UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



FORM 10-Q


(Mark One)
	x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2013


	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________


Commission file number 000-52619

AmREIT MONTHLY INCOME & GROWTH FUND III, LTD.

(Exact Name of Registrant as Specified in Its Charter)


Texas		20-2964630
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

8 Greenway Plaza, Suite 1000
Houston, TX		77046
(Address of Principal Executive Offices)		(Zip Code)

(713) 850-1400

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


	Large accelerated filer o		Accelerated filer o
	Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

TABLE OF CONTENTS

			PAGE
Definitions			ii
PART I - FINANCIAL INFORMATION
	ITEM 1.	Financial Statements.	1
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1514
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk.	1918
	ITEM 4.	Controls and Procedures.	1918
PART II - OTHER INFORMATION
	ITEM 1.	Legal Proceedings.	19
	ITEM 1A.	Risk Factors.	19
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2019
	ITEM 3.	Defaults Upon Senior Securities.	2019
	ITEM 4.	Mine Safety Disclosures.	2019
	ITEM 5.	Other Information.	2019
	ITEM 6.	Exhibits.	2019
SIGNATURES			2120
EXHIBIT INDEX			2221

Table of Contents

DEFINITIONS

As used in this Quarterly Report, the following abbreviations and terms have the meanings as listed below. Additionally, the terms “we,” “our,” “MIG III,” the “Partnership” and “us” refer collectively to AmREIT Monthly Income & Growth Fund III, Ltd. and its subsidiaries, including joint ventures, unless the context clearly indicates otherwise.

ABBREVIATION		DEFINITION
AmREIT		AmREIT, Inc., a Maryland corporation and parent of our General Partner.
ARIC		AmREIT Realty Investment Corporation and its consolidated subsidiaries, a wholly-owned taxable REIT subsidiary of AmREIT.
CEO		Chief Executive Officer.
CFO		Chief Financial Officer.
Exchange Act		Securities Exchange Act of 1934, as amended.
GAAP		U.S. generally accepted accounting principles.
General Partner		AmREIT Monthly Income & Growth III Corporation, a wholly-owned subsidiary of AmREIT, Inc.
GLA		Gross leasable area.
LIBOR		London interbank offered rate.
Limited Partners		Owners / holders of our Units.
MIG IV		AmREIT Monthly Income & Growth Fund IV, L.P., an affiliated entity.
NYSE		New York Stock Exchange.
Offering		Both the issuance and sale of our initial 80 Units pursuant to the terms of a private placement memorandum dated April 19, 2005, and subsequent sale of Units through October 31, 2006 (a total of 2,844 Units).
Partners		Collectively our General Partner and Limited Partners.
PTC/BSQ		PTC/BSQ Holding Company LLC.
REIT		Real Estate Investment Trust.
SEC		Securities and Exchange Commission.
Securities Act		Securities Act of 1933, as amended.
Units		Limited partnership units sold in our Offering.
Quarterly Report		Quarterly Report on Form 10-Q filed with the SEC for the three and ~~six~~nine months ended ~~June~~September 30, 2013.

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PART I – FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS.

AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for Unit data)

	June 30, 2013			December 31, 2012
	September 30, 2013			December 31, 2012
	(unaudited)
ASSETS
Real estate investments at cost:
Land	$	11,089		$	11,089
Buildings		21,~~504~~633			21,484
Tenant improvements		1,~~303~~320			1,217
		33,896			33,790
		34,042			33,790
Less accumulated depreciation and amortization		(6,~~172~~392	)		(5,732	)
		27,724			28,058
		27,650			28,058
Investment in non-consolidated entities		1817,~~500~~746			20,749
Acquired lease intangibles, net		7—			28
Net real estate investments		4645,~~231~~396			48,835
Cash and cash equivalents		~~2,937~~926			3,170
Tenant and account receivables, net		~~503~~589			462
Accounts receivable - related party		~~469~~557			470
Notes receivable		~~113~~109			103
Deferred costs, net		~~622~~595			710
Other assets		~~509~~463			543
TOTAL ASSETS	$	5148,~~384~~635		$	54,293
LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Notes payable	$	24,~~673~~630		$	24,759
Notes payable - related party		~~3,563~~673			5,622
Accounts payable and other liabilities		~~710~~816			629
Accounts payable - related party		96175			49
Acquired below-market lease intangibles, net		—			4
Security deposits		127			127
TOTAL LIABILITIES		2926,~~169~~421			31,190
Partners’ capital:
General partner		—			—
Limited partners, 2,833 Units outstanding at
Limited partners, 2,833 Units outstanding at September 30, 2013 and December 31, 2012		22,214			23,103
June 30, 2013 and December 31, 2012		22,215			23,103
TOTAL PARTNERS’ CAPITAL		22,214			23,103
TOTAL PARTNERS’ CAPITAL		22,215			23,103
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	48,635		$	54,293
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	51,384		$	54,293

See Notes to Consolidated Financial Statements.

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AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the three and ~~six~~nine months ended ~~June~~ September 30, 2013 and 2012 (in thousands, except for per Unit data) (unaudited)

	Three months ended June 30,						Six months ended June 30,
	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Revenues:
Rental income from operating leases	$	~~882~~890		$	~~714~~812		$	12,~~732~~622		$	12,~~400~~212
Total revenues		~~882~~890			~~714~~812			12,~~732~~622			12,~~400~~212
Expenses:
General and administrative		3855			3650			70125			61111
General and administrative - related party		99103			90107			~~190~~293			~~184~~291
Asset management fees - related party		5859			5859			~~117~~176			~~117~~176
Property expense		~~280~~283			~~231~~196			~~479~~762			~~553~~749
Property management fees - related party		32			2631			6395			5384
Legal and professional		8346			7177			~~149~~195			~~201~~278
Depreciation and amortization		~~254~~257			~~280~~284			~~517~~774			~~553~~837
Total operating expenses		~~844~~835			~~792~~804			12,~~585~~420			12,~~722~~526
Operating income (loss)		3855			~~(78~~8	)		~~147~~202			(~~322~~314	)
Other income (expense):
Interest and other income		—1			1			23			3839
Interest expense		(~~309~~296	)		(~~410~~422	)		(~~696~~992	)		(~~812~~1,234	)
Equity in losses from non-consolidated entities		(138	)		(602	)		(334	)		(814	)
Income (loss) from non-consolidated entities		225			(262	)		(109	)		(1,076	)
Margin tax expense		—			—			(7	)		1
Margin tax benefit (expense)		14			8			7			9
Total other expense		(447	)		(1,011	)		(1,035	)		(1,587	)
Total other expense, net		(56	)		(675	)		(1,091	)		(2,262	)
Loss from continuing operations		(~~409~~1	)		(~~1,089~~667	)		(~~888~~889	)		(12,~~909~~576	)
Income from discontinued operations:
Income from real estate operations		—			—(15	)		—			10(5	)
Gain on debt extinguishment		—			—			—			1,533
Income from discontinued operations		—			—(15	)		—			1,~~543~~528
Net loss	$	(~~409~~1	)	$	(~~1,089~~682	)	$	(~~888~~889	)	$	(~~366~~1,048	)
Loss from continuing operations per Unit	$	(~~144~~0.3735	)	$	(~~384~~235.4044	)	$	(313.4580	)	$	(~~673~~909.8428	)
Income from discontinued operations per Unit		—			—			—			544.65
Income (loss) from discontinued operations per Unit		—			(5.29	)		—			539.36
Net loss per Unit	$	(~~144~~0.3735	)	$	(~~384~~240.4073	)	$	(313.4580	)	$	(~~129~~369.1993	)
Weighted average Units outstanding		2,833			2,833			2,833			2,833

See Notes to Consolidated Financial Statements.

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AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL For the ~~six~~ nine months ended ~~June~~September 30, 2013 (in thousands) (unaudited)

	Partners’ Capital	~~Partners’ Capital~~
	General Partner	~~General Partner~~	Limited Partners	~~Limited Partners~~		Total	~~Total~~
Balance at December 31, 2012	$	—	$	23,103		$	23,103
Net loss (1)		—		(~~888~~889	)		(~~888~~889	)
Balance at June 30, 2013	$	—	$	22,215		$	22,215
Balance at September 30, 2013	$	—	$	22,214		$	22,214

(1) The allocation of net loss includes a curative allocation to increase the General Partner capital account by $9 for the ~~six~~nine months ended ~~June~~September 30, 2013. The cumulative curative allocation since inception of the Partnership is $396. The Partnership Agreement provides that no Partner shall be required to fund a deficit balance in their capital account.

See Notes to Consolidated Financial Statements.

Table of Contents

AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

	Six months ended June 30,
	Nine months ended September 30,
	2013			2012
Cash flows from operating activities:
Net loss	$	(~~888~~889	)	$	(~~366~~1,048	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Gain on extinguishment of debt		—			(1,533	)
Equity in losses from non-consolidated entities		~~334~~109			~~814~~1,076
Depreciation and amortization		~~622~~892			~~692~~1,030
Bad debt (recovery) expense		(6263	)		8(39	)
Decrease (increase) in tenant and accounts receivables		5			(40	)
(Increase) decrease in tenant and accounts receivables		(81	)		(94	)
Decrease (increase) in accounts receivable - related party		~~204~~214			(~~127~~213	)
Increase in deferred costs		—			(201	)
Decrease (increase) in deferred costs		—			(267	)
Increase in other assets		(1	)		(50	)
Decrease (increase) in other assets		28			65
Increase (decrease) in accounts payable and other liabilities		81163			~~(99~~33	)
Increase in accounts payable - related party		131			574
Increase (decrease) in accounts payable - related party		253			870
Decrease in security deposits		—			(21	)
Increase (decrease) in security deposits		—			(18	)
Net cash provided by (used in) operating activities		~~426~~626			(~~349~~138	)
Cash flows from investing activities:
Improvements to real estate		(~~148~~292	)		(~~284~~360	)
Payments received on notes receivable		611			—
Investments in and advances to non-consolidated entities		(~~318~~393	)		(73	)
Distributions from non-consolidated entities		23,~~137~~154			280
Net cash provided by (used in) investing activities		12,~~677~~480			(77153	)
Cash flows from financing activities:
Payments on notes payable		(86129	)		(74103	)
Proceeds from notes payable - related party		—			~~353~~501
Payments on notes payable - related party		(25,~~250~~221	)		—
Loan acquisition costs		—			(4454	)
Net cash provided by (used in) financing activities		(25,~~336~~350	)		~~235~~344
Net decrease in cash and cash equivalents		(233	)		(191	)
Net increase (decrease) in cash and cash equivalents		(2,244	)		53
Cash and cash equivalents, beginning of period		3,170			1,815
Cash and cash equivalents, end of period	$	~~2,937~~926		$	1,~~624~~868
Supplemental schedule of cash flow information:
Cash paid during the period for interest	$	~~525~~772		$	~~461~~657
Cash paid during the period for taxes	$	30		$	91
Supplemental schedule of noncash investing and financing activities:
Reclassification from accounts payable - related party to notes payable - related party	$	~~191~~272		$	~~443~~887
Property delivered as settlement of debt	$	—		$	9,628
Construction fees included in accounts payable	$	~~107~~145		$	3572
Reclass fom tenant and accounts receivable to notes receivable	$	1617		$	—106

See Notes to Consolidated Financial Statements.

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AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~June~~September 30, 2013 (unaudited)


1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

General

We are a Texas limited partnership formed on April 19, 2005 to acquire, develop ~~and~~ and operate, directly or indirectly through joint venture arrangements, a ~~portfolio~~ portfolio of commercial real estate consisting primarily of multi-tenant shopping centers and mixed-use developments. Our General Partner is a subsidiary of AmREIT, an SEC reporting, Maryland corporation that is publicly traded on the NYSE and that has elected to be taxed as a REIT. As of ~~June~~September 30, 2013, our investments included two wholly-owned properties comprised of approximately 125,000 square feet of GLA and ~~seven~~six properties in which we own a non-controlling ~~interest~~ interest through joint ventures comprising approximately 1985,~~190,~~000 square feet of GLA. A majority of our properties are located in highly populated, suburban communities in Texas.

As of the date of this Quarterly Report, our operating period, which ended on October 31, 2012, has expired and we have entered into our liquidation period. However, an orderly liquidation of all of our properties will likely take years for our General ~~Partners~~Partner to complete and wind up our operations. Because we have entered into our liquidation period, we will not invest in any new real estate without approval of our limited partners. Because liquidation was not imminent as of ~~June~~September 30, 2013, the financial statements are presented assuming we continue as a going concern.

Economic Conditions and Liquidity

Over the past several years, our results of operations and valuations of our real estate assets have been negatively impacted by overall economic conditions from the recent, severe recession. Most of our retail properties were purchased prior to 2008 when retail real estate market prices were much higher, and our property valuations were negatively impacted by these market dynamics. The United States ~~economy~~ has experienced recent improvements in the general economy,; ~~but general concerns from the recent~~however, ~~severe~~high ~~recession~~levels ~~remain.~~of ~~Concerns~~unemployment ~~include~~have persisted, ~~but~~ ~~are~~and ~~not~~rental ~~limited~~rates toand ~~the~~valuations ~~potential~~for ~~future~~retail ~~increase~~space inhave ~~interest~~not ~~rates~~fully ~~as well~~recovered asto ~~the~~pre-recession ~~availability~~levels and ~~cost~~may ofnot ~~capital~~for asa ~~the~~number ~~economy~~of ~~improves~~years. ~~Additionally, there~~As isa ~~remaining~~result, ~~uncertainty~~we ~~whether~~have ~~the~~faced ~~United~~significant ~~States~~liquidity ~~economy~~challenges ~~will~~over bethe ~~adversely~~last ~~affected~~several byyears. ~~inflation~~However, ~~deflation~~other orthan ~~stagflation~~our Olmos Creek property, ~~and~~which we delivered to the ~~systemic impact~~lender ofas ~~periods~~settlement of ~~high~~unpaid ~~unemployment,~~debt in ~~volatile~~February ~~energy costs~~2012, ~~geopolitical issues,~~we ~~which~~ have ~~contributed~~been tosuccessful ~~increased~~in ~~market~~meeting ~~volatility~~our ~~and~~historic ~~weakened business~~cash ~~and~~shortfalls ~~consumer~~through ~~confidence.~~(1) ~~High~~managing ~~levels~~the timing of ~~unemployment~~forecasted capital ~~have~~expenditures ~~persisted, and~~related ~~rental~~to ~~rates~~the ~~and~~lease-up ~~valuations~~of ~~for~~properties, ~~retail~~(2) ~~space~~managing ~~have~~the ~~not~~timing ~~fully~~of ~~recovered~~operating expense payments and, to the extent ~~pre-recession~~possible, ~~levels~~accelerating ~~and~~cash ~~may~~collections, ~~not~~(3) ~~for~~deferring athe ~~number~~payment of ~~years.~~fees ~~Most~~owed ofto our ~~retail properties~~General ~~were~~Partner ~~purchased~~and ~~prior~~its toaffiliates, ~~2008~~(4) selling ~~when~~certain ~~retail~~of ~~real~~our ~~estate~~properties ~~market~~and ~~prices were~~investments ~~much~~in ~~higher,~~non-consolidated ~~and~~entities ~~our~~(see ~~property~~Note ~~valuations~~4) ~~have~~and/or ~~been~~(5) ~~negatively~~obtaining ~~impacted~~funds bythrough ~~these~~additional ~~market~~borrowings ~~dynamics~~from AmREIT.

WeAs ~~have faced significant liquidity challenges over the last several years. Other than with our Olmos Creek property (which was delivered to the lender as settlement~~ of ~~unpaid~~ ~~debt~~September in30, ~~February 2012)~~2013, we have ~~been~~$926,000 ~~successful~~ in ~~meeting~~cash ~~our historic~~on ~~cash~~hand ~~shortfalls~~and ~~through~~our ~~(1)~~liquidity ~~managing~~has ~~the~~improved ~~timing~~due ~~of forecasted capital expenditures related~~ to the ~~lease-up~~refinance of ~~properties,~~the ~~(2)~~PTC/BSQ ~~managing~~joint venture debt, the ~~timing~~sale of ~~operating~~ ~~expense~~Woodlake ~~payments~~Square and, to the Woodlake ~~extent~~Pointe ~~possible,~~joint ~~accelerating~~venture’s ~~cash collections,~~sale ~~(3)~~of ~~deferring~~a ~~the~~portion ~~payment~~ of ~~fees~~its ~~owed~~Woodlake toPointe ~~our~~property. ~~General~~See ~~Partner~~also ~~and its~~Note ~~affiliates, (~~4) ~~selling~~related ~~certain~~to of our ~~properties and~~ investments in in non-consolidated entities,. ~~including~~During ~~the~~2013, ~~anticipated~~we ~~sale~~have ofrepaid aapproximately ~~single~~$5.8 ~~tenant building~~million ~~and portion~~ of ~~land~~our bynotes ~~our~~payable ~~Woodlake~~–related ~~Pointe~~party and ~~joint~~we ~~venture~~resumed ~~(see~~monthly ~~Note~~payments ~~4) and/or~~of ~~(5)~~interest, ~~obtaining~~asset ~~funds~~management ~~through~~fees ~~additional~~and ~~borrowings~~overhead ~~from~~allocations to AmREIT.

~~Our~~We expect ~~PTC/BSQ~~to fund approximately $1.5 million in capital expenditures over the next two years at our Casa Linda property (a 50% joint venture ~~successfully~~between ~~refinanced~~us ~~its~~and ~~debt~~MIG IV) onrepresenting ~~June~~our ~~28,~~50% ~~2013,~~share ~~increasing~~of ~~the total~~a ~~debt~~lease-up ~~from~~strategy ~~$44~~at this property.4 The $38 million mortgage on the property matures in January 2014.We have engaged a mortgage broker to assist us with refinancing this loan and have recently selected a lender based upon preliminary terms for a non-recourse loan with an initial funding of $5437.095 million ~~with~~and ana ~~additional~~future funding of approximately $4.5 million ~~available~~ for ~~future~~the ~~capital~~potential ~~improvements~~acquisition of an adjacent property. WeThe ~~received~~proposed terms of the loan are a ~~distribution~~term ~~from~~of ~~our~~four years ~~PTC~~with ~~/BSQ~~a ~~joint~~one-year ~~venture~~extension, inan ~~the~~interest ~~amount~~rate of $13.950% ~~million.~~over We3-Month ~~subsequently repaid~~LIBOR ~~approximately~~and ~~$1.4~~interest-only ~~million~~payments for the first two years with monthly payments of ~~notes~~interest and ~~payable~~principal based upon a 30-year ~~related~~amortization ~~party~~thereafter onwith ~~July~~the 3,balance ~~2013.~~due ~~See~~upon ~~also~~maturity. ~~Note~~We 4expect ~~related~~the joint venture to ~~our~~close ~~investments~~on inthe ~~non-consolidated~~loan ~~entities~~during the fourth quarter of 2013.

We expect to fund approximately $1.5 million in capital expenditures over the next two years at our Casa Linda property (a 50% joint venture between us and MIG IV) representing our 50% share of a lease-up strategy at this property. The lease-up strategy includes certain tenant build-out and site improvements. The $38 million mortgage on the property matures in January 2014. The joint venture will likely require a one-year extension of the loan to complete this strategy and then refinance the property on a long-term basis. We believe we will be successful in obtaining a one-year extension based on our preliminary discussions with the lending agent; however, no assurances can be given. We do not guarantee this debt, and our risk of loss is limited to our ownership interest in the property.

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~~On April 5,~~We ~~2013,~~continue ~~our~~to ~~Woodlake~~work ~~Pointe~~with ~~joint~~the ~~venture~~debt ~~entered~~servicer ~~into a sales agreement~~ to ~~sell a~~refinance ~~portion of~~ the ~~land~~Westside ~~and~~Plaza adebt (see ~~single~~Note ~~tenant~~5) ~~building~~to ataddress ~~our~~various ~~Woodlake~~alternatives ~~Pointe property~~ for ~~$12.0~~relief ~~million~~either tothrough reduction anof ~~unrelated~~escrow ~~third~~requirements, ~~party.~~waiver ~~The~~of ~~land~~penalties and ~~building~~forgiveness of ~~are~~principal ~~secured~~or byall aof $6the above.7 ~~million~~We ~~loan~~believe that we will be ~~repaid~~successful in ~~full with proceeds~~this ~~from~~endeavor; ~~the~~however, ~~sale.~~we ~~The~~may ~~sale~~be isultimately ~~expected~~called upon to ~~close~~repay ina ~~the~~portion ~~third quarter~~ of ~~2013, and we~~the ~~estimate~~debt ~~that~~in ~~our~~order ~~portion~~to ofsuccessfully ~~the~~renegotiate ~~net~~or ~~cash~~refinance ~~proceeds,~~the ~~which~~debt. isIn ~~30%,~~the ~~would be approximately~~event ~~$1.5~~we ~~million.~~do Wenot ~~plan~~have tosufficient ~~use~~liquidity ~~the~~for ~~proceeds~~such toa ~~fund~~repayment, ~~our~~we ~~share~~may ofhave ~~the~~to ~~Casa Linda~~look ~~lease-up~~to ~~strategy~~our ~~and~~General ~~for~~Partner ~~working~~to ~~capital~~borrow ~~needs~~additional funds.

OnThere is ~~July~~no 15guarantee that we and our joint ventures will be successful with the above liquidity initiatives, and we may continue to look to AmREIT to ~~2013,~~provide additional financial support to us to meet our operating cash needs. We can provide no assurance that AmREIT ~~Woodlake~~will be able to provide additional support, LPif ~~(“Woodlake~~needed. ~~LP”)~~Historically, ~~which~~AmREIT ~~owns~~has ~~Woodlake~~deferred ~~Square~~payment of advisory fees earned to the extent such deferrals of fees were necessary for our continued operation. Such fees included property management, aasset management, ~~grocery-anchored~~development fees, ~~multi-tenant~~interest ~~retail~~expense ~~shopping~~on ~~center~~amounts ~~entered~~owed ~~into~~to aAmREIT ~~purchase~~and reimbursements of certain of AmREIT’s general and ~~sale~~administrative ~~agreement~~costs. ~~with~~Additionally, AmREIT has toagreed ~~sell~~that ~~Woodlake~~it ~~Square~~will ~~for~~not arequire ~~purchase~~us ~~price~~to repay the remaining balance of our notes ~~$41.6~~payable ~~million.~~– Werelated ~~expect~~party to ~~receive~~them ~~approximately~~until ~~$1.2~~a ~~million~~date ~~representing~~subsequent ~~our proportional~~to ~~share~~January 1, ~~which~~2014, isif such ~~3%,~~repayment ofwere to prevent the ~~net~~execution ~~proceeds.~~of ~~The~~our ~~sale~~strategy isor ~~expected~~present an unnecessary financial hardship to us. AmREIT’s agreement to provide such ~~close~~financial insupport ~~the~~and ~~third~~defer ~~quarter~~payment ofis ~~2013~~limited to its continued ability to do so.

There is no guarantee that we and our joint ventures will be successful with all of the above liquidity initiatives, and we may continue to look to AmREIT to provide additional financial support to us to meet our operating cash needs. Historically, AmREIT has deferred payment of advisory fees earned to the extent such deferrals of fees were necessary for our continued operation. Such fees included property management, asset management, development fees, interest expense on amounts owed to AmREIT and reimbursements of certain of AmREIT’s general and administrative costs. During 2013, we repaid approximately $2.3 million of our notes payable –related party, and we resumed monthly payments of interest, asset management fees and overhead allocations to AmREIT. We subsequently repaid approximately $1.4 million of notes payable - related party on July 3, 2013. See also Note 4 related to our investments in non-consolidated entities. We expect that sales of the single tenant building at our Woodlake Pointe property and the sale of the Woodlake Square shopping center during the third quarter of 2013 will provide us with approximately $2.7 million in net proceeds, which we believe will be sufficient to allow us to execute our strategy in the short term. In the event we are able to generate sufficient cash flows in the near term, we may elect to repay portions of the notes payable – related party; however, AmREIT has agreed that it will not require us to repay the $3.1 million notes payable – related party until a date subsequent to January 1, 2014 if such repayment were to prevent the execution of our strategy or present an unnecessary financial hardship to us. AmREIT’s agreement to provide such financial support and defer payment is limited to its continued ability to do so.

Strategic Plan

We have created a strategic plan to maximize the potential value of our real estate portfolio and execute an orderly, but opportunistic liquidation. The components of this strategic plan are as follows:

• Complete our development and redevelopment projects with a goal to stabilize these projects ~~during~~over the ~~balance~~next of6-12 ~~2013~~months. We believe that completing our development and redevelopment projects, including their lease-up and stabilization, will allow us to maximize the return on these properties upon sale. Our investments in 5433 Westheimer and PTC/BSQ represent our assets currently under development/redevelopment. See Note 4 for further discussion of redevelopment plans at each of these properties. • Continue to operate our projects in a first-class manner with a goal to generate operating cash flow in order to re-commence distributions ~~in 2014~~. We believe that the stabilization of our development and redevelopment properties, coupled with the continued and intense oversight of our properties will generate liquidity that could allow us to re-commence distributions to our Limited Partners; however, this will most likely not occur until we begin to sell our real estate assets. • Sell our properties opportunistically, ~~likely beginning in 2014,~~ as the market continues to recover. ~~Once~~Our sales by our Woodlake Square and Woodlake Pointe joint ventures are recent examples of our execution of this strategy. However, once a property is marketed for sale, it may take several months to receive offers and complete due diligence by both parties. Our General Partner has in good faith begun to review market sales opportunities for our remaining operating properties, but believes that retail property valuations continue to be challenged, and, accordingly, that attractive sales opportunities may not exist in the near term. When deciding whether or when to sell properties, our General Partner will consider factors such as potential appreciation of value, and timing of cash flows. As we have now entered the liquidation period, we will not be acquiring new real estate investments, but we will be completing our development and redevelopment projects and distributing net proceeds generated from property sales to our Limited Partners unless the General Partner has identified attractive acquisition opportunities and obtained a majority vote of the Limited Partners to re-invest such proceeds.

An orderly liquidation of all of our properties will take years for our General Partner to complete and wind up our operations. Because of challenging real estate market conditions, it is possible that investors may not recover all of their original investment. Although we believe that our strategic plan maximizes the potential value of our properties and is in the best interest of our Limited Partners, no assurances can be given that this strategy will be successful. Deterioration in the United States economy or the bankruptcy or insolvency of one or more of our significant tenants could cause this strategy to be insufficient. Even with the above strategic plan and liquidity initiatives, we still may incur cash shortfalls, we may be required to perform under certain guarantees of our joint ventures or be unable to refinance certain debt as it comes due that could result in lender repossession of one or more properties owned by us and/or our joint ventures or we may be forced to sell one or more properties at a time when it is disadvantageous to do so, potentially resulting in losses on the disposition of those properties.

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2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Our financial records are maintained on the accrual basis of accounting whereby revenues are recognized when earned and expenses are recorded when incurred. The consolidated financial statements include our accounts as well as the accounts of any wholly- or majority-owned subsidiaries in which we have a controlling financial interest. Investments in joint ventures and partnerships where we have the ability to exercise significant influence but do not exercise financial and operating control are accounted for using the equity method (see Note 4). The significant accounting policies of our non-consolidated entities are consistent with those of our subsidiaries in which we have a controlling financial interest. As of ~~June~~September 30, 2013, we do not have any interests in variable interest entities. All significant inter-company accounts and ~~transactions~~ transactions have been eliminated in consolidation.

The consolidated financial statements included in this Quarterly Report have been prepared pursuant to the rules and regulations of the SEC and are unaudited. In our opinion, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted of normal recurring items. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from these statements pursuant to the SEC rules and regulations and, accordingly, these financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Reclassifications

WeCertain ~~reclassified~~immaterial ~~$4,000~~reclassifications ~~and~~have ~~$10,000~~been ~~from~~made ~~state income tax~~ to ~~property expense on~~ our consolidated statements of operations for the three and ~~six~~nine months ended ~~June~~ September 30, 2012, ~~respectively~~ to conform to current period presentation. These items had no impact on previously reported net loss, our Consolidated Balance Sheet or Consolidated Statement of Cash Flow.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP 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.

Cash and Cash Equivalents

We consider 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.

Revenue Recognition

Rental income from operating leases – We lease space to tenants under agreements with varying terms. Our leases are accounted for as operating leases, and, although certain leases of the properties provide for tenant occupancy during periods for which no rent is due and/or for changes in the minimum lease payments over the terms of the leases, revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. Generally, possession or control occurs on the lease commencement date. In cases where significant tenant improvements are made prior to lease commencement, the leased asset is considered to be the finished space, and revenue recognition therefore begins when the improvements are substantially complete. Revenue from tenant reimbursements of taxes, maintenance expenses and insurance is recognized in the period the related expense is recorded. Additionally, certain of our lease agreements contain provisions that grant additional rents based upon tenants’ sales volumes (contingent or percentage rent). Percentage rents are recognized when the tenants achieve the specified targets as defined in their lease agreements. Accrued rents are included in tenant and accounts receivable, net.

Receivables and Allowance for Uncollectible Accounts

Tenant and Accounts Receivable, Net - Included in tenant and accounts receivable are base rents, tenant reimbursements and adjustments related to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rents and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Bad debt expenses and any related recoveries are included in property expense. As of September 30, 2013 and December 31, 2012, our allowance for uncollectible accounts related to our tenant receivables was $0 and $127,000, respectively.

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Receivables and Allowance for Uncollectible Accounts

Tenant and Accounts Receivable, Net - Included in tenant and accounts receivable are base rents, tenant reimbursements and adjustments related to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rents and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Bad debt expenses and any related recoveries are included in property expense. As of June 30, 2013 and December 31, 2012, our allowance for uncollectible accounts related to our tenant receivables was $1,000 and $132,000, respectively.

Accounts Receivable – Related Party - Included in accounts receivable related-party are short-term cash advances provided to certain of our affiliated investment entities primarily for their development needs. These cash advances are due upon demand.

Development Properties

Expenditures related to the development of real estate are capitalized as part of construction in progress, which includes carrying charges, primarily interest, real estate taxes and loan acquisition costs, and direct and indirect development costs related to buildings under construction. The capitalization of such costs ceases at the earlier of one year from the date of completion of major construction or when the property, or any completed portion, becomes available for occupancy. We capitalize costs associated with pending acquisitions of raw land as incurred and expense such costs if and when the acquisition of the property becomes no longer probable.

Acquired Properties and Acquired Intangibles

We ~~account~~ account for acquisitions of operating real ~~estate~~properties ~~acquisitions~~ as ~~an acquisition of a~~ business acquisitions, as we believe most operating real estate meets the definition of a “"business~~” under~~" under GAAP. Accordingly, we allocate the purchase price of each acquired property ~~properties~~ to land, building and improvements, identifiable intangible assets and to the acquired liabilities based on their respective fair values. Identifiable intangibles include amounts allocated to acquired above and below market leases, the value of in-place leases and customer relationship value, if any. We ~~determine fair value based on estimated cash flow projections that utilize~~Intangibles appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends and specific market and economic conditions that may affect the property. Factors considered by management in our analysis of determining the as-if-vacant property value include (i) an estimate of carrying costs during the expected lease-up periods, considering market conditions, and (ii) costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and estimates of lost rentals at market rates during the expected lease-up periods, tenant demand and other economic conditions. Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related ~~expenses. Intangibles related~~ to in-place lease value and above and below-market leases are recorded as acquired lease intangibles and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. Below market leases include fixed-rate renewal periods where we believe the renewal is reasonably assured. Premiums or discounts on debt are amortized to interest expense over the remaining term of such debt. Costs related to acquiring operating properties are expensed as incurred.

Depreciation

Depreciation is computed using the straight-line method over an estimated useful life of up to 39 years for buildings, up to 11 years for site improvements and ~~over~~ the term of the lease for tenant improvements. We re-evaluate the useful lives of ~~our~~ our buildings and improvements as warranted by changing conditions at our properties. As part of this re-evaluation, we may also consider whether such ~~changing~~ changing conditions indicate a potential impairment, and we perform an ~~impairment~~ impairment analysis, as necessary, at the property level. In the case of a ~~property~~ property redevelopment, we reassess the useful lives of specific buildings or ~~other~~ other improvements to be demolished as part of that redevelopment once the redevelopment is probable of occurring.

Impairment

We ~~review~~ review our properties for impairment whenever events or changes in ~~circumstances~~ circumstances indicate that the carrying amount of the assets, including acquired lease intangibles and accrued rental income, may not be recoverable ~~through~~ through operations. We determine whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the residual value of the property, with the carrying value 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. Both the estimated undiscounted cash flow analysis and fair value determination are based upon various factors that require complex and subjective judgments to be made by management. Such assumptions include projecting lease-up periods, holding periods, cap rates, rental rates, operating expenses, lease terms, tenant creditworthiness, tenant improvement allowances, terminal sales value and certain macroeconomic factors among other assumptions to be made for each property. For our multi-building retail centers, we consider the entire retail center as the asset group for purposes of our impairment analysis. We review our investments in non-consolidated entities for impairment based on a similar review of the properties held by the investee entity. No impairment charges were recognized during the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012.

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Fair Value Measurements

GAAP emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. GAAP requires the use of observable market data, when available, in making fair value measurements. Observable inputs are inputs that the market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of ours. When market data inputs are unobservable, we utilize inputs that we believe reflect our best estimate of the assumptions market participants would use in pricing the asset or liability. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified that are within Level 3 of the hierarchy). The three levels of inputs used to measure fair value are as follows:


	•	Level 1 Inputs – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Partnership has the ability to access.

	•	Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

	•	Level 3 Inputs – Unobservable inputs for the asset or liability, which are typically based on the Partnership’s own assumptions, as there is little, if any, related market activity.

Recurring Fair Value Measurements and Financial Instruments - Our consolidated financial instruments consist of cash and cash equivalents, tenant and accounts receivable, accounts receivable – related party, notes receivable, notes payable, notes payable – related party, accounts payable – related party, and accounts payable and other liabilities. The carrying values of all of these financial instruments, except for our notes payable, are representative of the fair values due to the short-term nature of the instruments. See Note 5 for fair value disclosures of our notes payable.

Subsequent Events

On ~~July 15,~~ ~~2013,~~October ~~Woodlake LP~~1, ~~which owns Woodlake Square~~2013, ~~entered~~we ~~into~~repaid ~~a purchase and sale agreement with AmREIT to sell Woodlake Square for a purchase price of~~ $~~41.6 million.~~650,000 Weon ~~expect to receive approximately $1.2 million representing our proportional share of~~ the ~~net~~note ~~proceeds~~payable ~~(see~~– ~~Note~~related ~~4).~~party ~~The sale is expected~~ to ~~close in the third quarter of 2013~~AmREIT.

~~Except as~~We ~~disclosed above, we~~ did not have any additional material subsequent events as of the date of this filing that impacted our consolidated financial statements.


3. REAL ESTATE DISPOSITIONS AND DISCONTINUED OPERATIONS

Olmos Creek - Our Olmos Creek mortgage of $11.2 million matured unpaid on November 1, 2011., ~~We assessed the Olmos Creek property for impairment~~ and we recorded an impairment of $2.1 million on the property in order to reflect it at its estimated fair value during the third quarter of 2011. The lender subsequently sold the note (including the right to the property) in January 2012. We entered into a settlement agreement with the new owner of the mortgage and delivered the property to the lender on February 6, 2012 in exchange for a release of substantially all of the obligations under the Olmos Creek mortgage. The settlement of the debt resulted in a gain on debt extinguishment of approximately $1.5 million as reported in income from discontinued operations on the consolidated statement of operations for the ~~six~~ nine months ended ~~June~~ September 30, 2012.

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The Olmos Creek property has been reflected as discontinued operations in the accompanying consolidated statement of operations. The following is a summary of our income from discontinued real estate operations for the periods presented below (amounts in thousands):

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2013		2012			2013		2012
Revenues:
Rental income from operating leases	$	—	$	—		$	—	$	91
Total revenues		—		—			—		91
Expenses:
Property expense		—		—15			—		3221
Property management fees - related party		—		—			—		3
Legal and professional		—		—			—		15
Depreciation and amortization		—		—			—		31
Total operating expenses		—		—15			—		8170
Income from real estate operations		—		—			—		10
Operating income (loss)		—		(15	)		—		21
Margin tax expense		—		—			—		(26	)
Income (loss) from real estate operations		—		(15	)		—		(5	)
Gain on debt extinguishment		—		—			—		1,533
Income from discontinued operations	$	—	$	—		$	—	$	1,543
Income (loss) from discontinued operations	$	—	$	(15	)	$	—	$	1,528


4. INVESTMENTS IN NON-CONSOLIDATED ENTITIES

We have investments in five entities through which we own an interest in ~~seven~~ six properties that are accounted for using the equity method of accounting due to our ability to exercise significant influence over them. Our investment balances as reported on our consolidated balance sheet are as follows (amounts in thousands):

Investment	~~Ownership~~	Ownership		~~June 30, 2013~~	September 30, 2013		~~December 31, 2012~~	December 31, 2012
5433 Westheimer	~~57.5~~	%57.5	%	$	~~2,983~~$	2,875	$	~~3,087~~$	3,087
Casa Linda	~~50.0~~	%50.0	%		~~2,439~~	2,328		~~2,707~~	2,707
Woodlake Pointe	~~30.0~~	%30.0	%		~~4,732~~	4,585		~~4,623~~	4,623
PTC/BSQ	~~20.0~~	%20.0	%		~~7,896~~	7,958		~~9,882~~	9,882
Woodlake Square	~~3.0~~	%3.0	%		~~450~~	—		~~450~~	450
Total				$	~~18,500~~$	17,746	$	~~20,749~~$	20,749

5433 Westheimer – We own a 57.5% interest in 5433 Westheimer, LP, which owns an office building with 134,000 square feet of GLA and formerly owned a 152-room hotel in Houston, Texas. The remaining 42.5% is owned by a third party, joint-venture partner. The property is not consolidated into our financial statements as we and our joint venture partner share equally in decision-making rights. On April 10, 2012, 5433 Westheimer, LP sold the 152-room hotel for $28.7 million, and the net proceeds received were used to pay down the existing loan balance to $3.8 million. 5433 Westheimer, LP continues to own and operate the office building. On October 19, 2012, 5433 Westheimer, LP refinanced this debt with a five-year term loan in the amount of $8.7 million, which includes amounts to be funded in the form of construction draws ~~related~~for to the ~~planned~~ redevelopment atof the property. We and our joint venture partner are joint and several guarantors of 25% of this debt., Weand we and our joint venture partner ~~have~~ initiated a redevelopment plan, primarily in the form of building and site improvements that ~~we believe~~ will allow for lease-up of the property at improved rental rates. As of ~~June~~September 30, 2013, approximately $610.21 million in redevelopment costs have been incurred out of a total expected cost of approximately $611.89 million (including lease-up costs), which is expected to be entirely funded by the property’s cash flows and construction draws under the loan.

Casa Linda - We own a 50% interest in AmREIT Casa Linda, LP, which owns a multi-tenant retail property located in Dallas, Texas with a combined GLA of 325,000 square feet. The remaining 50% is owned by MIG IV, an affiliate of our General Partner. The property is secured by a $38.0 million, seven-year mortgage loan that matures in January 2014. The loan bears an annual interest rate of 5.48% and is interest-only until maturity. During 2012, we and MIG IV initiated a lease-up strategy for the property. We expect that our portion of the costs to be incurred as part of the lease-up strategy is approximately $1.5 million. We expect to fund these capital requirements with cash on hand. We have engaged a mortgage broker to assist us with refinancing this loan and have recently selected a lender based on preliminary terms of a non-recourse loan with an initial funding of $37.95 million and a future funding of approximately $4.5 million for the potential acquisition of an adjacent property. The proposed terms of the loan are a term of four years with a one-year extension, an interest rate of 3.50% over 3-Month LIBOR and is interest-only for the first two years with monthly payments of interest and principal based upon a 30-year amortization thereafter with the balance due upon maturity. We expect the joint venture to close on the loan during the fourth quarter of 2013.

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~~Casa~~Woodlake Pointe ~~Linda~~ - We own a 50 30% interest in AmREIT ~~Casa Linda~~Westheimer Gessner, LP, which owns Woodlake Pointe, a multi-tenant retail property located in ~~Dallas~~Houston, Texas with a combined GLA of ~~325~~82,~~000~~120 square feet. The remaining 5070% is owned by ~~MIG~~affiliated ~~IV,~~AmREIT ~~an affiliate of our General Partner. The property is secured by a $38.0 million~~entities, ~~seven-year~~MIG ~~mortgage~~IV ~~loan that matures in January 2014. The loan bears an annual interest rate of 5.48~~(60%) and ~~is interest-only~~ARIC ~~until maturity~~(10%). During ~~2012~~ 2011, we ~~and~~signed ~~MIG IV initiated~~ a lease~~-up strategy~~ ~~for~~with ~~the~~a ~~property~~large ~~that~~national ~~includes~~fitness ~~certain~~ tenant, ~~build-out~~ and ~~site~~we completed ~~improvements.~~construction ~~The~~of ~~joint~~a ~~venture~~45,000 ~~will~~square ~~likely~~foot ~~require~~building aon ~~one-year extension of~~ the ~~loan~~ toproperty ~~complete~~during ~~this~~2012 ~~strategy.~~for Wea total ~~believe~~redevelopment wecosts ~~will~~of be$6.7 ~~successful~~million. inOn ~~obtaining~~September ~~a one-year~~30, ~~extension~~2013, ~~based on~~ our ~~preliminary~~Woodlake ~~discussions~~Pointe joint ~~with~~venture sold the ~~lending agent; however~~45,000 nosquare ~~assurances~~foot ~~can~~building beand ~~given.~~a Weportion doof ~~not~~the ~~guarantee~~land ~~this~~for ~~debt~~$12.0 ~~and~~million ~~our~~to ~~risk~~an unrelated ofthird ~~loss~~party. isThe ~~limited~~land toand ~~our~~building ~~ownership~~were ~~interest~~secured inby ~~the~~a ~~property~~$6.7 Wemillion ~~expect~~loan that ~~our~~ ~~portion~~was ofrepaid ~~the~~in ~~costs,~~full ~~which~~with isproceeds ~~50%,~~from tothe besale. ~~incurred~~We asreceived ~~part~~a distribution of ~~the lease-up strategy is approximately~~ $1.5 million. ~~We expect to fund these capital requirements with cash~~ on ~~hand~~October 1, ~~cash~~2013. ~~proceeds~~We ~~from~~subsequently ~~the~~repaid ~~anticipated sale of a~~approximately ~~portion~~$650,000 of ~~the~~notes ~~land~~payable ~~and~~- ~~single~~related ~~tenant~~party ~~building~~and atretained ~~our~~the ~~Woodlake~~remainder ~~Pointe property~~of ~~(discussed~~proceeds ~~below)~~as ~~and operating~~ cash ~~flows.~~on hand.

~~Woodlake Pointe~~ PTC/BSQ - We own a 3020% interest in ~~AmREIT~~PTC/BSQ ~~Westheimer~~Holding ~~Gessner,~~Company LPLLC, which owns ~~Woodlake Pointe, a~~three multi-tenant retail ~~property~~properties located in ~~Houston~~Plano, Texas with a combined GLA of 82460,~~120~~000 square feet. The remaining 7080% is owned by ~~affiliated~~an ~~AmREIT~~unaffiliated ~~entities,~~third party. ~~MIG~~We IVinitiated ~~(60%)~~a ~~and~~redevelopment ~~ARIC~~in ~~(10%).~~January ~~During~~2012 ~~2011,~~which weis ~~signed~~expected ato ~~lease~~be ~~with a large~~completed ~~national~~in ~~fitness~~the ~~tenant,~~fourth ~~and~~quarter weof ~~completed~~2013. ~~construction~~As of aSeptember 4530,~~000~~ ~~square~~2013, ~~foot~~approximately $10.4 ~~building~~million onin ~~the~~redevelopment ~~property~~costs ~~during~~have ~~2012~~been ~~for~~incurred out of a total ~~redevelopment~~expected ~~costs~~ cost of $611.7 9 million., Weincluding ~~are in discussions with another anchor~~ tenant ~~for~~improvements ~~the~~and ~~existing building~~leasing costs. OnOur ~~April 5, 2013, our Woodlake Pointe~~ PTC/BSQ joint venture ~~entered~~successfully ~~into~~refinanced ~~a sales~~its ~~agreement~~debt toon ~~sell~~June a28, ~~portion~~2013, ofincreasing the ~~land and a single tenant building at~~ ~~our~~total ~~Woodlake~~debt ~~Pointe~~from ~~property for~~ $1244.04 million to ~~an unrelated third party~~$54.0 ~~The land~~million ~~and~~with ~~building~~an ~~are~~additional ~~secured by a~~ $64.75 million available ~~loan~~for ~~that~~future ~~will~~capital beimprovements. ~~repaid~~We ~~in full~~received ~~with~~a ~~proceeds~~distribution from ~~the~~our PTC ~~sale.~~/BSQ ~~The~~joint ~~sale~~venture ~~is expected to close~~ in the ~~third quarter~~amount of ~~2013~~$1.9 ~~subject~~million ~~to customary closing conditions,~~ and ~~our~~repaid ~~portion of the net cash proceeds, which is 30%, is estimated to be~~ approximately $1.54 million~~. We~~ ~~plan~~of tonotes ~~use~~payable. ~~the~~The ~~proceeds~~terms toinclude ~~fund~~a ~~the~~three ~~Casa~~year ~~Linda~~maturity ~~lease-up~~with ~~strategy and for~~two ~~working~~one-year ~~capital~~extension ~~needs~~options.

~~PTC/BSQ~~Woodlake Square - We ~~own~~owned a 203% interest in ~~PTC/BSQ~~Woodlake ~~Holding~~Square ~~Company LLC~~LP, which ~~owns~~owned ~~three~~a multi-tenant retail ~~properties~~ property located in ~~Plano~~Houston, Texas with a combined GLA of ~~460~~161,000 square feet. The remaining 8097% iswas owned by ~~an unaffiliated~~ the third -party. ~~The~~institutional ~~joint~~partner ~~venture financed~~(90%), ~~the~~ARIC ~~property~~(1%) ~~with~~and aby ~~term~~MIG ~~loan~~IV ~~of $44~~(6%).4 ~~million~~Our interest ~~maturing~~in ~~December~~Woodlake ~~27, 2014.~~Square Wealso ~~commenced~~carried a ~~redevelopment~~promoted ofinterest ~~the~~in ~~property~~profits inand cash ~~January~~flows ~~2012~~once ~~and~~an 11.65% return is ~~expected~~met toon bethe ~~completed~~project. The joint venture commenced redevelopment of this property in the third quarter of ~~2013.~~ As2010 ofand completed ~~June~~the ~~30,~~redevelopment ~~2013,~~in ~~approximately~~April $72011.4 ~~million~~On inFebruary ~~redevelopment~~23, ~~costs have~~2012, ~~been~~this ~~incurred~~entity sold ~~out~~a parcel of aland ~~total~~that ~~expected~~resulted ~~cost~~in a gain of approximately $11437,000.9 ~~million,~~Our ~~including~~3% ~~tenant~~share ~~improvements~~of ~~and~~this ~~leasing~~gain ~~costs.~~is ~~Our~~included ~~PTC/BSQ~~in ~~joint~~our ~~venture~~equity ~~successfully refinanced~~in ~~its~~losses ~~debt~~from non-consolidated entities on ~~June~~our 28consolidated statement of operations. On September 18, 2013, the ~~increasing~~joint ~~the~~venture ~~total~~sold ~~debt~~the ~~from~~shopping ~~$44.4 million~~center to AmREIT for $5441.06 million ~~with~~based anon ~~additional~~arms-length ~~$4.5~~negotiations ~~million~~between ~~available~~AmREIT ~~for~~and ~~future~~our third party ~~capital~~institutional ~~improvements.~~partner Wethat ~~received~~owned a ~~distribution~~90% ~~from~~interest ~~our~~in ~~PTC~~the ~~/BSQ~~property. The joint venture inrecorded ~~the~~a ~~amount~~gain on sale of $110.94 million. Our share of this gain is included in our income (loss) from non-consolidated entities. We received ~~subsequently~~a ~~paid~~distribution for approximately $1.40 million, and we subsequently repaid approximately $1.6 million of notes payable - related party onin ~~July~~September 3, 2013~~. The terms include a~~ ~~three~~from ~~year~~these ~~maturity~~distributions ~~with~~and ~~two~~from ~~one-year~~cash ~~extension~~on ~~options~~hand.

~~Woodlake Square - We own~~Combined acondensed 3%financial ~~interest~~information infor ~~Woodlake~~our ~~Square LP, which owns a multi~~non-~~tenant~~consolidated ~~retail property located in Houston~~entities, ~~Texas~~at ~~with a combined GLA of 161,000 square feet. The remaining 97~~100% ~~is owned by the third-party institutional partner (90%)~~, ~~ARIC (1%) and by MIG IV (6%). Our interest in Woodlake Square also carries a promoted interest in profits and cash flows once an 11.65% return~~ is ~~met on the~~ ~~project.~~summarized ~~The~~for ~~joint venture commenced redevelopment of this property in~~ the ~~third~~ ~~quarter~~three ~~of 2010~~ and ~~completed~~nine ~~the~~months ~~redevelopment~~ended inSeptember ~~April 2011. As of June~~ 30, 2013, ~~Woodlake Square had incurred approximately $7.0 million in redevelopment costs with a total expected cost of approximately $8.3 million, including additional tenant improvements~~ and ~~leasing costs. On February 23,~~ 2012, ~~this entity sold a parcel of land that resulted in a gain of~~as ~~approximately~~follows ~~$437,000.~~(amounts ~~Our 3% share of this gain is included~~ in ~~our~~thousands): ~~equity in losses from non-consolidated entities on our consolidated statement of operations.~~

On July 15, 2013, AmREIT Woodlake Square, LP, entered into a purchase and sale agreement with AmREIT to sell Woodlake Square for a purchase price of $41.6 million. We expect to receive approximately $1.2 million representing our proportional share of the net proceeds.


	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012

Revenue	$	4,294		$	3,303		$	12,271		$	9,924
Depreciation and amortization		(1,470	)		(1,376	)		(4,513	)		(4,315	)
Interest expense		(1,047	)		(1,000	)		(3,095	)		(3,206	)
Net income (loss)		522			(464	)		240			(1,971	)


5. NOTES PAYABLE

Our outstanding debt to third party lenders as of September 30, 2013 and December 31, 2012 was as follows (amounts in thousands):


Notes payable	September 30, 2013		December 31, 2012
Lantern Lane	$	15,000	$	15,000
Westside Plaza		9,630		9,759
Total	$	24,630	$	24,759

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~~Combined~~Our ~~condensed~~Lantern ~~financial~~Lane ~~information~~debt ~~for~~is ~~our~~a ~~non~~variable-~~consolidated~~rate ~~entities,~~mortgage loan that bears interest at one-month ~~100~~LIBOR rate plus 2.75%, isand matures in 2015. We are currently delaying ~~summarized~~scheduled ~~for~~payments on our Westside Plaza fixed-rate mortgage loan and are in discussions with the ~~three~~lender to restructure the terms of the loan. Our mortgage loans are secured by our real estate properties and ~~six~~may ~~months~~be ~~ended~~prepaid ~~June~~but could be subject to a yield-maintenance premium or prepayment penalty. Our mortgage loans are generally due in monthly installments of interest and principal and our mortgages mature in 2015. As of September 30, 2013, ~~and~~the ~~2012~~weighted-average interest rate on our fixed-rate debt was 6.1%, asand the weighted average ~~follows~~remaining ~~(amounts~~life inof ~~thousands):~~such debt was 1.7 years.

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Revenue	$	4,983	$	3,377	$	9,709	$	8,423
Depreciation and amortization		1,740		1,349		3,458		2,939
Interest expense		1,250		1,134		2,492		2,236
Net loss		51		1,134		242		1,503

We also serve as guarantor on debt in the amount of $6.5 million, which relates to our 5433 Westheimer joint venture and matures in 2017. We have not accrued any liability with respect to this guarantee as we believe it is unlikely we would be required to perform and, therefore, the fair value of any obligation would be insignificant.

Notes Payable – Related Party – As of September 30, 2013 and December 31, 2012, our notes payable – related party were $672,000 and $5.6 million, ~~NOTES~~respectively. ~~PAYABLE~~On October 1, 2013, we repaid $650,000 of the remaining balance.

~~Our~~Fair ~~outstanding~~Value of Notes Payable – We record our debt asinstruments based on contractual terms, net of ~~June~~any 30applicable premium or discount on our consolidated balance sheet. We did not elect to apply the alternative GAAP provisions of the fair value option for recording financial assets and financial liabilities. In determining the fair value of our debt instruments, we ~~2013~~determine the appropriate treasury bill rate based on the remaining time to maturity for each of the debt instruments. We then add the appropriate yield spread to the treasury bill rate. The yield spread is a risk premium estimated by investors to account for credit risk involved in debt financing. The spread is typically estimated based on the property type and ~~December~~loan-to-value 31ratio of the debt instrument. The result is an estimate of the market interest rate a typical investor would expect to receive given the underlying subject asset (property type) and remaining time to maturity. The fair value of our notes payable is classified in Level 2 of the fair value hierarchy. Based on these estimates, ~~2012~~the fair value of notes payable was $25.3 million as ~~follows~~of September ~~(amounts~~30, in2013, ~~thousands):~~and December 31, 2012.

Notes payable	June 30, 2013		December 31, 2012
Lantern Lane	$	15,000	$	15,000
Westside Plaza		9,673		9,759
Total	$	24,673	$	24,759

Our Lantern Lane debt is a variable-rate mortgage loan that bears interest at one-month LIBOR rate plus 2.75% and matures in 2015. We are currently delaying scheduled payments on our Westside Plaza fixed-rate mortgage loan and are in discussions with the lender to restructure the terms of the loan. Our mortgage loans are secured by our real estate properties and may be prepaid but could be subject to a yield-maintenance premium or prepayment penalty. Our mortgage loans are generally due in monthly installments of interest and principal and our mortgages mature in 2015. As of June 30, 2013, the weighted-average interest rate on our fixed-rate debt was 6.1%, and the weighted average remaining life of such debt was 1.9 years.

We also serve as guarantor on debt in the amount of $18.2 million that is the primary obligation of our non-consolidated joint ventures. Approximately $16.1 million of this debt relates to Woodlake Square LP and matures in 2013; however, the proceeds from the anticipated sale of the Woodlake Square property to AmREIT are expected to repay this debt in full. See also Note 4. The remainder of the debt we guarantee relates to our 5433 Westheimer joint venture and matures in 2017. We have not accrued any liability with respect to these guarantees as we believe it is unlikely we would be required to perform and, therefore, the fair value of any obligation would be insignificant.

Notes Payable – Related Party – As of June 30, 2013 and December 31, 2012, our notes payable – related party were $3.6 million and $5.6 million, respectively. Approximately $1.0 million of our notes payable – related party is secured by our investment in the Woodlake Pointe property. Of the total balance, $422,000 accrues interest monthly at LIBOR plus a spread of 4.0% with a floor of 7.0%, and the remaining balance accrues interest monthly at 2.78%.

Fair Value of Notes Payable – We record our debt instruments based on contractual terms, net of any applicable premium or discount on our consolidated balance sheet. We did not elect to apply the alternative GAAP provisions of the fair value option for recording financial assets and financial liabilities. In determining the fair value of our debt instruments, we determine the appropriate treasury bill rate based on the remaining time to maturity for each of the debt instruments. We then add the appropriate yield spread to the treasury bill rate. The yield spread is a risk premium estimated by investors to account for credit risk involved in debt financing. The spread is typically estimated based on the property type and loan-to-value ratio of the debt instrument. The result is an estimate of the market interest rate a typical investor would expect to receive given the underlying subject asset (property type) and remaining time to maturity. The fair value of our notes payable is classified in Level 2 of the fair value hierarchy. Based on these estimates, the fair value of notes payable was $25.3 million as of June 30, 2013, and December 31, 2012.

6. CONCENTRATIONS

As of ~~June~~ September 30, 2013 and December 31, 2012, each of our two consolidated ~~properties~~ properties individually comprised greater than 10% of our consolidated total assets. Consistent with our strategy of investing in geographic areas that we ~~know~~ know well, both properties are located in the Houston metropolitan area. These Houston properties represent 100% of our rental income for the ~~six~~nine months ~~ended~~ ~~June~~ended September 30, 2013 and 2012. Houston is Texas’ largest city and the fourth largest city in the United States.

Following are the base rents generated by our top five tenants during the three and nine months ended September 30, 2013 and 2012 (amounts in thousands):


	For the three months ended September 30,				For the nine months ended September 30,
Tenant	2013		2012		2013		2012
Trend Mall	$	95	$	95	$	285	$	285
CVS/Pharmacy ⁽¹⁾		59		60		178		65
Fidelity Investments		54		46		160		139
Rice Food Markets, Inc.⁽²⁾		18		68		126		214
Fadis Mediterranean Delight		36		35		106		98
Totals	$	262	$	304	$	855	$	801



	(1)	Rent commenced on a new lease with CVS/Pharmacy during the second quarter of 2012.

	(2)	Fresh Market assumed this lease on July 24, 2013.

7. PARTNERS’ CAPITAL AND NON-CONTROLLING INTEREST

Distributions - We suspended all distribution payments in July 2009 and do not anticipate reinstating distributions until we have stabilized our properties and we generate liquidity that could allow us to re-commence distributions. Once we re-commence distributions, net cash flow, as defined, will be distributed among the Limited Partners and the General Partner in the following manner:


	•	first - 99% to the Limited Partners and 1% to the General Partner until such time as the Limited Partners have received cumulative distributions from all sources (including monthly cash distributions during the operating stage of the Partnership) equal to 100% of their unreturned invested capital plus an amount equal to 10% per annum uncompounded on their invested capital;

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Following are the base rents generated by our top five tenants during the three and six months ended June 30, 2013 and 2012 (amounts in thousands):


	•	second - 100% to the General Partner until it has received cumulative distributions from all sources (other than with respect to its Limited Partner units it purchased) in an amount equal to 40% of the net cash flow paid to date to the Limited Partners in excess of their adjusted capital; and

	•	thereafter - 60% to the limited partners and 40% to the General Partner.

	For the three months ended June 30,				For the six months ended June 30,
Tenant	2013		2012		2013		2012
Trend Mall	$	95	$	95	$	190	$	190
CVS/Pharmacy (1)		60		5		119		5
Rice Food Markets, Inc.		54		73		108		146
Fidelity Investments		53		46		106		93
Fadis Mediterranean Delight		35		36		70		69
Totals	$	297	$	255	$	593	$	503

8. RELATED PARTY TRANSACTIONS

~~(1)~~ Certain of ~~Rent~~our ~~commenced~~affiliates onreceive afees ~~new~~for ~~lease~~ongoing ~~with~~property ~~CVS/Pharmacy~~management ~~during~~and administrative services. In the ~~second~~event ~~quarter~~that these companies are unable to provide us with the respective services, we would be required to find alternative providers of ~~2012.~~these 7services. ~~PARTNERS’~~The ~~CAPITAL~~following ~~AND~~table ~~NON-CONTROLLING~~summarizes ~~INTEREST~~the amount of such compensation incurred by us during the three and nine months ended September 30, 2013 and 2012 (amounts in thousands):

Distributions - We suspended all distribution payments in July 2009 and do not anticipate reinstating distributions until we have stabilized our properties and we generate liquidity that could allow us to re-commence distributions. Once we re-commence distributions, net cash flow, as defined, will be distributed among the Limited Partners and the General Partner in the following manner:


	Three months ended September 30,				Nine months ended September 30,
Type of service	2013		2012		2013		2012

Asset management fees	$	59	$	59	$	176	$	176
Property management fees		32		31		95		87
Leasing costs		6		29		40		131
Interest expense - related party		15		87		103		243
Administrative costs reimbursements		103		107		293		291
	$	215	$	313	$	707	$	928

	•	first - 99% to the Limited Partners and 1% to the General Partner until such time as the Limited Partners have received cumulative distributions from all sources (including monthly cash distributions during the operating stage of the Partnership) equal to 100% of their unreturned invested capital plus an amount equal to 10% per annum uncompounded on their invested capital;
	•	second - 100% to the General Partner until it has received cumulative distributions from all sources (other than with respect to its Limited Partner units it purchased) in an amount equal to 40% of the net cash flow paid to date to the Limited Partners in excess of their adjusted capital; and
	•	thereafter - 60% to the limited partners and 40% to the General Partner.
8. RELATED PARTY TRANSACTIONS

In addition to the above fees incurred by us, the non-consolidated entities in which we have investments pay property management and leasing fees to one of our affiliated entities. During the nine months ended September 30, 2013 and 2012, such fees totaled $836,000 and $1.1 million, respectively. For more information, see Note 4 regarding investments in non-consolidated entities.

Certain of our affiliates receive fees for ongoing property management and administrative services. In the event that these companies are unable to provide us with the respective services, we would be required to find alternative providers of these services. The following table summarizes the amount of such compensation incurred by us during the three and six months ended June 30, 2013 and 2012 (amounts in thousands):

	Three months ended June 30,				Six months ended June 30,
Type of service	2013		2012		2013		2012
Asset management fees	$	58	$	58	$	117	$	117
Property management fees		32		26		63		53
Leasing costs		21		91		34		102
Interest expense - related party		29		80		88		156
Administrative costs reimbursements		99		90		190		184
	$	239	$	345	$	492	$	612

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In addition to the above fees incurred by us, the non-consolidated entities in which we have investments pay property management and leasing fees to one of our affiliated entities. During the six months ended June 30, 2013 and 2012, such fees totaled $536,000 and $677,000, respectively. For more information, see Note 4 regarding investments in non-consolidated entities.

9. COMMITMENTS AND CONTINGENCIES

Litigation - In the ordinary course of business, we may become subject to litigation or claims. There are no material pending legal proceedings against us.

Environmental matters - In connection with the ownership and operation of real estate, we may be potentially liable for costs and damages related to environmental matters. In particular, we are subject to numerous environmental laws and regulations as they apply to real estate pertaining to chemicals used by the dry cleaning industry, the existence of asbestos in older shopping centers, and underground petroleum storage tanks. We are not aware of any pending environmental proceedings with respect to our properties that would have a material adverse effect on our consolidated financial statements.

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ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

Certain information presented in this Quarterly Report constitutes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference include, but are not limited to, the following: changes in general economic conditions, changes in real estate market conditions, continued availability of proceeds from our debt or equity capital, our ability to locate suitable tenants for our properties, the ability of tenants to make payments under their respective leases, timing of acquisitions, development starts and sales of properties, the ability to meet development and redevelopment schedules and other risks, uncertainties and assumptions. Any forward-looking statement speaks only as of the date on which it was made, and we undertake no duty or obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

OVERVIEW

We are a Texas limited partnership formed to acquire, develop and operate, directly or indirectly through joint venture arrangements, commercial real estate consisting primarily of single-tenant and multi-tenant retail properties. Our Units are not currently listed on a securities exchange, and there currently is no established public trading market for our Units. We do not intend to list our Units on a securities exchange in the future.

Our General Partner is a Texas corporation and wholly-owned subsidiary of AmREIT, an SEC reporting Maryland corporation that is publicly traded on the NYSE and has elected to be taxed as a REIT. Our General Partner has the exclusive right to manage our business and affairs on a day-to-day basis pursuant to our limited partnership agreement. The Limited Partners have the right to remove and replace our General Partner, with or without cause, by a vote of the Limited Partners owning a majority of the outstanding Units (excluding any Units held by our General Partner). Our General Partner is responsible for all of our investment decisions, including decisions relating to the properties to be developed, the method and timing of financing or refinancing the properties, the selection of tenants, the terms of the leases, the method and timing of the sale of the properties and the reinvestment of net sales proceeds. Our General Partner utilizes the services of AmREIT and its affiliates in performing its duties under our limited partnership agreement.

As of ~~June~~ September 30, 2013, our investments ~~include~~included two wholly-owned properties comprised of approximately 125,000 square feet of GLA and ~~seven~~six properties in which we own a non-controlling interest through joint ventures ~~comprised of~~ comprising approximately 1985,~~190,~~000 square feet of GLA. A majority of our properties are located in highly populated, suburban communities in Texas. Substantially all of our revenue is derived from rental income from these properties, primarily from net leasing arrangements, where most of the operating expenses of the properties are absorbed by our tenants. As a result, our operating results and cash flows are primarily influenced by rental income from our properties and interest expense on our property acquisition indebtedness. Rental income accounted for 100% of our total revenue during the ~~six~~nine months ended ~~June~~ September 30, 2013 and 2012. As of ~~June~~September 30, 2013, our properties had an average occupancy rate of approximately 9998.7%~~, and the average debt leverage ratio of the properties in which we have an investment interest was approximately 59%, with 45% of such debt carrying a fixed rate of interest~~.

As of the date of this Quarterly Report, our operating period, which ended on October 31, 2012, has expired and we have entered into our liquidation period. However, an orderly liquidation of all of our properties will take years for our General Partner to complete and wind up our operations. Because we have entered into our liquidation period, we will not invest in any new real estate ~~without~~ without approval of our Limited ~~Partner~~Partners.

Over the past several years, our results of operations and valuations of our real estate assets have been negatively impacted by overall economic conditions. The United States economy has experienced recent improvements in the general economy, but general concerns from the recent, severe recession remain. Concerns include, but are not limited to the potential future increase in interest rates as well as the availability and cost of capital as the economy improves. Additionally, there is remaining uncertainty whether the United States economy will be adversely affected by inflation, deflation or stagflation, and the systemic impact of periods of high unemployment, volatile energy costs and geopolitical issues, which have contributed to increased market volatility and weakened business and consumer confidence. High levels of unemployment have persisted, and rental rates and valuations for retail space have not fully recovered to pre-recession levels and may not for a number of years. Most of our retail properties were purchased prior to 2008 when retail real estate market prices were much higher, and our property valuations have been negatively impacted by these market dynamics.14

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~~Our~~Over ~~PTC/BSQ~~the past several years, our results ~~joint~~of ~~venture~~operations ~~successfully~~and ~~refinanced~~valuations ~~its~~of ~~debt~~our onreal ~~June~~estate ~~28,~~assets ~~2013,~~have ~~increasing~~been ~~the total~~negatively ~~debt~~impacted by overall economic conditions from the ~~$44~~recent, severe recession.4 ~~million~~Most of our retail properties were purchased prior to ~~$54.0~~2008 ~~million~~when ~~with~~retail anreal ~~additional~~estate $4market prices were much higher, and our property valuations were negatively impacted by these market dynamics.5 ~~million~~The United States ~~available~~has experienced recent improvements in the general economy; however, high levels of unemployment have persisted, and rental rates and valuations for ~~future~~retail ~~capital~~space ~~improvements.~~have Wenot ~~received~~fully recovered to pre-recession levels and may not for a ~~distribution~~number ~~from~~of years. As a result, we have faced significant liquidity challenges over the last several years. However, other than our Olmos ~~PTC~~Creek ~~/BSQ~~property, ~~joint~~which ~~venture~~we indelivered to the ~~amount~~lender as settlement of ~~$1.9~~unpaid ~~million.~~debt Wein ~~subsequently~~February ~~repaid~~2012, we have been successful in ~~approximately~~meeting $our historic cash shortfalls through (1.4) ~~million~~managing the timing of ~~notes~~forecasted ~~payable~~capital -expenditures related ~~party~~to onthe lease-up ~~July~~of 3properties, ~~2013.~~(2) managing the timing of operating expense payments and, to the extent possible, accelerating cash ~~See~~collections, ~~also~~(3) ~~Note~~deferring 4the ~~related~~payment of fees owed to our General Partner and its affiliates, (4) selling certain of our properties and investments in non-consolidated entities (see Note 4 of the Notes to Consolidated Financial Statements) and/or (5) obtaining funds through additional borrowings from AmREIT.

As of September 30, 2013, we have $926,000 in cash on hand and our liquidity has improved due to the refinance of the PTC/BSQ joint venture debt, the sale of Woodlake Square and the Woodlake Pointe joint venture’s sale of a portion of its Woodlake Pointe property. See also Note 4 of the Notes to Concolidated Financial Statements related to our investments in non-consolidated entities. During 2013, we have repaid approximately $5.8 million of our notes payable –related party and we resumed monthly payments of interest, asset management fees and overhead allocations to AmREIT.

• Complete our development and redevelopment projects with a goal to stabilize these projects ~~during~~over the ~~balance~~next of6-12 ~~2013~~months. We believe that completing our development and redevelopment projects, including their lease-up and stabilization, will allow us to maximize the return on these properties upon sale. Our investments in 5433 Westheimer and PTC/BSQ represent our assets currently under development/redevelopment. See Note 4 of the Notes to the Consolidated Financial Statements for further discussion of redevelopment plans at each of these properties. • Continue to operate our projects in a first-class manner with a goal to generate operating cash flow in order to re-commence distributions ~~in 2014~~. We believe that the stabilization of our development and redevelopment properties, coupled with the continued and intense oversight of our properties will generate liquidity that could allow us to re-commence distributions to our Limited Partners; however, this most likely will not occur until we begin to sell our real estate assets. • Sell our properties opportunistically, ~~likely beginning in 2014,~~ as the market continues to recover. ~~Once~~Our asales ~~property~~by isour ~~marketed~~Woodlake ~~for~~Square ~~sale,~~and itWoodlake ~~may~~Pointe ~~take~~joint ~~several~~ventures ~~months~~are torecent ~~receive~~examples ~~offers~~of ~~and~~our ~~complete~~execution ~~due~~of ~~diligence~~this ~~by both parties~~strategy. Our General Partner has in good faith begun to review market sales opportunities for our remaining operating properties, but believes that retail property valuations continue to be challenged, and, accordingly, that attractive sales opportunities may not exist in the near term. When deciding whether or when to sell properties, our General Partner will consider factors such as potential appreciation of value, and timing of cash flows. As we have now entered the liquidation period, we will not be acquiring new real estate investments, but we will be completing our development and redevelopment projects and we will be distributing net proceeds generated from property sales to our Limited Partners unless the General Partner has identified attractive acquisition opportunities and obtained a majority vote of the Limited Partners to re-invest such proceeds.

There is no guarantee that we and our joint ventures will be successful with the above liquidity initiatives, and we may continue to look to AmREIT to provide additional financial support to us to meet our operating cash needs. We can provide no assurance that AmREIT will be able to provide additional support, if needed. Historically, AmREIT has deferred payment of advisory fees earned to the extent such deferrals of fees were necessary for our continued operation. Such fees included property management, asset management, development fees, interest expense on amounts owed to AmREIT and reimbursements of certain of AmREIT’s general and administrative costs. Additionally, AmREIT has agreed that it will not require us to repay the remaining balance of our notes payable – related party to them until a date subsequent to January 1, 2014 if such repayment were to prevent the execution of our strategy or present an unnecessary financial hardship to us. AmREIT’s agreement to provide such financial support and defer payment is limited to its continued ability to do so.

RESULTS OF OPERATIONS

Below is a discussion of our results of operations for the three and ~~six~~nine months ended ~~June~~ September 30, 2013, as compared to the same period in 2012. For purposes of comparing our results for the period presented below, the operating results from Olmos Creek have been presented separately as discontinued operations.

~~Comparison of the Three Months Ended June 30, 2013, to the Three Months Ended June 30, 2012~~ 15

~~Revenue. Revenue~~Table ~~increased $168,000, or 24%, during the second quarter~~ of ~~2013~~Contents as compared to the same period during 2012 ($882,000 in 2013 versus $714,000 in 2012). The increase was primarily due to increased occupancy at our Lantern Lane property with the addition of two new tenants as compared to the same period in 2012.

~~Property~~Comparison ~~Expense.~~of ~~Property~~the ~~expense~~Three ~~increased~~Months ~~$49,000,~~Ended orSeptember ~~21%~~30, ~~during the second quarter of~~ 2013, ~~as compared~~ to the ~~same~~Three ~~period~~Months ~~during 2012 ($280,000~~Ended inSeptember ~~2013 versus $231~~30,~~000~~ in 2012). ~~The increase is primarily related to parking lot and sprinkler repairs that occurred during 2013 with no similar repairs in the corresponding prior period.~~

~~Legal~~Revenue. ~~and~~Revenue ~~professional. Legal and professional expense~~ increased $1278,000, or 1710%, during the ~~second~~third quarter of 2013 as compared to the same period induring 2012 ($83890,000 in 2013 versus $71812,000 in 2012). ~~This~~The increase iswas primarily due to ~~higher~~increased ~~tax~~occupancy ~~return~~at both ~~preparation~~our Lantern Lane and Westside Plaza properties as well as increased operating expenses inbilled ~~2013~~to ~~and~~tenants ~~professional~~as ~~fees~~compared ~~related~~ to ~~accounts~~the ~~receivable~~same ~~collections~~period in 2012. Overall, occupancy increased from 96.8% at ~~our~~September ~~Westside~~30, ~~Plaza~~2012 ~~property~~to 98.7% at September 30, 2013 for our consolidated properties.

Property Expense. Property expense increased $87,000, or 44%, during the third quarter of 2013 as compared to the same period during 2012 ($283,000 in 2013 versus $196,000 in 2012). The increase is primarily related to bad debt recoveries of $47,000 during 2012 with no such recoveries in 2013 and increased security expense at our Lantern Lane property.

Legal and professional. Legal and professional expense decreased $31,000, or 40%, during the third quarter of 2013 as compared to the same period in 2012 ($46,000 in 2013 versus $77,000 in 2012). This decrease is due to additional professional fees incurred related to the favorable resolution of an environmental matter at our Lantern Lane property during 2012, with no similar expenses during 2013.

Interest Expense. Interest expense decreased $126,000, or 30%, during the third quarter of 2013 as compared to the same period in 2012 ($296,000 in 2013 versus $422,000 in 2012). This decrease is due to a lower outstanding balance on our notes payable – related party after repaying $5.2 million during 2013.

Income (loss) from non-consolidated entities. Income (loss) from non-consolidated entities increased $487,000, or 186%, during the third quarter 2013 as compared to the same period in 2012 (income of $225,000 in 2013 compared to a loss of $262,000 in 2012). These amounts represent our ownership portion of our joint ventures’ net income or loss for the period. The resulting increase in income is primarily related to our portion of the gain on sale of Woodlake Square of approximately $10.5 million with our pro rata share of the gain representing approximately $311,000. Additionally, we benefited from increased income associated with lease-up of our properties within our investments in PTC/BSQ, Casa Linda, Woodlake Square and Woodlake Pointe (prior to their respective sales) as compared to the respective period in 2012. The increase is partially offset by our portion of the loss (approximately $173,000) on the sale of the land and building by our Woodlake Pointe investment. See further discussion of our sales of Woodlake Square and Woodlake Pointe as discussed in Note 4 of the Notes to Consolidated Financial Statements.

Comparison of the Nine Months Ended September 30, 2013, to the Nine Months Ended September 30, 2012

Revenue. Revenue increased approximately $410,000, or 19%, during the nine months ended September 30, 2013 as compared to the same period in 2012 ($2.6 million in 2013 versus $2.2 million in 2012). The increase was primarily due to increased occupancy at both our Lantern Lane and Westside Plaza properties as compared to the same period in 2012. Overall, occupancy increased from 96.8% at September 30, 2012 to 98.7% at September 30, 2013 for our consolidated properties.

Legal and Professional. Legal and professional expense decreased approximately $83,000, or 30%, for the nine months ended September 30, 2013 as compared to 2012 ($195,000 in 2013 versus $278,000 in 2012). This decrease is due to higher expenses in 2012 related to the disposition of Olmos Creek and additional professional fees incurred related to the favorable resolution of an environmental matter at our Lantern Lane property during 2012 with no similar expenses during 2013.

Income (loss) from non-consolidated entities. Income (loss) from non-consolidated entities decreased approximately $967,000, or 90% for the nine months ended September 30, 2013 as compared to the same period in 2012 (a loss of $109,000 in 2013 versus a loss of $1.1 million in 2012). These amounts represent our ownership portion of our joint ventures’ net income or loss for the period. The resulting decrease in loss is primarily related to 1) our portion of the gain on sale of Woodlake Square of approximately $10.5 million with our pro rata share of the gain representing approximately $311,000. 2) Additionally, we benefited from increased income and lease-up of our properties within our investments in PTC/BSQ, Casa Linda, Woodlake Square and Woodlake Pointe (prior to their respective sales) as compared to the respective period in 2012 and 3) our 2012 loss of approximately $94,000 incurred as a result of the sale of the 152-room hotel during 2012 by our 5433 Westheimer joint venture. The increase is partially offset by our portion of the loss (approximately $173,000) on the sale of the land and building by our Woodlake Pointe investment. See further discussion of our sales of our investments in nonconsolidated investments as discussed in Note 4 of the Notes to Consolidated Financial Statements.

Gain on Debt Extinguishment. During the nine months ended September 30, 2012, we recognized a gain of $1.5 million on the extinguishment of debt on our Olmos Creek property. We did not recognize a similar gain during the nine months ended September 30, 2013. See Note 3 in the Notes to our Consolidated Financial Statements for further discussion on the disposition of our Olmos Creek property.

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Interest Expense. Interest expense decreased $101,000, or 25%, during the second quarter of 2013 as compared to the same period in 2012 ($309,000 in 2013 versus $410,000 in 2012). This decrease is due to loan costs at our Lantern Lane property becoming fully amortized during the second quarter of 2013. Also, interest expense decreased due to our related party notes payable being approximately $2.2 million less as of June 30, 2013 as compared to June 30, 2012, due to a principal repayment during the first quarter of 2013.

Equity in losses from non-consolidated entities. Equity in losses from non-consolidated entities decreased $464,000, or 77%, during the second quarter 2013 as compared to the same period in 2012 (a loss of $138,000 in 2013 versus a loss of $602,000 in 2012). These amounts represent our ownership portion of our joint ventures’ net income or loss for the period. The decrease in loss is primarily due to the loss that 5433 Westheimer, LP incurred as a result of the sale of the 152-room hotel during the second quarter of 2012, as discussed in Note 4 of the Notes to Consolidated Financial Statements, with no such loss on sale during the current period.

Comparison of the Six Months Ended June 30, 2013, to the Six Months Ended June 30, 2012

Revenue. Revenue increased approximately $332,000, or 24%, during the six months ended June 30, 2013 as compared to the same period in 2012 ($1.7 million in 2013 versus $1.4 million in 2012). The increase is primarily attributable to an increase in occupancy at our Lantern Lane property with the addition of two new tenants as compared to the same period in 2012.

Property Expense. Property expense decreased approximately $74,000, or 13%, for the six months ended June 30, 2013 as compared to 2012 ($479,000 in 2013 versus $553,000 in 2012). This decrease was primarily due to bad debt recoveries of $62,000 in 2013 as compared to bad debt expense of $8,000 during 2012.

Legal and Professional. Legal and professional expense decreased approximately $52,000, or 26%, for the six months ended June 30, 2013 as compared to 2012 ($149,000 in 2013 versus $201,000 in 2012). This decrease is due to higher expenses in 2012 related to the disposition of Olmos Creek and additional professional fees for the resolution of an environmental matter at our Lantern Lane property during 2012 with no similar expenses during 2013.

Equity in losses from non-consolidated entities. Equity in losses from non-consolidated entities decreased approximately $480,000, or 59% for the six months ended June 30, 2013 as compared to the same period in 2012 (a loss of $334,000 in 2013 versus a loss of $814,000 in 2012). These amounts represent our ownership portion of our joint ventures’ net income or loss for the period. The increased loss is primarily due to the loss that 5433 Westheimer, LP incurred as a result of the sale of the 152-room hotel during 2012, as discussed in Note 4 of the Notes to Consolidated Financial Statements with no such loss on sale during the current period.

Gain on Debt Extinguishment. During the six months ended June 30, 2012, we recognized a gain of $1.5 million on the extinguishment of debt on our Olmos Creek property. We did not recognize a similar gain during the six months ended June 30, 2013. See Notes 3 and 5 in the Notes to our Consolidated Financial Statements for further discussion on the disposition of our Olmos Creek property.

LIQUIDITY AND CAPITAL RESOURCES

Cash ~~and~~ and cash equivalents are our primary sources of liquidity. As of ~~December~~September 30, 2013, and December 31, 2012, our cash and cash equivalents totaled approximately $~~2.9 million~~926,000 and approximately $3.2 million, respectively.

As a result, we have faced significant liquidity challenges over the last several years. Other than with our Olmos Creek property (which was delivered to the lender as settlement of unpaid debt in February 2012), we were successful in meeting our historic cash shortfalls through (1) managing the timing of forecasted capital expenditures related to the lease-up of properties, (2) managing the timing of operating expense payments and, to the extent possible, accelerating cash collections, (3) deferring the payment of fees owed to our General Partner and its affiliates, (4) selling certain of our properties and investments in non-consolidated entities (see Note 4 of the Notes to Consolidated Financial Statements related to our investments in non-consolidated entities) and/or (5) obtaining funds through additional borrowings from AmREIT.

As of September 30, 2013, our liquidity has improved due to the refinance of the PTC/SBQ joint venture debt, the sale of Woodlake Square and the Woodlake Pointe joint venture’s sale of a portion of its Woodlake Pointe property. See also Note 4 related to our investments in non-consolidated entities. During 2013, we have repaid approximately $5.8 million of our notes payable –related party and we resumed monthly payments of interest, asset management fees and overhead allocations to AmREIT.

Our short-term liquidity requirements consist primarily of operating expenses and other expenditures associated with our properties, regular debt service requirements and capital expenditures. We anticipate that our primary long-term liquidity requirements will include, but will not be limited to, operating expenses, making scheduled debt service payments and funding our existing redevelopment projects and other significant capital expenditures for our portfolio of properties.

We ~~have~~ ~~faced~~expect ~~significant~~to ~~liquidity~~fund ~~challenges~~approximately ~~over~~$1.5 ~~the~~million ~~last~~in ~~several~~capital ~~years.~~expenditures ~~Other~~over ~~than~~the ~~with~~next two years at our ~~Olmos~~Casa ~~Creek~~Linda property (~~which~~a ~~was~~50% ~~delivered~~joint toventure ~~the~~between ~~lender~~us asand ~~settlement~~MIG IV) representing our 50% share of ~~unpaid~~ ~~debt~~a inlease-up ~~February~~strategy ~~2012),~~at this property. To date we have ~~been~~not ~~successful~~incurred any capital expenditures. The $38 million mortgage on the property matures in ~~meeting~~January ~~our~~2014.We ~~historic~~have engaged a mortgage broker to assist us with ~~cash~~refinancing ~~shortfalls~~this ~~through~~loan ~~(1)~~and ~~managing~~have ~~the~~recently ~~timing~~selected ofa ~~forecasted~~lender ~~capital~~based upon ~~expenditures~~preliminary ~~related~~terms tofor ~~the~~a ~~lease~~non-uprecourse loan with an initial funding of ~~properties,~~$37.95 million ~~(2)~~and ~~managing~~a ~~the~~future ~~timing~~funding of ~~operating~~ ~~expense~~approximately ~~payments~~$4.5 ~~and,~~million tofor the ~~extent~~potential ~~possible,~~acquisition ~~accelerating cash~~of ~~collections,~~an ~~(3)~~adjacent ~~deferring~~property. ~~the~~The ~~payment~~terms of ~~fees~~the ~~owed~~proposed toloan ~~our~~are ~~General~~a ~~Partner~~term ~~and its~~of ~~affiliates~~four years with a one-year extension, ~~(4)~~an ~~selling~~interest ~~certain~~rate of ~~our~~3.50% ~~properties~~over 3-Month LIBOR and ~~investments~~interest-only inpayments ~~non-consolidated~~for ~~entities,~~the ~~including~~first two ~~the~~years ~~anticipated~~with ~~sale~~monthly payments of ainterest ~~single~~and ~~tenant building~~principal ~~and~~based ~~portion~~upon ofa ~~land~~30-year amortization bythereafter ~~our~~with ~~Woodlake~~the ~~Pointe~~balance ~~joint~~due ~~venture~~upon ~~(see~~maturity. ~~Note~~We ~~4 of~~expect the ~~Notes~~joint venture to ~~Consolidated~~close ~~Financial~~on ~~Statements)~~the ~~and/or~~loan ~~(5)~~during ~~obtaining~~the ~~funds through~~fourth ~~additional~~quarter ~~borrowings~~of ~~from AmREIT~~2013.

We continue to work with the debt servicer to refinance the Westside Plaza debt (see Note 5) to address various alternatives for relief either through reduction of escrow requirements, waiver of penalties and forgiveness of principal or all of the above. However, we may be ultimately called upon to recapitalize a portion of the debt in order to successfully renegotiate or refinance the debt. In the event we do not have sufficient liquidity for such a recapitalization, we may have to look to our General Partner to borrow the money.

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We expect to fund approximately $1.5 million in capital expenditures over the next two years at our Casa Linda property (a 50% joint venture between us and MIG IV) representing our 50% share of a lease-up strategy at this property. The lease-up strategy includes certain tenant build-out and site improvements. The joint venture will likely require a one-year extension of the loan, which matures in January 2014, to complete this strategy. We believe we will be successful in obtaining a one-year extension based on our preliminary discussions with the lending agent; however, no assurances can be given. We do not guarantee this debt, and our risk of loss is limited to our ownership interest in the property. We expect to fund our capital requirements with cash on hand, cash proceeds from the anticipated sale of a portion of the land and single tenant building at our Woodlake Pointe property (discussed below) and operating cash flows.

On April 5, 2013, our Woodlake Pointe joint venture entered into a sales agreement to sell a portion of the land and a single tenant building at our Woodlake Pointe property for $12.0 million to an unrelated third party. The land and building are secured by a $6.7 million loan that will be repaid in full with proceeds from the sale. The sale is expected to close in the third quarter of 2013, and we estimate that our portion of the net cash proceeds, which is 30%, would be approximately $1.5 million. We plan to use the proceeds to fund the Casa Linda lease-up strategy and for working capital needs.

On July 15, 2013, AmREIT Woodlake, LP (“Woodlake LP”), which owns Woodlake Square, a grocery-anchored, multi-tenant retail shopping center, entered into a purchase and sale agreement with AmREIT to sell Woodlake Square for a purchase price of $41.6 million. We expect to receive approximately $1.2 million representing our proportional share of the net proceeds. The sale is expected to close in the third quarter of 2013.

There is no guarantee that we and our joint ventures will be successful with all of the above liquidity initiatives, and we may continue to look to AmREIT to provide additional financial support to us to meet our operating cash needs. Historically, AmREIT has deferred payment of advisory fees earned to the extent such deferrals of fees were necessary for our continued operation. Such fees included property management, asset management, development fees, interest expense on amounts owed to AmREIT and reimbursements of certain of AmREIT’s general and administrative costs. During 2013, we resumed monthly payments of interest, asset management fees and overhead allocations to AmREIT, and we subsequently repaid approximately $1.4 million of notes payable - related party on July 3, 2013. See also Note 4 related to our investments in non-consolidated entities. We expect that sales of the single tenant building at our Woodlake Pointe property and the Woodlake Square shopping center during the third quarter of 2013 will provide us with approximately $2.7 million in net proceeds, which we believe will be sufficient to allow us to execute our strategy in the short term. In the event we are able to generate sufficient cash flows in the near term, we may elect to repay portions of the notes payable – related party; however, AmREIT has agreed that it will not require us to repay the $3.1 million notes payable – related party until a date subsequent to January 1, 2014 if such repayment were to prevent the execution of our strategy or present an unnecessary financial hardship to us. AmREIT’s agreement to provide such financial support and defer payment is limited to its continued ability to do so. Even with the above strategic plan and liquidity initiatives, we still may incur cash shortfalls, we may be required to perform under certain guarantees of our joint ventures or be unable to refinance certain debt as it comes due that could result in lender repossession of one or more properties owned by us and/or our joint ventures or we may be forced to sell one or more properties at a time when it is disadvantageous to do so, potentially resulting in losses on the disposition of those properties.

Current Market Conditions

Over ~~the~~ the past several years, our results of operations and valuations of our real ~~estate~~ estate assets have been negatively impacted by overall economic conditions. The ~~United~~ United States economy has experienced recent improvements in the general economy, but general concerns from the recent, severe recession remain. Concerns include, but are not limited to the potential future increase of future interest as well as the availability and cost of capital as the economy improves. Additionally, there is remaining uncertainty of whether the United States economy will be adversely affected by inflation, deflation or stagflation and the systemic impact of periods of high unemployment, volatile energy costs, geopolitical issues, which have contributed to increased market volatility and weakened business and consumer confidence. High levels of unemployment have persisted, and rental rates and valuations for retail space have not fully recovered to pre-recession levels and may not for a number of years. Our General Partner believes that the retail real estate market is likely to remain depressed ~~for most~~through of 2013; however, it is difficult to determine the breadth and duration of the financial market problems and how such problems may affect our tenants and the valuation of our assets. To navigate these challenging market conditions, we have created a strategic plan to maximize value during our liquidation period as further described in the “Overview” section above.

18Cash Flow Activities for the Nine Months Ended September 30, 2013 and 2012

~~Table~~ Cash flows ofprovided ~~Contents~~by (used in) operating activities, investing activities and financing activities during the nine months ended September 30, 2013 and 2012, are as follows (in thousands):

Cash Flow Activities for the Six Months Ended June 30, 2013 and 2012


	Nine months ended September 30,
	2013			2012
Operating activities	$	626		$	(138	)
Investing activities		2,480			(153	)
Financing activities		(5,350	)		344

~~Cash~~Net cash flows provided by ~~(used in)~~ operating activities, ~~investing~~increased ~~activities~~by ~~and~~$764,000 ~~financing activities~~ during the nine ~~six~~ months ended ~~June~~September 30, 2013, ~~and~~as compared to the same period in 2012 ($626,000 ~~are~~provided asby ~~follows~~operating activities in 2013 versus $138,000 used in (operating activities in ~~thousands~~2012):. This increase is primarily due to increased income from operations exclusive of non-cash charges for depreciation, gains on extinguishment of debt and losses from non consolidated investments of $563,000, primarily from increased occupancy at our consolidated properties as well as improved collections and deferral of payments.

	Six months ended June 30,
	2013			2012
Operating activities	$	426		$	(349	)
Investing activities		1,677			(77	)
Financing activities		(2,336	)		235

Net cash flows provided by investing activities increased by $2.6 million during the nine months ended September 30, 2013, as compared to the same period in 2012 ($2.5 million provided by investing activities in 2013 versus $153,000 used investing activities in 2012). This increase in cash inflows is primarily due to the $1.9 million distribution that we received from our PTC/BSQ joint venture related to the refinance of its debt and the distribution of approximately $1.0 million we received from the sale of Woodlake Square. See also Note 4 to the Notes to Consolidated Financial Statements.

Net ~~cash~~ cash flows ~~from~~used ~~operating~~in financing activities increased by $~~775,000~~5.7 ~~during~~million for the ~~six months~~nine months ended ~~June~~September 30, 2013, as compared to the same period in 2012 ($~~426,000 provided~~5.4 bymillion ~~operating~~used in financing activities in 2013 versus $~~349~~344,000 ~~used~~provided inby financing ~~operating~~ activities in 2012). This ~~decrease~~increase ~~in operating cash outflows~~ was primarily ~~attributable~~due to ~~(1)~~ ~~increases~~payments inmade during ~~revenue~~2013 aton ~~our~~notes ~~Lantern~~payable ~~Lane~~– ~~property~~related ~~with~~party ~~two~~compared ~~new~~to ~~tenants,~~proceeds ~~(2)~~from additional aborrowings ~~decrease in non-reimbursable expenses and (3) improved collections~~ on ~~accounts~~ ~~receivable~~notes payable – related party during 2012.

Net cash flows from investing activities increased by $1.8 million during the six months ended June 30, 2013, as compared to the same period in 2012 ($1.7 million provided by investing activities in 2013 versus $77,000 used investing activities in 2012). This increase in cash inflows is primarily due to the $1.9 million distribution that we received from our PTC/BSQ joint venture related to the refinance of its debt. See also Note 4 to the Notes to Consolidated Financial Statements related to our PTC/BSQ joint venture.

Net cash flows used in financing activities increased by $2.6 million for the six months ended June 30, 2013, as compared to the same period in 2012 ($2.3 million used in financing activities in 2013 versus $235,000 provided by financing activities in 2012). This increase was primarily due to payments made during 2013 on notes payable – related party compared to proceeds from additional borrowings on notes payable – related party during 2012.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Under ~~the~~ the supervision and with the participation of our General Partner’s CEO and CFO, our General Partner’s management has evaluated the effectiveness of the ~~design~~ design and operation of our disclosure controls and procedures (as defined in ~~Rule~~ Rule 13a-15(e) or 15d-15(e) of the Exchange Act) as of ~~June~~September 30, 2013. Based on that evaluation, our General Partner’s CEO and CFO concluded that, as of ~~June~~September 30, 2013, our disclosure controls and procedures were effective in causing material information relating to us to be recorded, processed, summarized and reported by management on a timely basis and to ensure the quality and timeliness of our public disclosures in accordance with SEC disclosure obligations.

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Changes in Internal Controls Over Financial Reporting

There ~~has~~ has been no change to our internal control over financial reporting during the quarter ended ~~June~~September 30, 2013, that has materially affected, or is ~~reasonably~~ reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS.

In the ordinary course of business, we may become subject to litigation or claims. Neither we nor our properties are the subject of any material pending legal proceeding, nor are we aware of any legal proceeding that a government authority is contemplating against us.

ITEM 1A. RISK FACTORS. Not applicable.


ITEM 1A.	RISK FACTORS.

Not applicable.

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.	MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5.	OTHER INFORMATION.

None.

ITEM 6.	EXHIBITS.

The exhibits listed on the accompanying Exhibit Index are filed, furnished, or incorporated by reference (as stated therein) as part of this Quarterly Report.

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ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.	MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5.	OTHER INFORMATION.
None.
ITEM 6.	EXHIBITS.

The exhibits listed on the accompanying Exhibit Index are filed, furnished, or incorporated by reference (as stated therein) as part of this Quarterly Report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AmREIT Monthly Income & Growth Fund III, Ltd.
	By:	AmREIT Monthly Income & Growth III Corporation, its General Partner
Date: August 13, 2013	By:	/s/ H. Kerr Taylor
Date: November 12, 2013	By:	/s/ H. Kerr Taylor
		H. Kerr Taylor
		President, Chief Executive Officer, and Director
Date: August 13, 2013	By:	/s/ Chad C. Braun
Date: November 12, 2013	By:	/s/ Chad C. Braun
		Chad C. Braun
		Executive Vice President, Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary

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EXHIBIT INDEX


Exhibit 3.1	Certificate of Limited Partnership of AmREIT Monthly Income & Growth Fund III, Ltd., dated April 19, 2005 (incorporated herein by reference from Exhibit 3.1 to the Partnership’s Registration Statement on Form 10-SB dated April 30, 2007).

Exhibit 3.2	Agreement of Limited Partnership of AmREIT Monthly & Income Growth Fund III, Ltd., dated April 19, 2005 (incorporated herein by reference from Exhibit 3.2 to the Partnership’s Registration Statement on Form 10-SB dated April 30, 2007).

Exhibit 31.1	Certification of the Chief Executive Officer of the Partnership’s General Partner pursuant to Exchange Act Rule 13a-14(a) (filed herewith).

Exhibit 31.2	Certification of the Chief Financial Officer of the Partnership’s General Partner pursuant to Exchange Act Rule 13a-14(a) (filed herewith).

Exhibit 32.1	Certification of the Chief Executive Officer of the Partnership’s General Partner pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

Exhibit 32.2	Certification of the Chief Financial Officer of the Partnership’s General Partner pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

Exhibit 101.INS	XBRL Instance Document*

Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document*

Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*

Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document*

Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*

* Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of ~~June~~September 30, 2013 (unaudited) and December 31, 2012, (ii) the Consolidated Statements of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 (unaudited), (iii) the Consolidated Statements of Partners’ Capital for the ~~six~~nine months ended ~~June~~September 30, 2013 (unaudited), (iv) the Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 (unaudited) and (v) the Notes to the Consolidated Financial Statements (unaudited).

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