

     VIII. LICENSE AND ASSOCIATION MEMBERSHIP

     The Dealer's acceptance of this Agreement  constitutes a representation to
the Company and the Dealer Manager that the Dealer is a properly  registered or
licensed broker-dealer,  duly authorized to sell Shares under Federal and state
securities  laws and  regulations  and in all  states  where it offers or sells
Shares,  and that it is a member in good standing of the NASD.  This  Agreement
shall  automatically  terminate  if the  Dealer  ceases  to be a member in good
standing  of such  association,  or in the  case  of a  foreign  dealer,  so to
conform.  Dealer  agrees to notify the  Dealer  Manager  immediately  if Dealer
ceases to be a member in good standing,  or in the case of a foreign dealer, so
to  conform.  The Dealer  Manager  hereby  agrees to abide by the Rules of Fair
Practice of the NASD and to comply with Rules 2730,  2740, 2420 and 2750 of the
NASD Conduct Rules.

     IX.  ANTI-MONEY LAUNDERING COMPLIANCE PROGRAMS

     The Dealer's acceptance of this Agreement  constitutes a representation to
the  Company  and the  Dealer  Manager  that the  Dealer  has  established  and
implemented  anti-money  laundering  compliance  programs  in  accordance  with
proposed NASD Rule 3011 and Section 352 of the Money  Laundering  Abatement Act
reasonably   expected  to  detect  and  cause  the   reporting  of   suspicious
transactions in connection with the sale of Shares of the Company.

     X.   LIMITATION OF OFFER

     The  Dealer  will offer  Shares  only to  persons  who meet the  financial
qualifications  set forth in the  Prospectus  or in any  suitability  letter or
memorandum  sent to it by the Company or the Dealer  Manager and will only make
offers to persons  in the  states in which it is  advised  in writing  that the
Shares are qualified for sale or that such  qualification  is not required.  In
offering  Shares,  the Dealer will comply with the  provisions  of the Rules of
Fair  Practice  set forth in the NASD Manual,  as well as all other  applicable
rules and regulations  relating to suitability of investors,  including without
limitation,  the  provisions  of  Article  III.C.  of the  Statement  of Policy
Regarding  Real  Estate  Investment  Trusts  of the North  American  Securities
Administrators Association, Inc.


                                      A-3




     XI.  TERMINATION

     The Dealer will suspend or terminate its offer and sale of Shares upon the
request of the  Company or the Dealer  Manager at any time and will  resume its
offer and sale of Shares  hereunder upon  subsequent  request of the Company or
the Dealer  Manager.  Any party may terminate this Agreement by written notice.
Such termination  shall be effective 48 hours after the mailing of such notice.
This Agreement and the exhibits hereto are the entire  agreement of the parties
and supersedes all prior agreements, if any, between the parties hereto.

     This Agreement may be amended at any time by the Dealer Manager by written
notice to the Dealer, and any such amendment shall be deemed accepted by Dealer
upon placing an order for sale of Shares after it has received such notice.

     XII. PRIVACY LAWS

     The Dealer  Manager  and Dealer  (each  referred to  individually  in this
section as "party") agree as follows:

     A. Each party agrees to abide by and comply with (i) the privacy standards
and requirements of the  Gramm-Leach-Bliley  Act of 1999 ("GLB Act"),  (ii) the
privacy  standards and  requirements of any other  applicable  Federal or state
law, and (iii) its own internal privacy policies and procedures, each as may be
amended from time to time.

     B. Each party  agrees to refrain from the use or  disclosure  of nonpublic
personal  information  (as defined under the GLB Act) of all customers who have
opted out of such  disclosures  except as necessary to service the customers or
as otherwise necessary or required by applicable law; and

     C. Each party shall be responsible  for  determining  which customers have
opted out of the disclosure of nonpublic  personal  information by periodically
reviewing  and, if necessary,  retrieving a list of such customers (the "List")
as provided by each to identify  customers  that have  exercised  their opt-out
rights.  In the  event  either  party  uses  or  discloses  nonpublic  personal
information of any customer for purposes other than servicing the customer,  or
as otherwise  required by  applicable  law, that party will consult the List to
determine  whether  the  affected  customer  has  exercised  his or her opt-out
rights. Each party understands that each is prohibited from using or disclosing
any nonpublic  personal  information  of any customer that is identified on the
List as having opted out of such disclosures.

     XIII. NOTICE

     All  notices  will be in  writing  and will be duly  given  to the  Dealer
Manager when mailed to 8 Greenway Plaza,  Suite 824, Houston,  Texas 77046, and
to the Dealer when mailed to the address specified by Dealer herein.

     XIV. ATTORNEY'S FEES AND APPLICABLE LAW

     In any action to enforce the  provisions  of this  Agreement  or to secure
damages  for its  breach,  the  prevailing  party  shall  recover its costs and
reasonable attorney's fees. This Agreement shall be construed under the laws of
the  State  of  Texas  and  shall  take   effect  when  signed  by  Dealer  and
countersigned by the Dealer Manager.



                              THE DEALER MANAGER:
                           AmREIT Securities Company


Attest:

By:    ______________________________   By: _________________________________
Name:  ______________________________       Chad C. Braun
Title: ______________________________       President



                                      A-4





We have read the foregoing Agreement and we hereby accept and agree to the
terms and conditions therein set forth. We hereby represent that the list below
of jurisdictions in which we are registered or licensed as a broker or dealer
and are fully authorized to sell securities is true and correct, and we agree
to advise you of any change in such list during the term of this Agreement.

1. Identity of Dealer:

Name:__________________________________________________________________________

Type of
entity: _______________________________________________________________________
        (to be completed by Dealer) (corporation, partnership or proprietorship)

Organized in the State of: ____________________________________________________
                               (to be completed by Dealer)         (State)

Licensed as broker-dealer in the following States:_____________________________
                                                   (to be completed by Dealer)

Tax I.D.  #: __________________________________________________________________

2. Person to receive notice pursuant to Section XI.

Name:    ______________________________________________________________________

Company: ______________________________________________________________________

Address: ______________________________________________________________________

City, State and Zip Code: _____________________________________________________

Telephone No.: ________________________________________________________________

Telefax No.:   ________________________________________________________________

AGREED TO AND ACCEPTED BY THE DEALER:


    ______________________________________
            (Dealer's Firm Name)


By: ______________________________________
                  Signature

Title: ___________________________________



                                      A-5








                                                               Exhibit 3.3


                           STATEMENT OF DESIGNATION
                                       OF
                             CLASS C COMMON SHARES
                                       OF
                                     AMREIT

                                  ARTICLE ONE

     AmREIT (the  "Trust"),  pursuant to the  provisions of Section 3.30 of the
Texas Real Estate  Investment  Trust Act (the "Texas REIT Act"),  hereby  files
this  Statement  of  Designation  of Class C Common  Shares of the  Trust  (the
"Statement") prior to the issuance of any Class C Common Shares, such series of
unissued  shares having been  established  by a resolution  duly adopted by all
necessary  action on the part of the Trust and the Board of Trust Managers,  as
provided  for in the  Amended and  Restated  Declaration  of Trust,  as amended
("Declaration of Trust").

                                  ARTICLE TWO

     The name of the Trust is AmREIT.

                                 ARTICLE THREE

     Pursuant to the authority  conferred  upon the Board of Trust  Managers by
the  Declaration  of Trust and Section 3.30 of the Texas REIT Act, the Board of
Trust  Managers,  pursuant  to Section  10.20 of the Texas REIT Act,  adopted a
resolution  establishing the Class C Common Shares of the Trust and designating
the series  and  fixing  and  determining  the  preferences,  limitations,  and
relative  rights  thereof,  as set  forth in the true and  correct  copy of the
resolution attached hereto as Exhibit A (the "Designating Resolution").

                                  ARTICLE FOUR

     The Designating Resolution was adopted effective as of August 5, 2003.

                                  ARTICLE FIVE

     The Designating Resolution was duly adopted by all necessary action on the
part of the Trust.











     IN WITNESS  WHEREOF,  the undersigned  officer has executed this Statement
effective as of August ____, 2003.



                                    By: /s/ Chad C. Braun
                                        ___________________________________
                                  Name: Chad C. Braun
                                 Title: Executive Vice President and
                                        Chief Financial Officer


THE STATE OF TEXAS

COUNTY OF HARRIS

     BEFORE ME, the undersigned Notary Public,  duly commissioned and qualified
within and for the State and County  aforesaid,  personally  came and  appeared
CHAD C. BRAUN,  in his capacity as Executive Vice President and Chief Financial
Officer  of  AmREIT,  and  acknowledged  to me that he  executed  the above and
foregoing  instrument  on  behalf  of the  said  AmREIT,  as his own  free  and
voluntary  act and deed,  for the uses,  purposes  and  considerations  therein
expressed.

     IN WITNESS WHEREOF,  has executed these presents together with me, Notary,
on this _____ day of August, 2003.




                                 NOTARY PUBLIC

                                 My commission expires:










                                   EXHIBIT A

                           DESIGNATING RESOLUTIONS OF
                         THE BOARD OF TRUST MANAGERS OF
                                     AMREIT
                                 August 5, 2003


Authorization of Class C Common Shares

     WHEREAS, the Board of Trust Managers of AmREIT (the "Trust") has deemed it
to be in the best interest of the Trust and its  shareholders  for the Trust to
establish a series of common shares  pursuant to the  authority  granted to the
Board of Trust Managers in the Restated  Declaration of Trust,  as amended (the
"Declaration of Trust") of the Trust:

     NOW, THEREFORE,  BE IT RESOLVED,  that pursuant to the authority vested in
the Board of Trust  Managers by the  Declaration  of Trust,  a series of common
shares, par value $0.01 per share, is hereby established,  and the terms of the
same shall be as follows:

     A.  TITLE.  The series of  preferred  shares is hereby  designated  as the
"Class C Common Shares" (the "Class C Common Shares").

     B. NUMBER.  The maximum number of authorized  shares of the Class C Shares
shall be 4,400,000.

     C.  DIVIDENDS.  Subject  to  the  preferential  rights  of any  series  of
Preferred Shares, holders of Class C Common Shares will be entitled to receive,
when, as and if declared by the Board of Trust  Managers,  out of funds legally
available for the payment of  dividends,  non-cumulative  cash  dividends in an
amount per Class C Common Share equal to $0.70 per annum.  Dividends payable on
the  Class C Common  Shares  for each  full  monthly  dividend  period  will be
computed by dividing the annual dividend rate by twelve. Dividends with respect
to the Class C Common Shares will be  non-cumulative  from the date of original
issuance  (the "Issue  Date") and will be payable  monthly  when, as and if the
Board of Trust  Managers  declares  a  monthly  dividend  on the Class C Common
Shares for that  month in its  discretion  (the last day of each month  being a
"Dividend Payment Date"). Any dividend payable on the Class C Common Shares for
any partial  dividend period after the initial dividend period will be computed
on the basis of a 360 day year  consisting  of twelve 30 day months.  Dividends
will be payable to  holders of record as they  appear in the shares  records of
the Trust at the close of business on the applicable record date, which will be
the  fifteenth  day of the  calendar  month in which  the  applicable  Dividend
Payment Date falls or such other date designated by the Board of Trust Managers
for the payment of dividends that is no more than thirty (30) nor less than ten
(10) days prior to the Dividend Payment Date. Holders of Series C Common Shares
shall not be entitled to any dividends,  whether  payable in cash,  property or
shares, in excess of non-cumulative  dividends, as herein provided on the Class
C Common Shares.

     If any  Class C  Common  Shares  are  outstanding,  no  dividends  will be
declared or paid or set apart for payment on the Class A Common  Shares for any
period unless full  dividends have been or  contemporaneously  are declared and
paid or declared  and a sum  sufficient  for the payment  thereof set apart for
such payment on the Class C Common Shares for the then current monthly dividend
period;  provided  however,  that dividends on the Class A Common Shares may be
declared  and paid and set apart for  payment  without  regard to  whether  any
dividends  were paid or not paid (or declared or not  declared) by the Trust on
the Class C Common Shares for any past monthly dividend period.

     D. LIQUIDATION RIGHTS.  In the event of any  liquidation,  dissolution or
winding up of the Trust, subject to the prior rights of any series of Preferred
Shares,  the  holders of Class C Common  Shares  will share pro rata,  with the
holders of the Class A Common Shares,  the Class B Common  Shares,  the Class C
Common Shares and the holders of any other series of Common Shares that rank on
a parity with the Class C Common Shares as to the  distribution  of assets upon
liquidation,  the assets of the Trust  remaining  following  the payment of all
liquidating  distributions  payable to  holders of capital  shares of the Trust
with liquidation rights senior to those of the common shares.

     E. MANDATORY REDEMPTION BY THE TRUST.  The Class C Common Shares will not
be redeemable  prior to the third  anniversary  of the Issue Date. On and after
such third  anniversary date, the Trust, at its option (to the extent the Trust
has funds legally  available  therefor)  upon not less than 30 nor more than 60
days' written notice, may redeem Class C Common Shares, in whole or in part, at
any time or from time to time, for, at the option of the holder thereof, either
(i) cash at the redemption price per share of $11.00 or (ii) one Class A Common
Share per each Class C Common Share redeemed by such holder.

     Notwithstanding  the  foregoing,  unless  the full  then  current  monthly
dividends  on all  Class C Common  Shares  have been or  contemporaneously  are
declared and paid or declared and a sum sufficient for the payment  thereof set
apart for payment for the then current monthly  dividend period (without regard
to whether any dividends  were paid or not paid in any prior  monthly  dividend
period), no Class C Common Shares will be redeemed unless all outstanding Class
C Common Shares are simultaneously  redeemed. The foregoing,  however, will not
prevent the  purchase  or  acquisition  of shares of the Class C Common  Shares
pursuant to a purchase  or exchange  offer made on the same terms to holders of
all outstanding Class C Common Shares. Unless full current monthly dividends on
all  outstanding  Class C Common  Shares  have  been or  contemporaneously  are
declared and paid or declared and a sum sufficient for the payment  thereof set
apart for payment for the then current monthly  dividend period (without regard
to whether any dividends  were paid or not paid in any prior  monthly  dividend
period),  the  Trust  will  not  purchase  or  otherwise  acquire  directly  or
indirectly through a subsidiary or otherwise, any Class C Common Shares.

     If fewer  than all of the  outstanding  Class C  Common  Shares  are to be
redeemed,  the number of shares to be redeemed  will be determined by the Trust
and those  shares may be redeemed  pro rata from the holders of record of those
shares in  proportion  to the number of those  shares  held by the  holders (as
nearly as may be practicable without creating fractional Class C Common Shares)
or any other equitable method determined by the Trust.

     Class C Common Shares shall be redeemed by the Trust on the date specified
in a notice to the  holders of the Class C Common  Shares  (the  "Call  Date").
Notice of  redemption  will be given by  publication  in a newspaper of general
circulation  in the City of New York,  such  publication to be made once a week
for two  successive  weeks  commencing  not less than 30 nor more than 60 days'
prior to the  redemption  date.  A similar  notice will be mailed by the Trust,
postage  prepaid,  not  less  than 30 nor  more  than  60  days'  prior  to the
redemption  date,  addressed  to the  respective  holders  of record of Class C
Common  Shares to be redeemed at their  respective  addresses as they appear on
the shares  transfer  records of the  Trust.  No failure to give  notice or any
defect  therein or in the  mailing  thereof  will  affect the  validity  of the
proceeding  for the  redemption  of any Class C Common  Shares except as to the
holder to whom notice was defective or not given.  Each notice will state:  (1)
the Call  Date;  (2) the  redemption  price;  (3) the  number of Class C Common
Shares to be redeemed;  (4) the place or places where the Class C Common Shares
are to be surrendered for payment of the redemption  price;  (5) that dividends
on the shares to be  redeemed  will  cease to accrue on the Call Date;  and (6)
that any conversion rights will terminate at the close of business on the third
business day immediately preceding the Call Date. If fewer than all the Class C
Common Shares held by any holder are to be redeemed,  the notice mailed to that
holder  will also  specify  the number of Class C Common  Shares to be redeemed
from that holder.  Notice  having been given as  aforesaid,  from and after the
Call Date (unless the Trust shall fail to issue and make  available  the number
of Class A Common  Shares  and/or  amount  of cash  necessary  to  effect  such
redemption),  (i) except as otherwise provided herein, dividends on the Class C
Common  Shares so called for  redemption  shall  cease to accrue on the Class C
Common  Shares called for  redemption  (except that, in the case of a Call Date
after a dividend  record date and prior to the related  Dividend  Payment Date,
holders of Class C Common  Shares on the dividend  record date will be entitled
on such Dividend  Payment Date to receive the dividend  payable on such shares,
if any),  (ii) said  shares  shall no longer be deemed to be  outstanding,  and
(iii) all rights of the  holders  thereof  as holders of Class C Common  Shares
shall cease (except the rights to receive the Class A Common Shares and/or cash
payable upon such  redemption,  without  interest  thereon,  upon surrender and
endorsement of their  certificates  if so required and to receive any dividends
payable thereon).  As promptly as practicable after the surrender in accordance
with said notice of the certificates for any such shares so redeemed  (properly
endorsed or  assigned  for  transfer,  if the Trust shall so require and if the
notice shall so state), such holders will be issued  certificates  representing
Class A Common Shares and/or any cash (without interest thereon) for which such
shares have been redeemed in accordance with such notice.

     Upon any redemption of Class C Common Shares,  the Trust shall pay in cash
to the holder of such shares an amount equal to the dividend accrued and unpaid
for the then currently  monthly dividend period only (without regard to whether
any dividends were paid or not paid in any prior monthly dividend  period),  if
any.  Immediately  prior to  authorizing  any  redemption of the Class C Common
Shares,  and as a  condition  precedent  for such  redemption,  the  Trust,  by
resolution of the Board of Trust Managers,  shall declare a mandatory  dividend
on the  Class C Common  Shares  payable  in cash on the Call  Date in an amount
equal to the  dividend  owed and unpaid for the then current  monthly  dividend
period  (without  regard to whether any dividends  were paid or not paid in any
prior monthly dividend period) on the Class C Common Shares to be redeemed,  if
any,  which amount  shall be added to the  redemption  price.  If the Call Date
falls  after a  dividend  payment  record  date and prior to the  corresponding
Dividend  Payment Date,  then each holder of Class C Common Shares at the close
of  business  on such  dividend  payment  record  date shall be entitled to the
dividend  payable on such shares on the  corresponding  Dividend  Payment  Date
notwithstanding  the  redemption of such shares prior to such Dividend  Payment
Date.  Except as provided  above,  the Trust shall make no payment or allowance
for accrued dividends on Class C Common Shares called for redemption.

     F. LIMITED OPTIONAL REDEMPTION.  Subject to and upon compliance with the
provisions of this Section F, at any time prior to the seventh  anniversary  of
the  Issue  Date of the  Class C Common  Shares,  any  holder of Class C Common
Shares  who has held  Class C  Common  Shares  for not  less  than one year may
present all or any portion (but not less than 25%) of those shares to the Trust
for  redemption  at any time (the  "Limited Put Right").  The Trust may, at its
sole option,  redeem  those shares  presented  for  redemption  for cash to the
extent it has sufficient funds available thereof.  Notwithstanding  anything to
the contrary  contained in this Section F, at no time during a 12-month period,
may the number of Class C Common Shares  redeemed by the Trust exceed 5% of the
number of Class C Common Shares  outstanding  at the beginning of that 12-month
period.

     To the extent that the Trust's board of trust  managers  decides to accept
any shares  for  redemption  under this  Section F, the Trust will only use the
following  amounts for redemptions  effected under this Section F: (1) the full
amount of the proceeds from the sale of shares under our dividend  reinvestment
plan ("Reinvestment Proceeds") attributable to any calendar quarter may be used
to redeem shares presented for redemption pursuant to his Section F during that
quarter, and (2) at the sole discretion of the Trust's board of trust managers,
up to $100,000 per calendar  quarter of the proceeds of any public  offering of
its common  shares.  Any amount of offering  proceeds  which is  available  for
redemptions  under this Section F, but which is unused in any  quarter,  may be
carried over to the next succeeding calendar quarter for use in addition to the
amount of offering  proceeds and Reinvestment  Proceeds that would otherwise be
available for redemptions under this Section F in such quarter.

     In the event there are insufficient  funds to redeem all of the shares for
which Limited Put Right requests have been submitted, the Trust will redeem the
shares  in the  order in which  such  Limited  Put  Right  requests  have  been
received.  A holder of Class C Common  Shares  whose  shares  are not  redeemed
pursuant to a Limited Put Right request due to  insufficient  funds can either:
(1) ask that the request to redeem the Class C Common Shares be honored at such
time, if any, as there are sufficient  funds available for redemption of shares
pursuant to this Section F (in which event the.  Limited Put Right request will
be retained and those shares will be redeemed before any subsequently  received
Limited Put Right requests are honored), or (2) withdraw his or her Limited Put
Right request. A holder of Class C Common Shares will not relinquish his or her
Class C Common  Shares until such time as the Trust  commits to redeeming  such
shares pursuant to this Section F.

     Any  holder of Class C Common  Shares who wishes to have his or her shares
redeemed pursuant to this Section F must mail or deliver a written request on a
form  provided  by the  Trust and  executed  by such  holder,  its  trustee  or
authorized  agent, to the Trust or a redemption  agent designated by it on such
form (such person or entity, the "Redemption  Agent").  The Redemption Agent at
all  times  will be  registered  as a  broker-dealer  with the  Securities  and
Exchange Commission and each applicable state securities commission.  Within 30
days following the Redemption  Agent's  receipt of such holder's  request,  the
Redemption Agent will forward to that holder the documents  necessary to effect
the redemption,  including any signature  guarantee the Trust or the Redemption
Agent may require.  The  Redemption  Agent will effect the  redemption  for the
calendar  quarter provided that it receives the properly  completed  redemption
documents  relating to the shares to be  redeemed  from the holder at least one
calendar  month prior to the last day of the current  calendar  quarter and has
sufficient  funds  available to redeem the shares.  The  effective  date of any
redemption  under this Section F will be the last date during a quarter  during
which  the  Redemption  Agent  receives  the  properly   completed   redemption
documents.

     Upon the  Redemption  Agent's  receipt of notice for  redemption of shares
pursuant  to this  Section F, the  redemption  price for Class C Common  Shares
redeemed  pursuant to this  Section F (the  "Optional  Redemption  Price") will
initially be $9.00 per share.  The Trust's board of trust  managers may, in its
sole discretion, adjust the Optional Redemption Price at any time and from time
to time in its sole  discretion.  Any such  change in the  Optional  Redemption
Price will be effective on the 10th day after the public  announcement  of such
change in the Optional  Redemption  Price.  Any Class C Common Shares  acquired
pursuant  to a  redemption  under this  Section F will be retired and no longer
available for issuance by the Trust.

     A holder of Class C Common Shares may present fewer than all of his or her
shares to the Trust for  redemption;  provided,  however,  that (1) the minimum
number of Class C Common Shares which must be presented for redemption pursuant
to this  Section F shall be at least 25% of his or her shares,  and (2) if such
holder retains any Class C Common Shares, he or she must retain at least $2,500
worth of such shares;  provided further, that he or she must only retain $1,000
worth  of Class C  Common  Shares  if such  shares  are  held by an  Individual
Retirement Plan, Keogh Plan or pension plan.

     Notwithstanding anything contained in the Section F or any other provision
hereof  to the  contrary,  the  Trust's  board of trust  managers,  in its sole
discretion,  may amend or suspend the redemption plan at any time it determines
that any  amendment or  suspension  is in the best  interest of the Trust.  The
Trust's board of trust  managers may suspend the redemption of shares if (1) it
determines, in its sole discretion,  that the redemption impairs the capital or
the operations of the Trust; (2) it determines, in its sole discretion, that an
emergency makes such redemption not reasonably practical;  (3) any governmental
or  regulatory  agency  with  jurisdiction  over the Trust so  demands  for the
protection of the shareholders; (4) it determines, in its sole discretion, that
the redemption  would be unlawful;  (5) it determines,  in its sole discretion,
that the  redemption,  when  considered  with  all  other  redemptions,  sales,
assignments,  transfers and exchanges of the Trust's common shares, could cause
direct or indirect  ownership  of shares of the Trust's  common stock to become
concentrated  to an extent which would  prevent the Trust from  qualifying as a
real  estate  investment  trust under the  Internal  Revenue  Code of 1986,  as
amended,  and/or the rules and regulations  promulgated  thereunder;  or (6) it
determines, in its sole discretion,  the suspension to otherwise be in the best
interest of the Trust.  The redemption  plan will  terminate,  and the Trust no
longer shall accept  shares for  redemption  at such time as the Class C Common
Shares become eligible to convert into Class A Common Shares

     G.  VOTING RIGHTS.  Holders of the Class C Common  Shares  shall have the
right to vote on all matters presented to common shareholders as a single class
with all other  holders  of common  shares.  In any matter in which the Class C
Common Shares may vote,  including any action by written consent,  each Class C
Common Share will be entitled to one vote. The holders of Class C Common Shares
may  separately  designate  a proxy  for the vote to which  the  Class C Common
Shares are entitled.

     So long as any Class C Common Shares are  outstanding,  in addition to any
other vote or consent of shareholders  required by law or by the Declaration of
Trust,  the  affirmative  vote of at lease 66 2/3% of the votes  entitled to be
cast by the  holders  of the Class C Common  Shares,  at the time  outstanding,
acting  as a single  class,  given in person  or by  proxy,  either in  writing
without a meeting or by vote at any meeting  called for the  purpose,  shall be
necessary for effecting or validating:

          (1) Any sale of all or substantially  all of the assets of the Trust,
     any liquidation of the Trust or any amendment, alteration or repeal of any
     of the  provisions of the  Declaration of Trust or the Bylaws of the Trust
     that  materially  and  adversely  affects  the  voting  powers,  rights or
     preferences  of the  holders  of the  Class  C  Common  Shares;  provided,
     however,  that the amendment of the provisions of the Declaration of Trust
     so as to authorize or create, or to increase the authorized amount of, any
     shares of any class or series  ranking on a parity with the Class C Common
     Shares in the  distribution of assets on any  liquidation,  dissolution or
     winding up of the Trust or in the payment of dividends shall not be deemed
     to materially adversely affect the voting powers, rights or preferences of
     the holders of Class C Common Shares; or

          (2)  The  authorization  or  creation  of,  or  the  increase  in the
     authorized  amount of,  any shares of any class or series or any  security
     convertible  into shares of any class or series ranking prior or senior to
     the  Class  C  Common  Shares  in  the   distribution  of  assets  on  any
     liquidation,  dissolution  or winding up of the Trust or in the payment of
     dividends;

provided, however, that no such vote of the holders of Class C Common Shares
shall be required if, at or prior to the time when such amendment, alteration
or repeal is to take effect, or when the issuance of any such prior shares or
convertible security is to be made, as the case may be, provision is made for
the redemption of all Class C Common Shares at the time outstanding.

H. CONVERSION.

         Holders of Class C Common Shares shall have the right to convert all
or a portion of such shares into Class A Common Shares, as follows:

     (1) Subject to and upon  compliance with the provisions of this Section H,
a holder  of Class C Common  Shares  shall  have the  right,  at such  holder's
option,  at any time on or after the seventh  anniversary  of the Issue Date of
such shares,  to convert such shares,  in whole or in part, into fully-paid and
non-assessable  shares of  authorized  but unissued  Class A Common Shares at a
conversion  price equal to the purchase price of the Class C Common Shares plus
10% (the "Conversion Amount"). The number of Class A Common Shares to be issued
upon  conversion  shall be determined by dividing the Conversion  Amount by the
Market  Price (as  defined in the  Declaration  of Trust) of the Class A Common
Shares on the date the notice of conversion is received by the Trust; provided,
however,  that the right to convert Class C Common Shares called for redemption
shall  terminate  at the  close of  business  on the Call  Date  fixed for such
redemption,  unless  the  Trust  shall  default  in  making  payment  upon such
redemption.

     (2) In order to exercise the conversion  right, the holder of each Class C
Common Share to be converted  shall send, to the office of the Trust, a written
notice to the Trust that the holder thereof elects to convert such share.  Each
share  surrendered  for  conversion  shall be  accompanied  by  instruments  of
transfer,  in form  satisfactory  to the Trust,  duly executed by the holder or
such  holder's  duly  authorized  attorney and an amount  sufficient to pay any
transfer  or similar  tax (or  evidence  reasonably  satisfactory  to the Trust
demonstrating that such taxes have been paid).

     Holders of Class C Common  Shares at the close of  business  on a dividend
payment  record date shall be entitled to receive the dividend  payable on such
shares  of  the  corresponding   Dividend  Payment  Date   notwithstanding  the
conversion  thereof  following  such dividend  payment record date and prior to
such Dividend  Payment Date.  However,  Class C Common Shares  surrendered  for
conversion  during the period  between the close of  business  on any  dividend
payment record date and the opening of business on the  corresponding  Dividend
Payment  Date  (except  shares  converted  after  the  issuance  of  notice  of
redemption  with respect to a Call Date during such  period,  such shares being
entitled to such dividend on the Dividend  Payment Date) must be accompanied by
payment  of an amount  equal to the  dividend  payable  on such  shares on such
Dividend  Payment  Date.  Except as  provided  above,  the Trust shall make not
payment or allowance for unpaid  dividends on converted shares or for dividends
on the Class A Common Shares issued upon such conversion.

     Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the  certificates for Class C Common
Shares shall have been  surrendered and such notice shall have been received by
the Trust as aforesaid  (and, if applicable,  payment of an amount equal to the
dividend  payable  on such  shares  shall  have been  received  by the Trust as
above-described)  and  the  person  or  persons  in  whose  name or  names  any
certificate  or  certificates  for Class A Common Shares shall be issuable upon
such conversion  shall be deemed to have become the holder or holders of record
of the shares represented thereby at such time on such date.

     (3) No  fractional  Class A Common Share shall be issued upon  conversion.
Instead any  fractional  share that would  otherwise  be  deliverable  upon the
conversion of Class C Common Shares,  the Trust shall pay to the holder of such
share an  amount  in cash  based  upon the  Market  Price  (as  defined  in the
Declaration of Trust) of the Class A Common Shares.

     (4) The Conversion Amount shall be adjusted from time to time as follows:

          (i) If the Trust  shall  after the Issue Date (a) pay a  dividend  or
     make a distribution on any class or series of its capital stock in Class A
     Common Shares,  (b) subdivide its outstanding Class A Common Shares into a
     greater  number of shares,  (c)  combine  its  outstanding  Class A Common
     Shares into a smaller  number of shares or (d) issue any shares of capital
     stock by  reclassification  of its Class A Common  Shares,  the Conversion
     Amount in effect at the opening of business on the date following the date
     fixed for the  determination  of a  shareholder  entitled to receive  such
     dividend  or  distribution  or at the  opening  of  business  on the  date
     following   the   day  on   which   such   subdivision,   combination   or
     reclassification  becomes effective, as the case may be, shall be adjusted
     so that the holder of any Class C Common Shares thereafter surrendered for
     conversion  shall be  entitled  to  receive  the  number of Class A Common
     Shares (or  fraction of a share) that such holder would have owned or have
     been  entitled  to  receive  after  the  happening  of any  of the  events
     described above had such Class C Common Shares been converted  immediately
     prior to the record date in the case of a dividend or  distribution or the
     effective   date  in  the   case   of  a   subdivision,   combination   or
     reclassification. An adjustment made pursuant to this paragraph H(4) shall
     become effective immediately after the opening of business on the day next
     following the record date (except as provided in paragraph H(4)(vi) below)
     in the case of a  dividend  or  distribution  and shall  become  effective
     immediately  after the opening of business on the date next  following the
     effective   date  in  the   case   of  a   subdivision,   combination   or
     reclassification.

          (ii) If the Trust  shall  distribute  to all  holders  of its Class A
     Common Shares any shares of capital stock of the Trust (other than Class A
     Common Shares),  evidence of its  indebtedness or assets  (including cash,
     but excluding regularly scheduled cash dividends) or rights or warrants to
     subscribe for or purchase any of its  securities  (excluding  those rights
     and warrants issued to all holders of Class A Common Shares entitling them
     for a period  expiring  within  forty-five (45) days after the record date
     referred to in paragraph H(4)(ii) above to subscribe for or purchase Class
     A Common Shares,  which rights and warrants are referred to in and treated
     under  such  paragraph   H(4)(ii)  above)  (any  of  the  foregoing  being
     hereinafter in this paragraph H(4)(iii) called the  "Distribution"),  then
     in each such case the  Conversion  Amount  in  effect  at the  opening  of
     business on the date following the date fixed for the  determination  of a
     shareholder  entitled to receive  such  distribution  or at the opening of
     business  on the  date  following  the  day  on  which  such  subdivision,
     combination or  reclassification  becomes  effective,  as the case may be,
     shall  be  adjusted  so that  the  holder  of any  Class C  Common  Shares
     thereafter  surrendered  for  conversion  shall be entitled to receive the
     number of Class A Common  Shares (or fraction of a share) that such holder
     would have owned or have been  entitled to receive  after the happening of
     any of the  events  described  above had such Class C Common  Shares  been
     converted  immediately  prior to the record date in the case of a dividend
     or  distribution  or the  effective  date in the  case  of a  subdivision,
     combination  or  reclassification.  An  adjustment  made  pursuant to this
     paragraph  H(4) shall become  effective  immediately  after the opening of
     business on the day next  following the record date (except as provided in
     paragraph  H(4)(vi) below) in the case of a dividend or  distribution  and
     shall become  effective  immediately  after the opening of business on the
     date  next  following  the  effective  date in the case of a  subdivision,
     combination or reclassification.

          (iii) If the Trust  shall be a party to any  transaction  (including,
     without  limitation,  a merger,  consolidation,  statutory share exchange,
     issuer or self tender offer for all or a substantial  portion of the Class
     A  Common  Shares  outstanding,  sale of all or  substantially  all of the
     Trust's  assets  or  recapitalization  of the Class A Common  Shares,  but
     excluding any  transaction as to which  paragraph (i) of this Section H(4)
     applies)   (each  of  the  foregoing   being   referred  to  herein  as  a
     "Transaction"),  in each case as a result of which  Class A Common  Shares
     shall be converted  into the right to receive  stock,  securities or other
     property (including cash or any combination thereof),  each Class C Common
     Share which is not converted into the right to receive  stock,  securities
     or other property in connection with such  Transaction  shall thereupon be
     convertible  into the kind and amount of shares of stock,  securities  and
     other property (including cash or any combination thereof) receivable upon
     consummation  of such  Transaction  by a holder of that  number of Class A
     Common  Shares,  or  fraction  thereof,  into which one (1) Class A Common
     Share was convertible  immediately  prior to such  Transaction.  The Trust
     shall  not  be a  party  to any  Transaction  unless  the  terms  of  such
     Transaction   are  consistent   with  the  provisions  of  this  paragraph
     H(4)(iii),  and it shall not  consent  or agree to the  occurrence  of any
     Transaction  until  the  Trust  has  entered  into an  agreement  with the
     successor or purchasing entity, as the case may be, for the benefit of the
     holders of the Class C Common Shares that will contain provisions enabling
     the holders of the Class C Common  Shares that  remain  outstanding  after
     such Transaction to convert into the consideration  received by holders of
     Class A Common Shares at the Conversion Amount in effect immediately prior
     to such  Transaction.  The provisions of paragraph H(4)(v) shall similarly
     apply to successive Transactions.

          (iv) If:

               (1) the Trust shall authorize the granting to the holders of the
          Class A Common  Shares of  rights or  warrants  to  subscribe  for or
          purchase  any shares of any class or series of  capital  stock or any
          other rights or warrants; or

               (2) the Trust shall authorize the granting to the holders of the
          Class A Common  Shares of  rights or  warrants  to  subscribe  for or
          purchase  any shares of any class or series of  capital  stock or any
          other rights or warrants; or

               (3) there  shall be any  reclassification  of the Class A Common
          Shares or any  consolidation  or merger to which the Trust is a party
          and for which  approval of any shares of the Trust is required,  or a
          statutory  share  exchange,  or an issuer or self tender offer by the
          Trust for all or a  substantial  portion of its  outstanding  Class A
          Common Shares (or an amendment thereto changing the maximum number of
          shares  sought or the amount or type of  consideration  being offered
          therefor) or the sale or transfer of all or substantially  all of the
          assets of the Trust as an entirety; or

               (4) there shall occur the voluntary or involuntary  liquidation,
          dissolution or winding up of the Trust,

     then the Trust  shall  cause to be mailed to each holder of Class C Common
     Shares  at such  holder's  address  as shown on the stock  records  of the
     Trust,  as promptly as possible,  but at least  fifteen (15) days prior to
     the applicable date hereinafter specified, a notice stating (A) the record
     date for the payment of such dividend, distribution or rights or warrants,
     or, if a record date is not established,  the date as of which the holders
     of Class A Common  Shares  of  record  to be  entitled  to such  dividend,
     distribution or rights or warrants are to be determined or (B) the date on
     which  such  reclassification,   consolidation,  merger,  statutory  share
     exchange,  sale,  transfer,  liquidation,  dissolution  or  winding  up is
     expected to become effective, and the date as of which it is expected that
     holders of Class A Common  Shares of record  shall be entitled to exchange
     their Class A Common  Shares for  securities  or other  property,  if any,
     deliverable upon such reclassification,  consolidation,  merger, statutory
     share exchange, sale, transfer, liquidation,  dissolution or winding up or
     (C) the date on which such tender offer commenced,  the date on which such
     tender offer is scheduled to expire  unless  extended,  the  consideration
     offered and the other material terms thereof (or the material terms of any
     amendment  thereto).  Failure to give or receive such notice or any defect
     therein  shall not affect the  legality  or  validity  of the  proceedings
     described in this Section H(4).

          (v) Whenever the  Conversion  Amount is adjusted as herein  provided,
     the  Trust  shall  promptly  prepare a notice  of such  adjustment  of the
     Conversion  Amount  setting forth the adjusted  Conversion  Amount and the
     effective  date such  adjustment  becomes  effective  and shall  mail such
     notice of such adjustment of the Conversion Amount to each holder of Class
     C Common  Shares  at such  holder's  last  address  as shown on the  stock
     records of the Trust.

          (vi)  In any  case  in  which  this  Section  H(4)  provides  that an
     adjustment  shall become  effective on the day next  following  the record
     date for an event,  the Trust may defer until the occurrence of such event
     (A)  issuing to the holder of any Class C Common  Shares  converted  after
     such record date and before the  occurrence  of such event the  additional
     Class A Common  Shares  issuable  upon  such  conversion  by reason of the
     adjustment required by such event over and above the Class A Common Shares
     issuable upon such conversion  before giving effect to such adjustment and
     (B) paying to such holder any amount of cash in lieu of any fraction.

          (vii) There shall be no adjustment of the  Conversion  Amount in case
     of the  issuance  of any capital  stock of the Trust in a  reorganization,
     acquisition or other similar  transaction except as specifically set forth
     in this Section H. If any action or transaction  would require  adjustment
     of the  Conversion  Amount  pursuant  to more than one  paragraph  of this
     Section H(4)E, only one adjustment shall be made and such adjustment shall
     be the amount of adjustment that has the highest absolute value.

          (viii) If the  Trust  shall  take any  action  affecting  the Class A
     Common Shares,  other than action  described in this Section H(4), that in
     the  opinion of the Board of Trust  Managers  would  materially  adversely
     affect the conversion rights of the holders of Class C Common Shares,  the
     Conversion  Amount for the Class C Common  Shares may be adjusted,  to the
     extent  permitted by law, in such manner,  if any, and at such time as the
     Board of Trust  Managers,  in its sole  discretion,  may  determine  to be
     equitable under the circumstances.

          (ix) The Trust shall at all times  reserve and keep  available,  free
     from  preemptive  rights,  out of the  aggregate  of  its  authorized  but
     unissued  Class A  Common  Shares  solely  for the  purpose  of  effecting
     conversion of the Class C Common Shares, the full number of Class A Common
     Shares  deliverable upon the conversion of all outstanding  Class C Common
     Shares not theretofore  converted into Class A Common Shares. For purposes
     of this paragraph H(4)(ix), the number of Class A Common Shares that shall
     be  deliverable  upon the  conversion  of all  outstanding  Class C Common
     Shares  shall  be  computed  as if at the  time of  computation  all  such
     outstanding shares were held by a single holder.

     The Trust  covenants that any Class A Common Shares issued upon conversion
of  the  Class  C  Common  Shares  shall  be  validly  issued,  fully-paid  and
non-assessable.

RATIFICATION AND AUTHORIZATION

     RESOLVED,  that any and all acts and deeds of any officer or Trust Manager
of the Trust  taken prior to the date hereof on behalf of the Trust with regard
to the foregoing resolutions are hereby approved, ratified and confirmed in all
respects as and for the acts and deeds of the Trust; and

     FURTHER  RESOLVED,  that the  officers  of the Trust be,  and each of them
hereby is, severally and without the necessity for joinder of any other person,
authorized,  empowered  and  directed  to execute  and deliver any and all such
further  documents  and  instruments  and to do and  perform  any and all  such
further acts and deeds that may be necessary  or  advisable to  effectuate  and
carry out the purposes and intents of the foregoing resolutions, including, but
not  limited  to, the  filing of a  statement  with the County  Clerk of Harris
County,  Texas,  setting forth the designations,  preferences,  limitations and
rights of Class C Shares  pursuant to Section  3.30 of the Texas REIT Act,  all
such  actions  to be  performed  in such  manner,  and all such  documents  and
instruments  to be  executed  and  delivered  in  such  form,  as  the  officer
performing or executing the same shall  approve,  the  performance or execution
thereof by such officer to be  conclusive  evidence of the approval  thereof by
such officer and by the Board of Trust Managers.





                                                                Exhibit 5.1




                            LOCKE LIDDELL & SAPP LLP
                          2200 Ross Avenue, Suite 2200
                              Dallas, Texas 75201
                           (214) 740-8000 (Telephone)
                           (214) 740-8800 (Facsimile)
                      Writer's Direct No.: (214) 740-8743
                        e-mail: kbetts@lockeliddell.com


                                 August 6, 2003



AmREIT
8 Greenway Plaza, Suite 824
Houston, Texas  77046

Dear Ladies and Gentlemen:

     We have acted as counsel to AmREIT,  a Texas real estate  investment trust
(the  "Company"),  in connection with the Company's  registration  statement on
Form S-11 (as the same may be amended or  supplemented  from time to time,  the
"Registration  Statement"),  including the prospectus  included  therein at the
time the Registration Statement is declared effective (the "Prospectus"), filed
with the  Securities  and  Exchange  Commission  (the  "Commission")  under the
Securities Act of 1933, as amended (the "Act"),  for offering by the Company of
up to 4,400,000  class C common shares,  par value $0.01 per share (the "Common
Shares"). This opinion is being provided at your request in connection with the
filing of the Registration Statement.

     In  rendering  the  opinions   expressed  herein,  we  have  examined  the
Registration Statement, the Company's Amended and Restated Declaration of Trust
(the "Charter") and Bylaws and certain minutes of corporate  proceedings and/or
written  consents  of the  Company's  Board of  Trust  Managers.  We have  also
examined and relied as to factual matters upon the representations,  warranties
and other statements  contained in originals or copies,  certified or otherwise
identified to our satisfaction,  of such records,  documents,  certificates and
other  instruments as in our judgment are necessary or appropriate to enable us
to render the opinions expressed below.

     In our  examination  of the  aforesaid  documents,  we  have  assumed  the
genuineness of all signatures, the authenticity of all documents,  certificates
and instruments  submitted to us as originals and the conformity with originals
of all documents submitted to us as copies.

     Based on the  foregoing,  and such  examination  of law as we have  deemed
necessary,  we are of the  opinion  that when the  Registration  Statement  has
become effective under the Act and payment for such Common Shares has been made
in the manner  contemplated  by the  Registration  Statement and the Prospectus
such Common Shares sold  thereunder  will be duly  authorized,  validly issued,
fully paid and non-assessable by the Company.






     The opinions  stated herein relating to the validity and binding nature of
obligations  of the  Company  are  subject to (i) the effect of any  applicable
bankruptcy,  insolvency  (including,  without limitation,  all laws relating to
fraudulent  transfers),  reorganization,  moratorium or similar laws  affecting
creditors' rights generally and (ii) the effect of general principals of equity
(regardless of whether considered in a proceeding in equity or at law).

     The opinions  expressed  herein are as of the date hereof and are based on
the  assumptions  set forth  herein and the laws and  regulations  currently in
effect,  and we do not undertake and hereby  disclaim any obligations to advise
you of any change with  respect to any matter set forth  herein.  To the extent
that the  opinion  set forth  herein is governed by laws other than the federal
laws of the  United  States or the laws of the State of Texas,  our  opinion is
based solely upon certificates from public officials or governmental offices of
such state.  We express no opinion as to any matter other than as expressly set
forth herein, and no opinion is to, or may, be inferred or implied herefrom.

     We hereby  consent  to the  filing of this  opinion  as an  exhibit to the
Registration  Statement  and the  reference  to us  under  the  heading  "Legal
Matters" in the Prospectus  contained therein. In giving our consent, we do not
hereby admit that we are in the category of persons  whose  consent is required
under  Section 7 of the  Securities  Act or the rules  and  regulations  of the
Commission thereunder.

                                   Sincerely,

                                   LOCKE LIDDELL & SAPP LLP



                                By:   /s/
                                    ________________________________
                                    Kenneth L. Betts









                                                                Exhibit 8.1

                            Locke Liddell & Sapp LLP
                             Attorneys & Counselors

                    Austin o Dallas o Houston o New Orleans

2200 Ross Avenue                                             (214) 740-8000
Suite 2200                                              Fax: (214) 740-8800
Dallas, Texas 75201-6776                               www.lockeliddell.com




                                 August 7, 2003



AmREIT
8 Greenway Plaza, Suite 824
Houston, Texas  77046

Ladies and Gentlemen:

     We have acted as counsel to AmREIT,  a Texas real estate  investment trust
(the  "Company"),  in  connection  with the issuance and sale of class C common
shares  of  beneficial   interest  in  the  Company  in  accordance   with  the
Registration   Statement  of  the  Company  on  Form  S-11  (the  "Registration
Statement") and related prospectus in connection  therewith (the "Prospectus"),
which Form S-11 was filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"). For purposes of this
opinion, the term "Company" shall include AmREIT, Inc., a Maryland corporation,
and predecessor in interest to AmREIT,  a Texas real estate  investment  trust,
that was merged into AmREIT, a Texas real estate  investment trust, on December
22, 2002.

     For the  purposes of  rendering  our  opinion,  we have  examined  and are
relying upon such  documents  (including  all exhibits and  schedules  attached
thereto) as of this date that we have deemed relevant or necessary, including:

          1. The declaration of trust of the Company, as amended, and bylaws of
     the Company, as amended;

          2. The Registration Statement; and

          3. Such other  documents,  records and  instruments as we have deemed
     necessary in order to enable us to render the opinion  referred to in this
     letter,  and our opinion is  conditioned  upon  (without  any  independent
     investigation  or review thereof) the truth and accuracy,  at all relevant
     times,  of the  factual  representations  and  warranties,  covenants  and
     statements contained therein.

     This  opinion  is  also  subject  to  and  conditioned  upon  the  factual
representations contained in written officer's certificates to counsel executed
by officers  of the Company  (the  "Representation  Letters").  The initial and
continuing  truth  and  accuracy  of  the  representations   contained  in  the
Representation  Letters at all relevant times constitutes an integral basis for
the opinion  expressed  herein and this opinion is conditioned upon the initial
and  continuing  truth and  accuracy of these  representations  at all relevant
times.

     We have reviewed the descriptions set forth in the Registration  Statement
of the Company and its investments,  activities,  operations and governance. We
have relied upon the facts set forth in the Registration Statement and upon the
factual representations of officers of the Company. In addition, we have relied
on certain additional facts and assumptions described below. In connection with
rendering  this  opinion,  we have  assumed  to be true  and are  relying  upon
(without any independent  investigation or review thereof),  and our opinion is
conditioned upon the correctness of, the following:

     A.   The authenticity of all documents  submitted to us as originals,  the
          conformity to original documents of all documents  submitted to us as
          copies, and authenticity of the originals of such documents,  and the
          conformity  of final  documents to all  documents  submitted to us as
          drafts, and the authenticity of such final documents;

     B.   The genuineness of all signatures,  the due authorization,  execution
          and  delivery of all  documents  by all  parties  thereto and the due
          authority of all persons executing such documents (other than persons
          executing such documents on behalf of the Company);

     C.   All  representations  and  statements  set  forth  in such  documents
          (including the Representation Letters) are true and correct;

     D.   All obligations  imposed by any such documents on the parties thereto
          have been or will be performed or satisfied in accordance  with their
          terms;

     E.   All records made available to us are accurate and complete;

     F.   All  representations,  warranties  and other  statements  made by all
          parties are true and correct; and

     G.   All covenants  contained in the Representation  Letters have been and
          will be performed without waiver or breach of any provision thereof.

     We have further assumed the accuracy of the statements and descriptions of
the Company's  intended  activities as described in the Registration  Statement
and the  Prospectus  and that the Company will operate in  accordance  with the
method of operation described in the Registration Statement and the Prospectus.
We have also assumed, without investigation, that all documents,  certificates,
representations,  warranties  and  covenants  upon  which  we  have  relied  in
rendering  the  opinions  set forth below and that were given or dated  earlier
than the date of this letter continue to remain  accurate,  insofar as relevant
to the opinions set forth herein,  from such earlier date through and including
the date of this letter.

     Based  upon  our  examination  of  the  foregoing  items,  subject  to the
assumptions,  exceptions,  limitations and  qualifications set forth herein and
therein,  we are of the opinion that the Company  qualified as a REIT under the
Internal  Revenue  Code of 1986,  as amended  (the "Code") for its taxable year
ended December 31, 2002, the Company's form of  organization  and its manner of
operation is in conformity with the requirements for qualification and taxation
as a REIT as of the date of this  opinion,  the  Company's  proposed  manner of
operation  and  diversity  of equity  ownership  should  enable the  Company to
continue  to  satisfy  the  requirements  for  qualification  as a REIT for the
calendar  year 2003 and the  discussion  contained  under the caption  "Federal
Income Tax Consequences" in the Prospectus accurately reflects existing law and
fairly  addresses the material  federal  income tax issues  described  therein;
provided that, the Company operates in accordance with the methods of operation
described in the Registration Statement and the Prospectus, consistent with the
representations in the Representation Letters concerning the Company's intended
method of operation.

     In addition to the assumptions set forth above, this opinion is subject to
the following exceptions, limitations and qualifications:

          1. Our opinions expressed herein are based upon interpretation of the
     current   provisions  of  the  Code  and  existing   judicial   decisions,
     administrative  regulations  and  published  rulings and  procedures.  Our
     opinions  only  represent  our best  judgment and are not binding upon the
     Internal  Revenue  Service  or courts and there is no  assurance  that the
     Internal Revenue Service will not  successfully  challenge the conclusions
     set  forth  herein.  The  Internal  Revenue  Service  has not  yet  issued
     regulations  or  administrative  interpretations  with  respect to various
     provisions of the Code relating to REIT  qualification.  Consequently,  no
     assurance can be given that future legislative, judicial or administrative
     changes, on either a prospective or retroactive basis, would not adversely
     affect the  accuracy of the  conclusions  stated  herein.  We undertake no
     obligation  to advise you of changes in law which may occur after the date
     hereof.

          2. Our  opinions  are  limited  to the  federal  income  tax  matters
     addressed  herein,  and no other opinions are rendered with respect to any
     other matter not specifically set forth in the foregoing opinion.

          3. Our opinions are limited in all respects to the federal tax law of
     the United States and we express no opinion as to various state,  local or
     foreign tax consequences.

          4. The Company's qualification and taxation as a REIT depend upon the
     Company's   ability  to  satisfy  through  actual  operating  results  the
     applicable   asset    composition,    source   of   income,    shareholder
     diversification,  distribution,  record keeping and other  requirements of
     the Code necessary to qualify and be taxed as a REIT.

          5. The  foregoing  opinions  are based  upon the  proposed  method of
     operation as described in the  Registration  Statement and facts stated in
     the  Representation  Letters  and other  documents  described  herein.  We
     undertake no  obligation  to review at any time in the future  whether the
     Company  has  fulfilled  the  requirements  listed  in  paragraph  4  and,
     consequently,  no  assurance  can be given that the actual  results of the
     Company's operations for any taxable year will satisfy the requirements of
     the Code necessary to qualify or be taxed as a REIT.

          6.  In  the  event  any  one  of  the  statements,   representations,
     warranties,  covenants  or  assumptions  we have relied upon to issue this
     opinion  is  incorrect  in a  material  respect,  our  opinions  might  be
     adversely affected and may not be relied upon.

     This  opinion  is  furnished  to you for the  purpose  of  complying  with
applicable  securities laws. This opinion may not be used or relied upon by any
other person other than your  investors or for any other purpose and may not be
circulated,  quoted or otherwise  referred to for any purpose without our prior
written  consent.  We hereby  consent to the  reference to us under the caption
"Federal Income Tax  Consequences"  in the Registration  Statement,  and to the
filing of this  opinion as an Exhibit to the  Registration  Statement,  without
implying or admitting  that we are experts within the meaning of the Securities
Act with respect to any part of the Registration Statement.


                                           LOCKE LIDDELL & SAPP LLP


                                        By:  /s/
                                           _________________________________
                                           Jeffrey D. Wallace






                                                                 Exhibit 21.1

                                     AmREIT
                         Subsidiaries of the Registrant


Set forth below is certain information with respect to each of the Company's
subsidiaries:

SUBSIDIARY                                  STATE OF DOMICILE

AmREIT Realty Investment Corporation              Texas
AmREIT Operating Corporation                      Texas
AmREIT Opportunity Corporation                    Texas
AmREIT Securities Company                         Texas
AmREIT SPE 1 Inc.                                 Texas
AmREIT Income & Growth Corporation                Texas
AAA CTL Notes, LTD                                Texas
Sugarland Plaza, LP                               Texas
Sugarland IHOP, LP                                Texas
AmREIT Monthly Income & Growth Corporation        Texas





                                                             Exhibit 23.2


                         INDEPENDENT AUDITORS' CONSENT

To the Board of Trust Managers
AmREIT:

We consent to the use of our report included herein on the consolidated
financial statements and consolidated financial statement schedule as of
and for the year ended December 31, 2002 and to the reference to our firm
under the heading "Experts" in the prospectus.

KPMG LLP


/s/
_______________________________
Houston, Texas
August 4, 2003





                                                              Exhibit 23.3


                         INDEPENDENT AUDITORS' CONSENT

To the Board of Trust Managers
AmREIT:

We consent to the use in this  Amendment  No. 1 to  Registration  Statement No.
333-104652 of AmREIT on Form S-11 of our report dated March 15, 2002, appearing
in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

DELOITTE & TOUCHE LLP


/s/
_________________________________
Houston, Texas
August 6, 2003