UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Form 10-K

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2012
	For the fiscal year ended December 31, 2013
o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________ to _________
	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 Principle Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (713) 850-1400

Securities registered pursuant to Section 12(b) of the Act: None

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

Units of Limited Partnership Interest
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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 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 Act).	Yes o	No x
As of March 28, 2013, the Registrant had 2,844 Units of Limited Partnership Interest outstanding. There is no established trading market for such units.
As of March 27, 2013, the Registrant had 2,833 Units of Limited Partnership Interest outstanding. There is no established trading market for such units.

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TABLE OF CONTENTS

ITEM		PAGE		~~PAGE~~
			Cautionary Note Regarding Forward Looking Statements	ii
	Cautionary Note Regarding Forward-Looking Statements	ii
	Definitions	iii	~~Definitions~~	~~iii~~
	PART I		~~PART I~~
1.	1Business.	1	~~Business.~~	1
1A.	1ARisk Factors.	7	~~Risk Factors.~~	7
1B.	1BUnresolved Staff Comments.	7	~~Unresolved Staff Comments.~~	7
2.	2Properties.	7	~~Properties.~~	7
3.	3Legal Proceedings.	14	~~Legal Proceedings.~~	13
4.	4Mine Safety Disclosures.	14	~~Mine Safety Disclosures.~~	13
	PART II		~~PART II~~
5.	5Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities.	14	~~Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities.~~	14
6.	6Selected Financial Data.	14	~~Selected Financial Data.~~	14
7.	7Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.	14	~~Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.~~	14
7A.	7AQuantitative And Qualitative Disclosures About Market Risk.	20	~~Quantitative And Qualitative Disclosures About Market Risk.~~	21
8.	8Financial Statements And Supplementary Data.	20	~~Financial Statements And Supplementary Data.~~	21
9.	9Changes In And Disagreements With Accountants On Accounting And Financial Disclosure.	20	~~Changes In And Disagreements With Accountants On Accounting And Financial Disclosure.~~	21
9A.	9AControls And Procedures.	21	~~Controls And Procedures.~~	21
9B.	9BOther Information.	21	~~Other Information.~~	22
	PART III		~~PART III~~
10.	10Directors, Executive Officers And Corporate Governance.	21	~~Directors, Executive Officers And Corporate Governance.~~	22
11.	11Executive Compensation.	23	~~Executive Compensation.~~	23
12.	12Security Ownership Of Certain Beneficial Owners And Management, and Related Stockholder Matters.	24	~~Security Ownership Of Certain Beneficial Owners And Management, and Related Stockholder Matters.~~	23
13.	13Certain Relationships And Related Transactions, and Director Independence.	24	~~Certain Relationships And Related Transactions, and Director Independence.~~	24
14.	14Principal Accounting Fees And Services.	26	~~Principal Accounting Fees And Services.~~	25
	PART IV		~~PART IV~~
15.	15Exhibits and Financial Statement Schedules.	26	~~Exhibits and Financial Statement Schedules.~~	26
	Signatures	29	~~Signatures~~	29

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CAUTIONARY NOTE REGARDING FORWARD -LOOKING STATEMENTS

In this Annual Report, all references to “we,” “our,” the “Partnership,” “MIG III,” and “us” refer collectively to AmREIT Monthly Income & Growth Fund III, Ltd. and its subsidiaries, including joint ventures.

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act, and Section 21E of the Exchange Act. Such statements include, in particular, statements about our plans, strategies and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “plan,” “anticipate,” “estimate,” “predict,” “believe,” “potential,” “continue” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Annual Report is filed with the SEC. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and/or could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Forward-looking statements that were true at the time ~~made~~may involve inherent uncertainty and may ultimately prove to be incorrect or false. You are cautioned to not place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors.

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DEFINITIONS

As used in this 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.

ITEM		DEFINITION
ABR		Annualized Base Rent.
ADA		Americans with Disabilities Act of 1990.
AmREIT		AmREIT, Inc., a Maryland corporation and parent of our General Partner.
Annual Report		Annual report on Form 10-K filed with the SEC for the year ended December 31, ~~2012~~2013.
AOCI		Accumulated Other Comprehensive Income (Loss).
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.
IRS		Internal Revenue Service.
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.
Texas Margin Tax		The tax charged to companies conducting business in Texas. It is computed by applying the applicable tax rate (1% for us) to the profit margin, which is determined for us as total revenue less a 30% standard deduction.
Units		Limited partnership units in MIG III.

iii

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PART I

ITEM 1. BUSINESS.

BACKGROUND

We issued Units in the Offering in reliance upon exemptions from the registration requirements of the Securities Act and state securities laws. As a result, our Limited Partners may not transfer the Units except pursuant to an effective registration statement or pursuant to an exemption from registration. The Units are not currently listed on a securities exchange, and there currently is no established public trading market for the Units. We do not intend to list the Units on a securities exchange in the future.

Our General Partner is a Texas corporation and a wholly-owned subsidiary of AmREIT, an SEC reporting Maryland corporation that has a class of securities listed on the NYSE and that has elected to be taxed as a REIT. AmREIT and its predecessors have sponsored and advised 2021 partnerships or similar investment funds formed for the purpose of investing in properties during their 29-year history. 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. Our General Partner invested $1,000 in us in exchange for its general partner interest and invested $800,000 in us in exchange for 32 Units.

Rental income accounted for 100% of our total revenue during the years ended December 31, ~~2012~~2013, ~~2011~~2012, and ~~2010~~2011, 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 indebtedness. As of December 31, ~~2012~~2013, our properties had an average occupancy ofrate ~~83%, and the average leverage ratio~~ of ~~the properties in which we have an investment was~~ approximately 5588%~~, with 51% of such debt carrying a fixed rate of interest~~.

OUR PORTFOLIO AND JOINT VENTURES

As of December 31, ~~2012~~2013, our investments included two wholly-owned properties comprising approximately 125,000 square feet of GLA and six ~~seven~~ properties in which we own a non-controlling 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. See “Item 2. Properties” for a more detailed description of our investments in properties.

Our joint ventures are structured as limited partnerships or limited liability companies in which we own interests. Each of these limited partnerships or limited liability companies directly owns one or more of the ~~seven~~six underlying properties. Each general partner or managing member is responsible for establishing policies and operating procedures with respect to the business and affairs of the underlying property. However, we and each of our joint venture partners must approve all significant decisions involving the properties.

	Our current joint venture investments contain the following features:
	•	our right either to approve significant decisions of the joint venture or to influence operations of the joint venture, subject to the right of the joint venture partner to approve sales or refinancing;
	•	the total compensation paid by us and the joint venture to our General Partner and its affiliates in connection with a joint venture will not exceed the compensation that would be permissible under our limited partnership agreement if we owned 100% of the joint venture;

Our current joint venture investments contain the following features:


	•	our right either to approve significant decisions of the joint venture or to influence operations of the joint venture, subject to the right of the joint venture partner to approve sales or refinancing;

	•	the total compensation paid by us and the joint venture to our General Partner and its affiliates in connection with a joint venture will not exceed the compensation that would be permissible under our limited partnership agreement if we owned 100% of the joint venture;

	•	no duplication of joint venture costs and expenses or of costs and expenses relating to the joint venture business, including organization and syndication expenses, acquisition and development costs; and

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• no duplication of joint venture costs and expenses or of costs and expenses relating to the joint venture business, including organization and syndication expenses, acquisition and development costs; and • any purchase, sale or financing transactions between the joint venture partner and our General Partner or its affiliates must be on terms that are commercially reasonable and comparable to those relating to transactions between unrelated parties.

OUR INVESTMENT OBJECTIVES

Our operating period ended on October 31, 2012, and we have entered into our liquidation period. 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~~Most ~~United~~of our ~~States~~retail ~~economy~~properties iswere ~~still~~purchased ~~experiencing~~prior ~~weakness from~~to ~~the~~2008 ~~past~~when ~~economic~~retail ~~recession,~~real ~~which resulted in increased unemployment,~~estate ~~weakening~~market ofprices ~~tenant~~were ~~financial~~much ~~condition~~higher, ~~large-scale business failures~~ and ~~tight~~ ~~credit~~our ~~markets.~~property ~~High~~valuations ~~levels of unemployment~~ have ~~persisted, and rental~~been ~~rates~~negatively ~~and~~impacted ~~valuations~~by ~~for~~these ~~retail~~market ~~space~~dynamics. ~~have~~We ~~not~~believe ~~fully~~that ~~recovered~~the toretail ~~pre-recession~~real ~~levels~~estate ~~and~~market ~~may~~has ~~not~~experienced ~~for a number of years~~improvement. ~~Furthermore~~However, ~~the~~it ~~uncertainty surrounding~~is ~~the~~difficult ~~rapidly~~to determine ~~increasing~~if ~~national debt of~~ the ~~United~~improvements ~~States~~experienced ~~and continuing~~in ~~global~~2013 ~~economic~~will ~~uncertainty~~continue ~~have~~through ~~kept markets volatile~~2014. ~~Most of our~~ ~~retail~~To ~~properties~~navigate ~~were~~these ~~purchased~~challenging ~~prior to 2008 when retail real estate~~ market ~~prices~~ ~~were much higher~~conditions, we and our ~~property~~General ~~valuations~~ Partner have ~~been~~created ~~negatively impacted~~a bystrategic ~~these~~plan ~~market~~to ~~dynamics.~~maximize ~~Because~~the wepotential ~~have~~value ~~entered~~of ~~into~~ our ~~liquidation~~real ~~period,~~estate weportfolio doand ~~not~~then ~~intend~~execute toan ~~invest~~orderly, inbut ~~any~~opportunistic ~~new~~liquidation. ~~real~~We plan ~~estate.~~to:

• Complete our development and redevelopment projects with a goal to stabilize these projects over the next 6-12 months. We believe that completing our development and redevelopment projects, including their lease-up and stabilization, will allow us to maximize the ~~retail~~return ~~real~~on ~~estate~~these ~~market~~properties isupon ~~likely~~sale. Our investments in 5433 Westheimer, Woodlake Pointe and PTC/BSQ represent our assets currently under development or redevelopment. See Note 4 of the Notes to ~~remain~~the Consolidated Financial Statements for further discussion of redevelopment plans at ~~depressed levels~~each inof ~~2013~~these ~~when~~properties. ~~compared~~• Continue to ~~pre~~operate our projects in a first-~~recession~~class ~~levels;~~manner ~~however,~~with ita isgoal ~~difficult~~ to ~~determine~~generate operating cash flow in order to re-commence distributions. We believe that upon stabilization of our development and redevelopment properties, coupled with the ~~breadth~~continued and ~~duration~~intense oversight of ~~the~~our ~~unfavorable~~properties, ~~financial~~we ~~market conditions~~will ~~and~~generate ~~how~~liquidity ~~such~~that ~~conditions~~could ~~may~~allow ~~affect~~us to re-commence distributions to our ~~tenants~~Limited ~~and~~Partners; ~~the~~however, ~~valuation~~this of most likely will not occur until we begin to sell our real estate assets. To• ~~navigate~~Sell ~~these~~our ~~challenging~~properties ~~market~~opportunistically, ~~conditions~~likely beginning in 2014. Once a property is marketed for sale, weit may take several months to receive offers and ~~our~~complete due diligence by both parties. Our General Partner ~~have~~has ~~created~~in agood ~~strategic~~faith ~~plan~~begun to ~~maximize~~review ~~the~~market opportunities to sell our operating properties. When deciding whether or when to sell properties, our General Partner will consider factors such as potential appreciation of value and timing of ~~our~~ cash flows. As we have now entered the liquidation period, we will not be acquiring new real estate ~~portfolio~~investments. We will be completing our development and ~~execute~~redevelopment anprojects ~~orderly~~and distributing net proceeds generated from property sales to our Limited Partners, ~~but~~unless ~~opportunistic~~the ~~liquidation. The~~General ~~components~~Partner has identified attractive acquisition opportunities and obtained a majority vote of ~~this~~the ~~strategic~~Limited ~~plan~~Partners ~~are~~to asre-invest ~~follows:~~such proceeds.

• An orderly ~~Complete~~liquidation ~~our~~of ~~redevelopment~~all ~~projects~~of ~~with a goal to stabilize these projects during 2013. We believe that completing~~ our ~~development~~properties ~~and redevelopment projects, including their lease-up and stabilization,~~ will ~~allow~~take usyears tofor ~~maximize the potential value and return on these properties upon sale. Our investments in 5433 Westheimer, Woodlake Pointe, and Preston Towne Crossing represent~~ our ~~assets~~General Partner ~~currently under redevelopment. See Note 4 of the Notes~~ to ~~the~~complete ~~Consolidated~~and ~~Financial~~wind ~~Statements~~up ~~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 recommence distributions in 2014~~operations. WeBecause ~~believe that upon stabilization~~ of ~~our~~challenging redevelopment properties, coupled with continued and disciplined management of our operating properties, we will generate sufficient liquidity that could allow us to re-commence distributions to our Limited Partners; however, this most likely will occur as we begin to sell our real estate ~~assets. • Sell our properties opportunistically, likely beginning in 2014, after the~~ market ~~has had a chance to recover. Once a property is marketed for sale~~conditions, it ~~may~~is ~~take~~possible several months, or even longer, 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 operating properties, but believes that ~~retail~~investors ~~property valuations continue to be depressed, and accordingly, attractive sales opportunities~~ may not ~~exist~~recover inall ~~the~~of their ~~near~~original ~~term~~investment. ~~When~~Although ~~deciding~~we ~~whether~~believe orthat ~~when to sell properties,~~ our ~~General~~strategic ~~Partner~~plan ~~will consider many factors including, but not limited to~~ maximizes the potential ~~appreciation of property~~ value ~~as well as the timing~~ of ~~cash~~our ~~flows.~~properties Asand weis ~~have~~in ~~now entered~~ the ~~liquidation~~best ~~period,~~interests weof ~~expect to distribute the net proceeds, if any, generated from property sales to~~ our Limited Partners, ~~unless~~no ~~the~~assurances ~~General~~can ~~Partner~~be ~~has~~given ~~identified~~that ~~attractive~~this ~~acquisition~~strategy ~~opportunities~~will ~~and obtained a majority vote of the Limited Partners to re-invest such proceeds~~be successful.

~~Although we~~The ~~believe~~above ~~that~~steps ~~our~~may ~~strategic~~not ~~plan~~be ~~maximizes~~sufficient, ~~the~~and ~~potential~~we ~~value~~could ofincur ~~our properties~~individual setbacks and ispossibly significant losses. Additional deterioration in the ~~best~~United ~~interest~~States ofeconomy ~~our~~or ~~Limited~~the ~~Partners,~~bankruptcy anor ~~orderly liquidation~~insolvency of ~~all~~one or more of our ~~properties~~significant tenants could ~~take~~cause ~~years~~our ~~for~~current plans to meet our ~~General~~projected ~~Partner~~ cash shortfalls to ~~complete~~be insufficient. Even with the above strategic plan and liquidity ~~wind~~initiatives, upwe still may incur cash shortfalls if we are required to perform under certain guarantees (see Note 4 of the Notes to Consolidated Financial Statements) of our ~~operations.~~joint ~~Additionally~~ventures or are unable to refinance certain debt as it comes due, which nocould ~~assurances~~result ~~can~~in lender repossession of one or more properties owned by us and/or our joint ventures or be forced to sell ~~given~~one ~~that~~or ~~this~~more ~~strategy~~properties ~~will~~at bea ~~successful,~~time ~~and~~when it is ~~possible~~disadvantageous ~~that~~to ~~investors may~~do ~~not~~so, ~~recover~~potentially ~~all~~resulting ofin ~~their~~losses ~~original~~on ~~investment~~the disposition of those properties.

As sole owner of our General Partner, AmREIT has the ability to purchase our wholly-owned properties that our General Partner determines are in our best interests to sell. For the properties that we own through a joint venture, AmREIT typically has contractual buy-sell or rights of first offer, subject to the approval of our joint venture partners. If our General Partner determines that it is in our best interests to sell one of our properties, our General Partner will notify AmREIT of our desire to sell such property. AmREIT will then have 30 days to determine whether to pay the market value to acquire the property for itself. To determine the market value of a property, both AmREIT and we, at our own cost and expense, will appoint a real estate appraiser with at least five years of full-time commercial appraisal experience and who is a member of the Appraisal Institute. If either of us fails to appoint an appraiser, the single appraiser appointed shall be the sole appraiser and will determine the market value. Each appraiser will conduct an independent appraisal of the property within 30 days after the two appraisers are appointed. If the appraised values are within five percent of each other, the market value of the property will be the mean of the two appraisals. If the two appraisals are more than five percent apart, a third appraiser meeting the qualifications stated above and independent from each party shall be appointed by the existing appraisers. Upon completion of the third appraisal, if the low appraisal and/or the high appraisal are/is more than five percent lower and/or higher than the middle appraisal, the low appraisal and/or the high appraisal will be disregarded. If only one appraisal is disregarded, the remaining two appraisals will be added together and their total divided by two, with the resulting quotient being the market value. If both the low appraisal and the high appraisal are disregarded as stated above, the middle appraisal will be the market value. AmREIT will have 10 business days after the final determination of market value to elect to purchase the property.

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As sole owner of our General Partner, AmREIT has the ability to purchase our wholly-owned properties that our General Partner determines are in our best interests to sell. For properties we own through a joint venture, AmREIT typically has contractual buy-sell or rights of first offer, subject to the approval of our joint venture partners. If our General Partner determines that it is in our best interests to sell one of our properties, our General Partner will notify AmREIT of our desire to sell such property. AmREIT will then have 30 days to determine whether to pay the market value to acquire the property for itself. To determine the market value of a property, both AmREIT and we, at our own cost and expense, will appoint a real estate appraiser with at least five years full-time commercial appraisal experience and who is a member of the Appraisal Institute. If either of us fails to appoint an appraiser, the single appraiser appointed shall be the sole appraiser and will determine the market value. Each appraiser will conduct an independent appraisal of the property within 30 days after the two appraisers are appointed. If the appraised values are within five percent of each other, the market value of the property will be the mean of the two appraisals. If the two appraisals are more than five percent apart, a third appraiser meeting the qualifications stated above and independent from each party shall be appointed by the existing appraisers. Upon completion of the third appraisal, if the low appraisal and/or the high appraisal are/is more than five percent lower and/or higher than the middle appraisal, the low appraisal and/or the high appraisal will be disregarded. If only one appraisal is disregarded, the remaining two appraisals will be added together and their total divided by two, with the resulting quotient being the market value. If both the low appraisal and the high appraisal are disregarded as stated above, the middle appraisal will be the market value. AmREIT will have 10 business days after the final determination of market value to elect to purchase the property.

During 2010, our General Partner and AmREIT followed the appraisal process outlined above, and AmREIT acquired the Market at Lake Houston property in February 2011 for a combination of cash and the assumption of debt. See Note 3 of the Notes to Consolidated Financial Statements.

Liquidity Challenges

~~Historically,~~Over ~~we have faced significant liquidity challenges over~~ the ~~last~~past several years~~. Other~~, ~~than~~ our ~~Olmos~~results ~~Creek~~of ~~property,~~operations asand ~~discussed~~valuations ~~below,~~of weour ~~have been~~real ~~successful~~estate inassets ~~meeting~~have ~~our~~been ~~historic~~negatively ~~cash~~impacted ~~shortfalls~~by ~~through~~overall ~~(1)~~economic ~~managing~~conditions ~~the~~from ~~timing of forecasted capital expenditures related to~~ the ~~lease-up of properties~~recent, ~~(2)~~severe ~~managing~~recession. ~~the~~Most ~~timing~~ of ~~operating~~our ~~expense~~retail ~~payments~~properties ~~and,~~were ~~to the~~purchased ~~extent~~prior ~~possible,~~to ~~accelerating~~2008 ~~cash~~when ~~collections,~~retail ~~(3)~~real ~~deferring~~estate ~~the~~market ~~payment~~prices ~~of fees~~were ~~owed~~much tohigher, ~~our General Partner~~ and ~~its affiliates, (4) sales of certain of~~ our property ~~properties~~valuations ~~and~~were ~~investments~~negatively inimpacted ~~non-consolidated~~by ~~entities,~~these ~~(5)~~market ~~obtaining~~dynamics. The ~~funds~~United ~~through~~States ~~additional~~has ~~borrowings~~experienced ~~from~~recent ~~AmREIT~~improvements ~~and/or~~in ~~(6)~~the ~~selling~~general ~~certain of our investments~~economy; however, ~~including~~it ~~the anticipated~~is ~~sale~~difficult ofto adetermine ~~single~~if ~~tenant~~the ~~building~~improvements ~~and~~experienced ~~portion~~in ~~of land by our~~2013 ~~Woodlake~~will ~~Pointe~~continue ~~joint~~through ~~venture.~~2014 ~~See~~and ~~also~~into ~~Note 4 of~~ the ~~Notes to Consolidated Financial Statements~~future.

~~Our~~We have faced significant liquidity challenges over the last several years. However, other than our Olmos Creek ~~mortgage~~property ofwhich ~~$11.2~~we ~~million~~delivered ~~matured~~to the lender as settlement of unpaid ondebt ~~November~~in 1February 2012, ~~2011.~~we ~~The~~were successful in meeting ~~lender~~our ~~subsequently~~historic ~~sold~~cash ~~the~~shortfalls ~~mortgage~~through (~~including~~1) managing the ~~right~~timing of forecasted capital expenditures related to the ~~property~~lease-up of properties, (2) inmanaging the ~~January~~timing ~~2012.~~of Weoperating ~~entered~~expense ~~into~~payments aand, ~~settlement~~to ~~agreement~~the ~~with~~extent ~~the~~possible, ~~new~~accelerating cash ~~owner~~collections, of(3) deferring the ~~mortgage~~ ~~and~~payment ~~delivered~~of ~~the~~fees ~~property~~owed to ~~the~~our ~~purchaser~~General onPartner and ~~February~~its 6affiliates, ~~2012~~(4) selling certain of our properties and investments in ~~exchange~~non-consolidated ~~for~~entities a(see ~~release~~Note 4 of the ~~obligations~~Notes ~~under~~to ~~the~~Consolidated ~~Olmos~~Financial Statements) ~~Creek~~and/or ~~mortgage.~~(5) Asobtaining ~~a result,~~funds wethrough noadditional ~~longer~~borrowings ~~own this property~~from AmREIT.

On ~~November~~September 3018, ~~2012~~2013, weour ~~modified~~Woodlake ~~the~~Square ~~terms~~joint ofventure ~~our~~sold ~~Lantern~~the ~~Lane~~Woodlake ~~mortgage~~Square shopping center to ~~extend the~~AmREIT ~~due~~for ~~date~~$41.6 million, and we ~~entered~~received ~~into~~ a ~~second~~distribution ~~loan~~of approximately ~~for~~ $21.20 million ~~in net cash proceeds to us~~. We subsequently ~~made~~repaid aapproximately $1.6 million ~~payment on our loan to AmREIT~~ onof ~~December~~notes 4,payable ~~2012.~~- ~~The~~related ~~remaining~~party ~~cash~~in ~~was~~September ~~retained~~2013 ~~for~~from ~~working~~these ~~capital~~distributions ~~needs~~and tofrom ~~fund~~cash ~~our~~on ~~portion (50%) of the lease-up strategy at our Casa Linda property in 2013 (discussed below)~~hand.

WeOn ~~expect~~September to30, ~~fund~~2013, ~~approximately $1.5 million in capital expenditures over the next two years at~~ our ~~Casa~~Woodlake ~~Linda~~Pointe ~~property (a 50%~~ joint venture ~~between~~sold usthe ~~and~~single-tenant ~~MIG IV)~~building ~~representing~~and ~~our~~land ~~50%~~parcel ~~share of a lease-up strategy~~ at ~~this~~our ~~property.~~Woodlake ~~The~~Pointe ~~lease-up~~property constructed ~~strategy~~for ~~includes certain tenant build-out and site improvements, to support~~ a ~~refinance~~national offitness ~~the~~tenant ~~property’s~~for $3812.0 million ~~mortgage~~to ~~loan~~an ~~that~~unrelated ~~matures January~~third ~~1, 2014~~party. The ~~joint~~land ~~venture has made progress with signing new leases, but additional improvements~~ and ~~vacancy lease-up are needed. The joint venture~~building ~~will~~were ~~likely~~secured ~~require~~by a ~~one-year~~$6.6 ~~extension~~million ~~of the~~ loan ~~to complete this strategy so~~ that wewas ~~can~~repaid ~~later~~in ~~accomplish~~full awith ~~long-term~~proceeds ~~refinance~~from of the ~~property~~sale. We ~~believe~~ wereceived ~~will be successful in obtaining~~ a ~~one-year~~distribution ~~extension~~of ~~based~~$1.5 million on ~~our preliminary~~October ~~discussions with the lending agent; however~~1, no2013 ~~assurances can be given that we will be successful~~ in ~~obtaining~~connection ~~the~~with ~~extension~~this sale. We dosubsequently ~~not guarantee~~repaid ~~this~~approximately ~~debt~~$650,000 ~~and our risk~~ of ~~loss~~notes ispayable ~~limited~~- related toparty ~~our~~and ~~investment~~retained ~~balance in~~ the ~~Casa~~remainder ~~Linda joint venture~~ of ~~$2.7~~the ~~million~~proceeds as ofcash ~~December~~on ~~31, 2012~~hand.

OnDuring ~~March 15~~2012, ~~2013,~~we ~~our~~and ~~Woodlake~~MIG ~~Pointe~~IV ~~joint~~initiated ~~venture~~a ~~entered~~lease-up ~~into~~strategy aat ~~letter~~our ~~of intent~~Casa toLinda ~~sell~~property (a 50% ~~portion~~joint ofventure ~~the~~between ~~land~~us and aMIG ~~single~~IV). ~~tenant~~We ~~building~~expect atto ~~our Woodlake~~fund ~~Pointe~~a ~~property~~total ~~for~~of approximately $121.05 million toin ancapital ~~unrelated~~expenditures ~~third~~representing ~~party~~our 50% share of a lease-up strategy at this property. The lease-up strategy includes certain ~~land~~tenant build-out and ~~building~~site ~~are~~improvements. ~~secured~~To bydate, athe joint venture has incurred approximately $61.23 million ~~loan~~of ~~that~~the ~~will~~planned becapital ~~repaid~~expenditures. inAdditionally, ~~full~~the ~~with~~joint ~~proceeds~~venture ~~from~~refinanced the ~~sale~~$38.0 ~~The~~million ~~sale~~mortgage isloan ~~expected~~on ~~to close in~~ the ~~second~~property on ~~quarter~~December of27, 2013, ~~and~~with ~~our~~a ~~portion~~four-year, ofnon-recourse ~~the~~loan ~~net~~with ~~cash~~an ~~proceeds~~opportunity ~~(30%) is~~for an additional funding of approximately $14.5 million. Wefor ~~plan to use~~ the ~~proceeds to fund the Casa Linda~~potential ~~lease-up~~acquisition ~~strategy~~of ~~(discussed~~an ~~above)~~adjacent ~~and for working capital needs~~property.

We continue to work with the debt servicer on the Westside Plaza debt (see Note 6 of the Notes to Consolidated Financial Statements) to address various alternatives for relief either through reduction of escrow requirements, waiver of penalties and forgiveness of principal or all of the above. We believe that we will be successful in this endeavor; however, we may be ultimately called upon to repay 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 repayment, we may need to look to our General Partner to borrow additional funds.

Although no assurance can be given, we believe that we will be able to generate liquidity sufficient to continue to execute our strategic plan through a combination of the foregoing liquidity initiatives. Historically, AmREIT has deferred payment of advisory fees and payment of notes payable – related party to the extent such deferral of payments were necessary for our continued operation. 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. In the event our liquidity is not sufficient to execute our strategy, AmREIT has agreed to defer payments, subject to its continued ability to do so.

Even with the above, we may still incur individual setbacks and significant losses. Additionally, 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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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 and payable 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. However, AmREIT has agreed that it will not require us to repay the $3.7 million notes payable–related party we owe to AmREIT as of December 31, 2012 until a date subsequent to January 1, 2014, if requiring such repayment would prevent the execution of our strategy or present an unnecessary financial hardship. In the event our liquidity is not sufficient to execute our strategy, AmREIT has agreed to provide financial support and defer payments subject to its continued ability to do so. Although no assurance can be given, we believe that we will be able to generate liquidity sufficient to continue to execute our strategic plan through a combination of the foregoing liquidity initiatives.

Current Market Conditions

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 is still experiencing weakness from the past economic recession, which resulted in increased unemployment, weakening of tenant financial condition, large-scale business failures and tight credit markets. 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. Furthermore, the uncertainty surrounding the rapidly increasing national debt of the United States and continuing global economic uncertainty have kept markets volatile. 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.

Leverage

We have leveraged and intend to leverage our investments in properties with operating histories using traditional, commercial real estate lending sources, as underwritten by our General Partner and the lender. We have not leveraged and do not intend to leverage equity contributed to joint venture developments, anticipating that local developers will employ construction financing consistent with that of traditional real estate projects and underwritten by the development partner, our General Partner and the lender.

We may refinance one of our properties after it has increased in value or when more favorable terms are available. Refinancing may permit us to retain such property and, at the same time, generate distributions to our Partners, enable us to engage in renovation or remodeling activities, or make further acquisitions. We may incur debt for expenditures related to our properties, including expenses to facilitate the sale or payment of capital expenditures. We may not incur indebtedness (or any refinancing thereof) to acquire or improve properties in an amount greater than 75% of our cash and cash equivalents plus the market value of our portfolio based on a cap rate approach applied to the net operating income of the property, with a target of 60% of the value of our assets.

We may borrow money from AmREIT or its affiliates if our General Partner, in the exercise of its fiduciary duties, determines that the transaction is on terms that are fair and reasonable and no less favorable to us than comparable loans between unaffiliated parties.

COMPETITION

All of our properties are located in geographic areas that include competing properties. The number of competitive properties in a particular area could have a material adverse effect on both our ability to lease space at our properties and on the rents charged. When pursuing acquisition, development and redevelopment opportunities, we also compete with an indeterminate number of other real estate investors, including domestic and foreign corporations and financial institutions, publicly-traded and privately-held REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds, some of which have greater financial resources than we do. Similarly, should we decide to dispose of any property, we may compete with third- party sellers of similar types of commercial properties for suitable purchasers, which may result in our receiving lower net proceeds from a sale or in our not being able to dispose of such property at a time of our choosing due to the lack of an acceptable return.

In operating and managing our properties, we compete for tenants based upon a number of factors including, but not limited to, location, rental rates, security, flexibility, expertise to design space to meet prospective tenants’ needs and the manner in which the property is operated, maintained and marketed. We may be required to provide rent concessions, incur charges for tenant improvements and other inducements, or we may not be able to timely lease vacant space, all of which would adversely impact our results of operations. InWe ~~light of the recent economic downturn, we have~~ had to utilize rent concessions and undertake tenant improvements during the economic downturn to a greater extent than we historically have done.

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GOVERNMENTAL REGULATIONS

Our properties and the tenants of our properties are subject to various federal, state and local environmental, health and safety laws, including laws governing the management of wastes, underground and aboveground storage tanks, local fire safety requirements, and local land use and zoning regulations. For example, some of our tenants handle regulated substances or wastes as part of their operations on our properties. Noncompliance with these environmental, health and safety laws could subject us or our tenants to liability. These environmental liabilities could affect a tenant’s ability to make rental payments to us. Moreover, changes in laws could increase the potential costs of compliance with environmental laws or health and safety laws, including increasing liability for noncompliance or requiring significant unanticipated expenditures. We are not presently aware of any instances of material non-compliance with environmental laws or health and safety laws at our properties, and we believe that we have all permits and approvals necessary under current law to operate our properties.

Environmental Regulations

Under various federal, state, and local environmental laws, ordinances, and regulations, a current or former owner or operator of real property may be liable for the cost to remove or remediate hazardous or toxic substances, asbestos-containing materials, wastes, or petroleum products at, on, under, from, or in such property. These costs could be substantial and liability under these laws may attach whether or not the owner or operator knew of, or was responsible for, the presence of such contamination. The presence of contamination on one of our properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the contamination, or otherwise adversely affect our ability to redevelop, sell or lease the property or mortgage the property. In addition, if contamination is discovered on one of our properties, environmental laws may impose restrictions on the manner in which a property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants. We also may be liable for the costs of remediating contamination at off-site disposal or treatment facilities when we arrange for disposal or treatment of hazardous substances at such facilities, without regard to whether we comply with environmental laws in doing so.

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Some of our properties are adjacent to or near other properties used for industrial or commercial purposes or that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances. Releases from these nearby properties could impact our properties. In addition, certain of our properties are currently used, have been used, and may be used in the future by others, including former owners or tenants of our properties, for commercial or industrial activities, such as gas stations and dry cleaners, that may release petroleum products or other hazardous or toxic substances at our properties or to surrounding properties.

We have obtained Phase I Environmental Site Assessments or similar environmental audits from an independent environmental consultant for substantially all our properties. A Phase I Environmental Site Assessment is a written report that identifies existing or potential environmental conditions associated with a particular property. These environmental site assessments generally involve a review of records, interviews and visual inspection of the property; however, they have a limited scope (e.g., they do not include soil sampling or ground water analysis) and may not reveal all potential environmental liabilities. Further, material environmental conditions may have arisen after the review was completed or may arise in the future, and future laws, ordinances or regulations may impose additional material environmental liability beyond what was known at the time the site assessment was conducted. Phase II environmental assessments generally involve the testing of soil, groundwater or other media and conditions. While environmental assessments conducted prior to acquiring our properties have not revealed, nor are we aware of, any environmental liability that we believe will have a material adverse effect on our operations, certain properties that we have acquired contain, or contained, uses that could have impacted our properties, including dry-cleaning establishments utilizing solvents or gas stations. Where we believed it was warranted, subsurface investigations or samplings of building materials were undertaken with respect to these and other properties. To date, the costs associated with these investigations and any subsequent remedial measures taken to address any identified impacts have not resulted in material costs. Prior to purchasing properties in the future, we plan to conduct Phase I Environmental Site Assessments and other environmental investigations, if warranted.

Americans with Disabilities Act of 1990

Under the ~~Americans with Disabilities Act of 1990, or~~ ADA, all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. Compliance with the ADA might require removal of structural barriers to handicapped access in certain public areas where such removal is “readily achievable.” We believe that our properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. Noncompliance with the ADA, however, could result in the imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate in this respect.

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CONFLICTS OF INTEREST

Our General Partner is subject to various conflicts of interest arising out of its relationship with us, the Limited Partners and AmREIT. Our General Partner and its affiliates have and will continue to try to balance our interests with their duties to other AmREIT-sponsored programs. However, to the extent that our General Partner or its affiliates take actions that are more favorable to other entities than to us, these actions could have a negative impact on our financial performance and, consequently, on distributions to our Limited Partners. Some of these conflicts are described below.

• Our General Partner has no assets other than its general partner interest in us and its investment in our Units and therefore cannot provide us with financial assistance in the event we have capital needs. • AmREIT, the parent of our General Partner, has substantial financial obligations related to its properties and its interest in other programs and may not be able to provide us financial assistance in the event we have capital needs. • AmREIT sponsors and manages other similar real estate programs and ventures that may compete with us. Conflicts of interest with our General Partner’s management may arise in its allocating opportunities between us and other programs, particularly where our General Partner’s profit or loss interest in such other investment is different than our General Partner’s interest in the Partnership. • Conflicts of interest may arise in connection with performance of our General Partner’s responsibilities to us and its responsibilities to its other affiliates, such as allocation of its time and access to resources, such as financing, goods, material or labor, or in connection with its access to the leasing or resale markets. Because the management of our General Partner manages other investment funds and entities with similar investment strategies, including AmREIT, competition for properties will create a conflict of interest. • Our General Partner’s management is engaged in substantial activities apart from our business, including their duties to AmREIT and other real estate programs sponsored by AmREIT. As such, the time they can devote as to our affairs is limited. • Our General Partner retains the services of affiliated leasing agents to lease the properties in which we have invested, and these leasing agents can face conflicts of interest if they are seeking to lease our properties and similar properties of our affiliates at the same time. • Conflicts of interest could arise in connection with any interest our General Partner may have in a particular property, including any interests our General Partner may have as an affiliate of AmREIT in connection with any sale of a property to AmREIT. • Our General Partner may receive compensation in the form of a brokerage commission for the work performed in the sale of our properties to third-party real estate investors, and our General Partner may have an incentive to sell a property even if not in the best interest of our Limited Partners. • The compensation payable to our General Partner and its affiliates has not been determined by arm’s-length negotiations and might exceed that which would be paid to unrelated persons under similar circumstances in arm’s length transactions. Also, a significant portion of this compensation is payable irrespective of the quality of the services provided or our success or profitability. • AmREIT or its affiliates, including our General Partner, may in the future serve as management for the general partner of other companies or ventures, and acquire, develop and operate real estate related activities in the same areas as ours for their own account. • ARIC, an affiliate of our General Partner, performs property management services for all of the properties in which we have an interest and may provide property management services for properties in which we acquire an interest in the future; therefore, we might not always have the benefit of independent property management to the same extent as if our General Partner and the property manager were unaffiliated. • Our legal counsel acts and may in the future act as counsel to us, our General Partner, AmREIT and certain of our respective affiliates, that may become adverse to us, which may preclude our counsel from representing any or all of such parties.

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• Our General Partner’s management is engaged in substantial activities apart from our business, including their duties to AmREIT and other real estate programs sponsored by AmREIT. As such, the time they can devote to our affairs is limited. • Our General Partner retains the services of affiliated leasing agents to lease the properties in which we have invested, and these leasing agents can face conflicts of interest if they are seeking to lease our properties and similar properties of our affiliates at the same time. • Conflicts of interest could arise in connection with any interest our General Partner may have in a particular property, including any interests our General Partner may have as an affiliate of AmREIT in connection with any sale of a property to AmREIT. • Our General Partner may receive compensation in the form of a brokerage commission for the work performed in the sale of our properties to third party real estate investors, and our General Partner may have an incentive to sell a property even if not in the best interests of our Limited Partners. • The compensation payable to our General Partner and its affiliates has not been determined by arm’s -length negotiations and might exceed that which would be paid to unrelated persons under similar circumstances in arm’s length transactions. Also, a significant portion of this compensation is payable irrespective of the quality of the services provided or our success or profitability. • AmREIT or its affiliates, including our General Partner, may in the future serve as management for the general partner of other companies or ventures, and acquire, develop and operate real estate related activities in the same areas as ours for their own account. • ARIC, an affiliate of our General Partner, performs property management services for all of the properties in which we have an interest and may provide property management services for properties in which we acquire an interest in the future; therefore, we might not always have the benefit of independent property management to the same extent as if our General Partner and the property manager were unaffiliated. • Our legal counsel acts and may in the future act as counsel to us, our General Partner, AmREIT and certain of our respective affiliates, that may become adverse to us, which may preclude our counsel from representing any or all of such parties. • Our General Partner is primarily responsible for contesting federal income tax adjustments proposed by the IRS. In the event of an audit of our federal income tax returns by the IRS, it is possible that the interests of our General Partner in such an audit could become inconsistent with or adverse to the interests of the Limited Partners.

Management expects to manage the above conflicts by actively monitoring opportunities and resources to determine the most appropriate course of action under the circumstances. Additionally, in the event our General Partner or its affiliates receive compensation from us for any additional services performed on our behalf, such services will only be provided on terms and conditions no less favorable to us than can be obtained from independent third parties for comparable services in the same location. Such services may include, but are not limited to, leasing coordination fees, construction and construction management fees, including in connection with renovation and remodeling, and tax appeal fees. The fees for such services, if provided by affiliates, will be separately itemized and retained in our records.

We may, from time to time, sell some of our properties to AmREIT. As a result of the inherent conflict in such a sale, we will only sell a property to AmREIT if it agrees to pay the market value or the amount of a bona fide final third- party offer for that property. In addition, we may borrow money from AmREIT or its affiliates. Although our General Partner will only approve an ~~affiliated~~ affiliated borrowing transaction if, in the exercise of its fiduciary duties, it it determines that the terms are fair and reasonable and no less favorable to us us than comparable loans between unaffiliated third parties, our General ~~Partner~~ Partner could face conflicts of interest in connection with such a transaction that may not be resolved in the best interests of our Limited Partners.

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EMPLOYEES

We have no employees. Our affairs are managed by our General Partner, and our General Partner and its affiliates provide services to us related to acquisitions, property management, accounting, investor relations and other administrative services. We are dependent upon our General Partner and its affiliates for these services.

See “Item 13. Certain Relationships and Related Transactions, and Director Independence” for a discussion of our compensation arrangements.

CORPORATE OFFICE

Our principal office is located at 8 Greenway Plaza, Suite 1000, Houston, Texas 77046. Our telephone number is (713) 850-1400.

ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

Corporate office

Our principal office is located at 8 Greenway Plaza, Suite 1000, Houston, Texas 77046. Our telephone number is (713) 850-1400.

Real Estate Investment Properties:

During the period from April 19, 2005 (inception) to December 31, ~~2012~~2013, we have acquired interests in ~~nine~~eight properties that we currently retain. We ~~wholly-~~directly own two properties and have investments in ~~seven~~six properties through joint venture arrangements. During 2013, one of our joint ventures sold the Woodlake Square property. We believe our properties are suitable for their intended use and are adequately insured.

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As of December 31, ~~2012~~2013, we owned interests in the following properties, all of which are located in Texas:

Property	Location		Percent Owned	~~Percent Owned~~		GLA	~~GLA~~		Percent Occupied (1)	~~Percent Leased (1)~~		ABR (2)	~~Annualized Base Rent (2)~~		Percentage of Total ABR	~~Percentage of Total ABR~~
Consolidated Properties
Lantern Lane	Houston, TX	~~Houston,TX~~		100%	%		81,567	~~81,567~~		~~99%~~100	%		1,668,609	~~1,558,000~~		11	~~9.9~~%	%
Westside Plaza	Houston, TX	~~Houston,TX~~		100%	%		43,021	~~43,021~~		~~93%~~100	%		877,814	~~817,000~~		6	~~5.2~~%	%
Total consolidated properties							124,588	~~124,588~~		~~97%~~100	% (6)		2,546,423	~~2,375,000~~		17	~~15.1~~%	%
Joint Venture Properties (3)
5433 Westheimer (5)	Houston, TX	~~Houston,TX~~		58%	%		133,881	~~133,881~~		~~56%~~74	%		1,916,574	~~1,316,000~~		12	~~8.4~~%	%
Casa Linda	Dallas, TX	~~Dallas, TX~~		50%	%		324,569	~~324,569~~		~~79%~~83	%		3,826,032	~~3,306,000~~		25	~~21.0~~%	%
Woodlake Pointe (4) (5)	Houston, TX	~~Houston,TX~~		30%	%		82,120	~~127,120~~		100%	%		144,000	~~144,000~~		1	~~0.9~~%	%
Preston Towne Crossing (5)	Dallas, TX	~~Dallas, TX~~		20%	%		221,081	~~221,077~~		~~80%~~88	%		3,932,828	~~3,346,000~~		25	~~21.3~~%	%
Berkeley Square	Dallas, TX	~~Dallas, TX~~		20%	%		125,333	~~125,333~~		~~85%~~92	%		1,971,097	~~1,931,000~~		13	~~12.3~~%	%
Preston Park Gold	Dallas, TX	~~Dallas, TX~~		20%	%		97,558	~~97,558~~		88%	%		1,137,624	~~1,138,000~~		7	~~7.2~~%	%
Woodlake Square		Houston,TX		3%				160,761		88%				2,150,000			13.7	%
Total joint venture properties							984,542			86	% (6)		12,928,155			83	%
Total joint venture properties								1,190,299		81%	(6)			13,331,000			84.9	%
Total Properties							1,109,130			88	% (6)	$	15,474,578			100	%
Total Properties								1,314,887		83%	(6)		$	15,706,000			100.0	%

	(1)	Percent ~~leased~~occupied is calculated as (i) GLA under commenced leases as of December 31, ~~2012~~2013, divided by (ii) total GLA, expressed as a percentage.
	(2)	~~Annualized~~ABR ~~base rent~~ is calculated by multiplying (i) monthly base rent as of December 31, ~~2012~~2013, by (ii) 12. ~~Annualized~~ABR ~~base rent~~ represents base rents in place on leases with rent having commenced as of December 31, ~~2012~~2013, and does not reflect straight-line rent or other adjustments under GAAP. Our leases do not contain material tenant concessions or rent abatements.
	(3)	Properties are owned through a joint venture that is not consolidated in our financial statements.
	(4)	As of December 31, ~~2012~~2013, this property was occupied by a tenant with a temporary lease.
	(5)	This property is currently under redevelopment.
	(6)	Represents weighted average percent ~~leased~~occupied based on GLA.

~~The~~Operating ~~majority~~Properties of- ~~our~~Our operating properties ~~have~~consist primarily ~~leases~~of ~~that~~multi-tenant ~~are~~centers ~~either~~and ~~leased~~mixed-use ~~directly~~properties. toThese orinvestments ~~guaranteed~~are byprimarily ~~the~~shopping ~~lessee’s~~centers ~~parent~~that ~~company,~~are ~~not~~grocery-anchored ~~just~~or ~~the~~mixed-use ~~operator~~properties whose oftenants ~~the individual~~consist ~~location~~of national, regional and local retailers. Our grocery-anchored shopping centers are inanchored ~~areas~~by ofan ~~substantial~~established ~~retail~~grocery ~~shopping~~store operator ~~traffic~~in the region. Our ~~strategy~~mixed-use isproperties toconsists ~~acquire~~of ~~properties~~a combination of office and hospitality tenants that ~~attract~~are typically anchored by a combination of national and regional tenants that provide ~~basic~~customer traffic and tenant draw for ~~staples~~specialty and ~~convenience~~restaurant ~~items~~tenants tothat support the local ~~customers~~consumer. We ~~believe~~also own shopping centers that ~~sales~~are ofleased to national drug stores, national restaurant ~~these~~chains, ~~items~~national ~~are~~value-oriented ~~less~~retail ~~sensitive~~stores toand ~~business~~other ~~cycle~~regional ~~fluctuations~~and ~~than~~local retailers. ~~higher~~Of our eight properties in which we own an interest, we have ~~priced~~designated ~~retail~~Lantern ~~items~~Lane, Westside Plaza, Casa Linda, Berkeley Square and Preston Park Gold as operating properties in that they are not currently under development or redevelopment.

~~Operating~~Development and Redevelopment Properties -We ~~Our operating properties consist~~have ~~primarily~~also ofinvested ~~multi-tenant~~in ~~centers~~development and ~~mixed-use~~redevelopment properties., ~~These~~either ~~investments are~~directly ~~primarily shopping centers that are grocery-anchored~~ or ~~mixed-use~~ ~~properties~~indirectly ~~whose~~through ~~tenants~~joint ~~consist of national, regional and local retailers~~ventures. ~~Our grocery-anchored~~The ~~shopping~~amount ~~centers are anchored by an established grocery store operator in the region. Our mixed-use properties consists~~ of aequity ~~combination~~committed ofto ~~office~~development and ~~hospitality~~redevelopment ~~tenants~~projects ~~that~~is ~~are~~generally ~~typically~~between ~~anchored~~25% byand a100% ~~combination~~ of the ~~national~~total ~~and~~cost ~~regional~~of ~~tenants~~the ~~that~~project, ~~provide~~with ~~customer~~the ~~traffic~~remaining ~~and~~costs ~~tenant~~being ~~draw~~funded ~~for~~through lines ~~specialty~~of ~~and~~credit, ~~restaurant~~construction ~~tenants~~financing ~~that~~or ~~support~~other ~~the~~property-level ~~local~~mortgage ~~consumer~~financing. ~~We also own~~ ~~shopping~~Our ~~centers~~5433 ~~that are leased to national drug stores~~Westheimer, ~~national~~Woodlake ~~restaurant chains,~~Pointe ~~national value-oriented retail stores~~ and ~~other~~Preston ~~regional~~Towne ~~and~~Crossing ~~local retailers. Of our nine~~ properties ~~in which we own an interest, Lantern Lane,~~were ~~Westside~~under ~~Plaza,~~redevelopment ~~Casa~~as ~~Linda,~~of ~~Berkeley~~December ~~Square~~31, ~~Preston Park Gold and Woodlake Square are operating~~2013.

~~Development and~~During ~~Redevelopment~~redevelopment ~~Properties~~our -General WePartner ~~have~~will ~~also invested~~hire ina ~~development~~general contractor to provide construction and ~~redevelopment~~construction ~~properties,~~management ~~either~~services ~~directly~~for ~~or indirectly~~each ~~through~~of ~~joint~~our ~~ventures~~development and redevelopment projects. The ~~amount~~general ofcontractor ~~equity~~will ~~committed~~be entitled to fees for ~~development~~providing these services, and ~~redevelopment~~these ~~projects~~fees ismay ~~generally~~be ~~between~~paid ~~25%~~on ~~and~~a ~~100%~~fixed ofprice ~~the~~basis or ~~total~~a cost ofplus ~~the~~basis. ~~project,~~We ~~with~~have ~~the~~engaged ~~remaining~~ARIC, ~~costs~~an ~~being~~affiliate ~~funded~~of ~~through lines~~our ofGeneral ~~credit~~Partner, for construction ~~financing~~management services orrelated ~~other~~to ~~property-level~~our ~~mortgage~~current ~~financing~~redevelopment projects. ~~Our~~ ~~5433~~In ~~Westheimer~~these cases, ~~Woodlake~~such services ~~Pointe~~will be provided on terms and ~~Preston~~conditions ~~Towne~~no ~~Crossing~~less ~~properties~~favorable ~~were~~to us than ~~under~~can ~~redevelopment~~be asobtained offrom ~~December~~independent ~~31,~~third ~~2012.~~parties for comparable services in the same location.

During redevelopment our General Partner will hire a general contractor to provide construction and construction management services for each of our development and redevelopment projects. The general contractor will be entitled to fees for providing these services, and these fees may be paid on a fixed price basis or a cost plus basis. In the future, we may engage ARIC, an affiliate of our General Partner, for construction management services. In these cases, such services will be provided on terms and conditions no less favorable to us than can be obtained from independent third parties for comparable services in the same location.

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Each of our development and redevelopment projects has and will have a project manager assigned to ensure all necessary functions are performed. The project manager is responsible for coordinating all phases of the project, including the feasibility study of each project prior to the commencement of development and much of the pre-development work. Each development also has a construction manager who is responsible for coordinating all the outsourced trades including architectural, engineering, environmental and construction contractors. The construction manager will be an employee of ARIC in the event that ARIC is providing construction management services to a development project. The project and construction managers are jointly responsible for the preparation and adherence to the development budgets. Capital inflows and outflows are carefully tracked and compared against budgets. Actual costs versus budget reports are prepared on a monthly basis for review by various parties including the development team, management team and lenders. The project and construction managers work in unison to ensure each project is built within budget and on a timely basis.

Net Leases - We typically enter into net leases with our tenants. “Net leases” are leases that typically require tenants to pay all or a majority of the operating expenses, including real estate taxes, special assessments and sales and use taxes, utilities, insurance and building repairs related to the property, in addition to base rent. Our leases do not contain material tenant concessions or rent abatements. Since each lease is an individually negotiated contract between two or more parties, each contract will have different obligations for both the landlord and tenant. Many large national tenants have standard lease forms that generally do not vary from property to property, and we have limited ability to revise the terms of leases for those tenants. We have acquired and may in the future acquire properties under which the lease terms have partially run. We evaluate the lease term risk based on criteria such as whether the property is in an attractive location, is difficult to replace or has other significant favorable real estate attributes. Some of our leases contain provisions that increase the amount of base rent payable at points during the lease term and/or provide for percentage rent that can be calculated by a number of factors. Our leases generally require that each tenant obtain, at its own expense, property insurance naming the above parties as an insured party for fire and other casualty losses in an amount that generally equals the full replacement value of such property. Our tenants are generally required to obtain our General Partner’s approval of all such insurance.

Description of Our Wholly-Owned Properties

Lantern Lane

On September 29, 2006, through our wholly-owned special purpose entity, AmREIT Lantern Lane, LP, we purchased the Lantern Lane property, a 7981,~~462~~567 square foot retail shopping center located in Houston, Texas from an unaffiliated third- party. Our mortgage loan of $13.4 million on this property matured in ~~September~~ September 2011. Upon maturity, we entered into a new $12.8 million secured term loan due April 7, 2013. On November 30, 2012, we modified the terms of our Lantern Lane mortgage to extend the due date, and we entered into a second loan for $2.2 million in net cash proceeds to us. The modifications include interest-only payments until the extended maturity date of November 2015 at an interest rate of one-month LIBOR rate plus 2.75%. We acquired this property with the expectation that it would provide a stable stream of rental income and have no plans to redevelop the property. ~~Rice~~The ~~Food~~Fresh Market, Inc. is the largest ~~tenant~~ tenant occupying 21,450 square feet with a lease scheduled to expire in January 2018. This lease has been assumed by the Fresh Market in connection with the acquisition of Rice Food ~~market~~Market, Inc. ~~The store closed in early 2013 for renovations and its planned re-opening as the Fresh Market is expected in November 2013.~~ Other major tenants include CVS ~~Pharmacy~~ /pharmacy and Fidelity Investments.

Westside Plaza

On September 30, 2005, we purchased the Westside Plaza property, a 43,021 square foot retail shopping center located in Houston, Texas from an unaffiliated third- party. We assumed two 20-year mortgage loans with a June 2015 maturity as part of the acquisition of this property. The first loan in the amount of $10.2 million bears an annual interest rate of 5.62% and had an outstanding principal balance of $9.10 million as of December 31, ~~2012~~2013. The second loan in the amount of $640,000 bears an annual interest rate of 12.75% and had an outstanding principal balance of $633,000 as of December 31, ~~2012~~2013. We are ~~electing~~currently todelaying ~~delay~~ scheduled payments on our Westside Plaza debt, and we are in negotiations with the lender to refinance our Westside Plaza debt. We completed the redevelopment of the property by adding aesthetic enhancements during 2007. ~~The~~ The Westside Plaza property is anchored by Trend Mall, which occupies 24,500 square feet with a lease scheduled to expire in June 2016.

Description of Our Joint Venture Properties

5433 Westheimer

On March 31, 2006, through a special purpose entity, 5433 Westheimer, LP, we purchased a 50% interest in the 5433 Westheimer property, a 133,881 square foot, 11 story office building and a 152-room hotel located in Houston, Texas from a third party. ~~Our joint venture partner~~Additionally, ~~Songy~~in ~~Partners~~2008, ~~holds~~we ~~the~~acquired ~~other~~an 50additional 7.5% ownership interest infrom ~~the joint~~Songy ~~venture. Additionally~~Partners, inour ~~2008,~~joint weventure ~~acquired~~partner anwho ~~additional~~owns 7the remaining 42.5% ~~ownership~~ interest ~~from~~in ~~Songy~~the ~~Partners~~property. The property is accounted for under the equity method of accounting as it does not meet all the conditions for consolidation. We completed an initial redevelopment of the office building and construction of a 152-room hotel in October 2009 at a total cost of approximately $31.7 million.

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In January 2008, we mortgaged our interest in this property with a $32.9 million, three-year variable-rate loan with a third- party lender. The debt matured unpaid on December 31, 2011. On April 10, 2012, 5433 Westheimer, LP sold the 152-room hotel for $28.7 million, and ~~net~~ 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. ~~The lender extended the remaining debt outstanding through October 31, 2012.~~ On October 19, 2012, 5433 Westheimer, LP refinanced this debt with a five-year term loan in the amount of $8.7 million, ~~including~~ 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. We ~~have~~and our joint venture partner initiated a redevelopment plan, primarily in the form of building and site improvements that we ~~believe~~ expect will allow for lease -up of ~~vacancy of~~ the property at improved rental rates. ~~We estimate~~As ~~that~~of ~~the~~December 31, 2013, approximately $10.1 million in redevelopment ~~will~~costs have been incurred out of a total expected cost of approximately $611.89 million (including lease-up costs), ~~which~~and ~~we expect to fund with~~ the ~~property’s~~balance ~~operating~~owed ~~cash~~on ~~flows~~this ~~and~~debt ~~construction~~is ~~draws~~$7.7 ~~under the loan~~million.

Our 5433 joint venture is currently not in compliance with its debt service coverage ratio covenant and the lender may discontinue funding the remaining redevelopment draws provided for in the loan. We do not believe that the joint venture has sufficient cash on hand to fund remaining development costs solely from its operating cash flows. The loan agreement between the lender and our joint venture requires that the lender be notified of any noncompliance. While we, as the general partner of the joint venture, have not yet notified the lender, we expect to do so in the near term in connection with our plan to refinance this debt. Based upon current estimates of fair value, we believe that there is sufficient equity in the property that supports a successful refinancing of the debt and completing the redevelopment. In the near term, we may be required to help fund our portion of the remaining development through operating cash flows and potential additional loans from AmREIT. While the lender could take possession of the property, we do not believe that they will elect to do so; however, all or a portion of our investment of $2.7 million is subject to risk.

We also serve as a guarantor of this debt (see Note 6 of the Notes to Consolidated Financial Statements); however, we do not believe that we would be required to perform under the guarantee as we believe the fair value of the property exceeds the amount of the loan. Accordingly, we believe that our potential exposure is limited to our investment balance. While we believe that we will be able to successfully refinance the debt, we can provide no assurances that we will be able to do so, or under circumstances and timing that allow us to maximize the value of the property.

Casa Linda

On December 8, 2006, through a joint venture arrangement with MIG IV, we acquired a 50% interest in the Casa Linda property, a 324,569 square foot retail shopping center located in Dallas, Texas with our joint venture partner retaining the remaining 50% interest in the joint venture. The property was purchased from an unaffiliated third- party. ~~The property is secured by a $38.0 million, seven-year mortgage loan with a maturity of January 2014. The loan bears an annual interest rate of 5.48% and is interest-only until maturity.~~ Albertson’s is the largest tenant, occupying 59,561 square feet with a lease scheduled to expire in July 2016. Additional tenants include Petco, Starbucks, Wells Fargo, Chili’s, Just Fitness 4 U and Supercuts. The property was originally built between 1946 and 1949. During 2012, we and MIG IV initiated a lease-up strategy for the property that includes certain tenant build-out and site improvements, to support a refinance of the property’s mortgage loan prior to maturity. The joint venture has made progress with signing new leases, but additional improvements and vacancy lease-up are needed. The joint venture will likely require a one-year extension of the loan to complete this strategy so that we can later accomplish a long-term refinance of the property. 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 that we will be successful in obtaining the extension We do not guarantee this debt and our risk of loss is limited to our investment balance in the Casa Linda joint venture of $2.7 million as of December 31, 2012. We expect that our portion of these costs (50%) to be incurred as part of this strategy is approximately $1.5 million. 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.

During 2012, we and MIG IV initiated a lease-up strategy at our Casa Linda property. We expect to fund a total of approximately $1.5 million in capital expenditures representing our 50% share of a lease-up strategy at this property. The lease-up strategy includes certain tenant build-out and site improvements. To date, the joint venture has incurred approximately $1.3 million of the planned capital expenditures. Additionally, the joint venture refinanced the $38.0 million mortgage loan on the property on December 27, 2013, with a four-year, non-recourse loan with the opportunity for an additional funding of approximately $4.5 million for the potential acquisition of an adjacent property.

Woodlake Pointe

On ~~November~~ November 21, 2007, through a joint venture arrangement with MIG IV and ARIC, we ~~acquired~~ acquired a 30% interest in AmREIT Westheimer Gessner, L.P., which owns the ~~Woodlake~~ Woodlake Pointe property, a 82,120 square foot retail shopping center located in in Houston, Texas. ~~Our~~The ~~joint~~remaining ~~venture~~70% ~~partners~~is ~~acquired~~owned ~~the~~by ~~remaining~~affiliated AmREIT ~~70%~~entities, ~~interest in~~MIG ~~the~~IV ~~joint~~(60%) ~~venture.~~and ~~The~~ARIC ~~property~~(10%). ~~was~~During ~~purchased~~2011, ~~from~~we ansigned ~~unaffiliated~~a lease ~~third-party.~~with Ona ~~May~~large ~~29,~~national ~~2008~~fitness tenant, ~~the~~and ~~joint~~we ~~venture~~completed ~~acquired~~construction of a ~~tract~~45,000 square offoot ~~land adjacent~~building toon the ~~Woodlake Pointe~~ property. ~~During~~during ~~November~~2012 ~~2011,~~for ~~AmREIT~~a ~~Westheimer~~total ~~Gessner, L.P.~~redevelopment ~~obtained~~costs aof $6.7 million. ~~construction~~On ~~loan~~September to30, ~~fund~~2013, ~~its~~our ~~redevelopment.~~Woodlake AsPointe ofjoint venture ~~December~~sold ~~31,~~the ~~2012~~45,000 ~~AmREIT~~square ~~Westheimer Gessner,~~foot ~~L.P.~~building ~~had~~and ~~incurred~~a ~~approximately~~land parcel for $512.7 0 million into ~~redevelopment costs,~~an ~~including~~unrelated ~~tenant~~third ~~improvements and leasing costs~~party. ~~Because~~The ~~this~~land ~~property was under redevelopment,~~ and ~~the~~building ~~tenant~~were ofsecured ~~the~~by ~~original~~a $6.6 ~~shopping~~million ~~center~~loan that was ~~temporarily~~ ~~occupying~~repaid ~~the~~in ~~premises,~~full wewith ~~recorded~~proceeds ~~rental income~~ from the ~~original~~sale. We ~~shopping~~received ~~center~~a asdistribution aof ~~reduction~~$1.5 tomillion ~~the~~on ~~basis~~October of1, ~~the~~2013 ~~asset.~~in connection with this sale.

In October 2012, the construction of a new 45,000 square foot building on the Woodlake Pointe property was completed and opened for business. On March 15, 2013, our Woodlake Pointe joint venture entered into a letter of intent to sell a portion of the land and the single tenant building for $12.0 million to an unrelated third party. The land and building are secured by a $6.2 million loan that will be repaid in full with proceeds from the sale. The sale is expected to close in the second quarter of 2013, and our portion of the net cash proceeds (30%) is approximately $1.5 million. We plan to use the proceeds to fund the Casa Linda lease-up strategy (discussed above) and for working capital needs.

Properties in Plano, Texas Owned Through a Joint Venture with an Affiliate of JPMorgan

Through our investment in PTC/BSQ, we purchased a 20% interest in Preston Towne Crossing, Berkeley Square and Preston Park Gold. The joint venture, 80% owned by JPMorgan Asset Management, acquired each of these shopping centers from unrelated third parties. These retail centers, further described below, are adjacent to one another in Plano, Texas, and total 456,935 square feet of GLA.

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~~Preston~~Properties Towne Crossing and Berkeley Square. The 221,077-square-foot Preston Towne Crossing and the 125,333-square-foot Berkeley Square were 80% and 85% occupied, respectively at December 31, 2012 and are located on 35 acres at the northeast corner of Preston Road and West Park Boulevard in Plano~~. The shopping centers were developed during 1986 and 1987 and underwent renovations during 2007 and 2008. During the second quarter of 2011~~, ~~the~~Texas ~~joint~~Owned ~~venture~~Through ~~acquired~~a ~~the~~Joint ~~vacant~~Venture ~~anchor~~with ~~building~~an ~~within~~Affiliate ~~the Preston Towne Crossing shopping center, and we invested $1.8 million (our funding requirement~~ of ~~20%). The properties also include undeveloped land behind Berkeley Square that we believe can be sold to an office or residential developer.~~JPMorgan

InThrough ~~December~~our ~~2011,~~investment ~~the~~in ~~joint~~PTC/BSQ, ~~venture~~we ~~refinanced~~purchased ~~the~~a ~~mortgage~~20% ~~loans~~interest ~~with~~in aPreston ~~$44.4~~Towne ~~million~~Crossing, ~~term~~Berkeley ~~loan~~Square ~~maturing~~and ~~December 27, 2014.~~ Preston Park Gold ~~was added as additional security under the loan~~. The ~~loan~~joint ~~bears~~venture, ~~interest at LIBOR plus 2.6~~80% owned ~~and~~by ~~had~~JPMorgan anAsset ~~outstanding~~Management, ~~balance~~acquired ofeach ~~$44.4 million as~~ of ~~December~~these ~~31,~~shopping ~~2012.~~centers ~~The~~from ~~loan~~unrelated ~~has~~third ~~two~~parties. ~~one-year~~These ~~extension~~retail ~~options~~centers, ~~provided~~further ~~certain~~described ~~conditions~~below, are ~~met.~~ ~~The~~adjacent ~~term loan included $7.0 million held in escrow~~ to ~~fund~~one ~~capital~~another ~~expenditures for the redevelopment of the anchor building as well as improvements to the remaining shopping center. Redevelopment began~~ in ~~January 2012 and is expected to be completed by June 2013. As of December 31~~Plano, ~~2012~~Texas, ~~approximately $6.9~~and ~~million of planned redevelopment costs have been incurred out of a~~ total ~~expected cost of $7.0 million~~443,972 ~~including~~square ~~tenant~~feet ~~improvements and leasing costs. In connection with the planned refinance~~ of ~~this joint venture’s debt (See Note 4 of the Notes to Consolidated Financial Statements), the joint venture is contemplating additional redevelopment of between $5~~GLA.0 ~~million and $6.0 million.~~

~~Major~~Preston Towne Crossing and Berkeley ~~tenants~~Square. ofThe ~~the~~221,081 square-foot Preston Towne Crossing ~~property~~and ~~include~~the 125,333 ~~REI~~square-foot Berkeley Square were 88% and 92% occupied, ~~which~~respectively, ~~occupies~~at 27December 31,~~000~~ ~~square feet~~2013, ~~Trader~~and ~~Joes,~~are ~~which~~located ~~occupies~~on ~~15,133~~35 ~~square~~acres ~~feet~~at ~~and~~the ~~Old~~northeast ~~Navy~~corner of ~~which~~Preston ~~occupies~~Road ~~15,000~~and ~~square~~West ~~feet.~~Park ~~Leases~~Boulevard ~~for~~in ~~these~~Plano. ~~tenants~~The ~~are~~shopping ~~scheduled~~centers towere ~~expire~~developed ~~2015,~~during ~~2022~~1986 and ~~2022,~~1987 ~~respectively.~~and ~~Additional~~underwent ~~tenants~~renovations ~~include~~during ~~Plaza~~2007 ~~Park~~and 2008. ~~Salon~~During the second quarter of 2011, ~~Half~~the ~~Price~~joint ~~Books~~venture acquired the vacant anchor building within the Preston Towne Crossing shopping center, and ~~Ulta~~we invested $1.8 ~~Studio~~million ~~Movie~~(our ~~Grill~~funding ~~Concepts,~~requirement ~~Ltd~~of 20%). isThe ~~the~~properties also include ~~largest~~undeveloped ~~tenant~~land ofbehind Berkeley Square ~~occupying~~that ~~30,977~~we ~~square~~believe ~~feet~~can ~~with~~be asold ~~lease scheduled~~ to ~~expire~~an inoffice or ~~February~~residential ~~2015~~developer.

~~Preston~~We ~~Park~~initiated ~~Gold.~~a ~~The~~redevelopment ~~97,558-square-foot~~in ~~Preston~~January ~~Park~~2012 ~~Gold,~~ which iswas ~~the~~substantially ~~former~~completed ~~Target/Vineyard~~in ~~Antique~~the ~~Mall~~fourth ~~building,~~quarter isof ~~located~~2013. ~~between~~We are ~~Preston~~continuing ~~Towne~~to ~~Crossing~~lease ~~and~~up ~~Berkeley~~the ~~Square~~property. ~~and~~As ~~was~~of ~~redeveloped~~December in31, ~~2007~~2013, approximately $11.6 ~~Major~~million in redevelopment costs have been ~~tenants~~incurred out of ~~the~~a ~~Preston~~total ~~Gold~~expected ~~property~~cost ~~include~~of ~~Gold’s~~$11.9 ~~Gym~~million, ~~which~~including ~~occupies~~tenant ~~49,427~~improvements and leasing costs. Our PTC/BSQ joint ~~square~~venture ~~feet~~refinanced ~~and~~its ~~Chair~~debt ~~King~~on ~~which~~June ~~occupies~~28, 272013,~~438~~ ~~square~~increasing ~~feet~~the total debt from $44.4 ~~Leases~~million to $54.0 million with an additional $4.5 million available for ~~these~~future capital improvements. The loan has a three-year maturity with two one-year ~~tenants~~extension ~~are~~options. ~~scheduled~~The tojoint ~~expire~~venture has also entered into an interest rate swap in ~~October~~an ~~2025~~equal and ~~June~~offsetting ~~2017,~~principal ~~respectively~~amount that converts the variable interest rate on the loan into fixed-rate debt. The joint venture accounts for the swap as a ~~Along~~hedge. ~~with~~The ~~Preston~~fair ~~Town~~value ~~Crossing~~of ~~and~~the ~~Berkeley~~interest ~~Square~~rate ~~described~~swap ~~above~~was a liability of $276,000 ~~Preston~~at December 31, 2013, as recorded by our joint ~~Park~~venture. ~~Gold~~For ~~secured~~the year ended December 31, 2013, our portion of the ~~aforementioned~~decrease in fair value totaled $4455,000 and is recorded as “equity portion of change in fair value of derivatives held by non-consolidated entity” on our Consolidated Statements of Comprehensive Loss.4 ~~million~~We ~~loan~~received ~~that~~a ~~was~~distribution ~~made~~from our PTC/BSQ joint venture in the amount of $1.9 million and ~~December~~repaid ~~2011~~approximately $1.4 million of notes payable-related party.

~~Woodlake~~Major tenants of the Preston Towne Crossing property include REI, which occupies 27,000 square feet, Trader Joes, which occupies 15,133 square feet and Old Navy which occupies 15,000 square feet. Leases for these tenants are scheduled to expire in 2015, 2022 and 2022, respectively. Additional tenants include Plaza Park Salon, Half Price Books and Ulta. Studio Movie Grill Concepts, Ltd. is the largest tenant of Berkeley Square occupying 30,977 square feet with a lease scheduled to expire in February 2015.

~~On August~~Preston 31Park Gold. The 97,558-square-foot ~~2007~~Preston Park Gold, which ~~through~~is athe ~~joint~~former ~~venture~~Target/Vineyard ~~arrangement~~Antique ~~with~~Mall ~~affiliates~~building, ofis ~~our~~located ~~General~~between ~~Partner,~~Preston ~~MIG~~Towne IVCrossing and ~~ARIC,~~Berkeley weSquare ~~acquired~~and awas ~~30%~~redeveloped ~~interest~~ in ~~the~~2007. ~~Woodlake Square~~Major ~~property,~~tenants aof ~~205,522~~the ~~square~~Preston ~~foot~~Gold ~~retail~~property ~~shopping~~include ~~center~~Gold’s ~~located~~Gym inwhich ~~Houston~~occupies 49,427 ~~Texas,~~square ~~from~~feet anand ~~unaffiliated~~Chair ~~third-party.~~King ~~Our~~which ~~joint~~occupies ~~venture~~27,438 ~~partners~~square ~~acquired~~feet. Leases for these ~~the~~tenants ~~remaining~~are ~~70%~~scheduled ~~interest~~to expire in ~~the~~October ~~joint~~2025 ~~venture~~and June 2017, respectively.

InDisposition ~~July 2010, we and our affiliated joint venture partners on our Woodlake Square property, MIG IV and ARIC, entered into a joint venture agreement with a third party. As part~~ of this joint venture agreement, we and our affiliates sold 90% of our interest in the property and retained a 10% ownership interest, which carries a promoted interest in cash flows once an 11.65% preferred return threshold is met on the project. Subsequent to this transaction, we retained a 3% ownership interest in the joint venture. The sale generated cash proceeds of approximately $3.4 million, and the remaining $23.8 million loan on the property was paid in full at closing. Additionally, we recorded an impairment of approximately $185,000 on this investment, which has been included in equity in losses from non-consolidated subsidiaries in our consolidated statements of operations. The new entity in which we now own a 3% interest, VIF II/AmREIT Woodlake L.P., is the borrower under a $20.9 million loan. The maturity of the new loan is July 2013, and it includes a one year extension option. We, along with our affiliate MIG IV are joint and several repayment guarantors on the loan. We continue to account for this investment using the equity method given our ability to significantly influence the property’s operations. Properties

~~Redevelopment~~Our ofOlmos ~~the~~Creek ~~property~~mortgage ~~began~~of in$11.2 ~~July~~million ~~2010~~matured ~~and~~unpaid ~~was~~on ~~completed~~November in1, ~~April~~ 2011. ~~As of~~The ~~December~~lender ~~31,~~subsequently ~~2012,~~sold ~~VIF~~the ~~II/AmREIT~~note ~~Woodlake~~(including ~~L.P.~~the ~~had~~right ~~incurred~~to ~~approximately~~the $6property) in January 2012.8 We ~~million~~entered ~~with~~into a ~~total~~settlement ~~expected~~agreement ~~cost~~with ofthe ~~approximately~~new ~~$8.3~~owner ~~million,~~of ~~including~~the mortgage and ~~additional~~delivered ~~tenant~~the ~~improvements~~property ~~and~~to ~~leasing~~the ~~costs.~~purchaser ~~The~~on ~~property~~February ~~was~~6, ~~88%~~2012, ~~leased~~in asexchange for a release of ~~December~~the ~~31,~~obligations ~~2012~~under the Olmos Creek mortgage. The ~~Randall’s~~settlement isof the ~~largest~~ ~~tenant~~debt ~~with~~resulted ~~59,230~~in a gain on debt extinguishment of approximately ~~leased~~$1.5 ~~square~~million, ~~feet~~which ~~that~~represents ~~expires~~the inamount ~~2036.~~by which the balance ~~Additional~~owed ~~tenants~~under ~~include~~the ~~Walgreen’s,~~note ~~Jos.~~payable A.exceeded ~~Bank~~the ~~Clothiers~~estimated ~~and~~fair ~~Ragin~~value ~~Cajun.~~of the property.

On February 25, 2011, we sold the Market at Lake Houston property to AmREIT, which generated net proceeds of $4.5 million and resulted in a gain of $1.7 million. In conjunction with the sale, AmREIT assumed outstanding debt in the amount of $15.7 million that was secured by the property. This property was owned 60% by us and 40% by an affiliated fund. The transaction was completed at fair market value pursuant to an independent appraisal process.

We owned a 3% interest in the Woodlake Square property, a 205,522 square foot retail shopping center located in Houston, Texas, through a joint venture arrangement with affiliates of our General Partner, MIG IV (6% ownership interest) and ARIC (1% ownership interest) and an unaffiliated third party institutional partner (the remaining 90% ownership interest). The joint venture commenced redevelopment of this property in the third quarter of 2010 and completed the redevelopment in April 2011. On February 23, 2012, the joint venture sold a parcel of land that resulted in a gain of approximately $437,000. Our 3% share of this gain is included in our equity in losses from non-consolidated entities on our consolidated statement of operations. On September 18, 2013, the joint venture sold the shopping center to AmREIT for $41.6 million based on arm’s-length negotiations between AmREIT and our third party institutional partner that owned a 90% interest in the property. Our 3% ownership interest in the joint venture also included a promoted interest in cash flows once an 11.65% preferred return threshold was me on the project. The joint venture recorded a gain on sale of $10.4 million. Our share of this gain is included in our income (loss) from non-consolidated entities. We received a distribution of approximately $1.0 million in connection with this sale.

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Disposition of Property

Our Olmos Creek mortgage of $11.2 million matured unpaid on November 1, 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 purchaser on February 6, 2012 in exchange for a release 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, which represents the amount by which the balance owed under the note payable exceeds the estimated fair value of the property.

Location of Properties and Concentration of Credit Risk

We have geographic concentration in our property holdings as all of our properties are located in Texas. The economies of the Texas metropolitan markets where we own investments have a significant impact on our cash flow and the value of our properties. Although a downturn in the economies of these metropolitan areas could adversely affect our business, general retail and grocery-anchored shopping centers that provide necessity-type items tend to be less sensitive to macroeconomic downturns. We also have tenant concentration in our properties.

The following table shows tenants which occupy 10% or more of the GLA for each property in which we own an interest and the lease expirations of such tenants, each as of December 31, ~~2012~~2013, assuming that tenants exercise no renewal options, but do exercise any early termination rights.

Property/Tenant	Industry		GLA		Percentage of ~~Total~~Property GLA		Year of Lease Expiration
Lantern Lane
Rice Food Markets, Inc. (acquired by Fresh Market)		Grocery		21,450		26%		2018
The Fresh Market, Inc.		Grocery		21,450		26%		2018
CVS Pharmacy		~~Grocery~~Pharmacy		11,884		15		2038
Fidelity Investments		Banking		9,578		12		2018
Westside Plaza
Trend Mall		Specialty Retail		24,500		57		2016
Fadi’s Mediterranean Delight		Dining		5,125		12		~~2012~~2017
Berkeley Square
Movie Grill Concepts, Ltd.		Entertainment		30,977		25		2015
Casa Linda
Albertson’s		Grocery		59,561		18		2016
Preston Park Gold
Gold’s Gym		Gym		49,427		51		2025
Chair King		Specialty Retail		27,438		28		2017
Preston Towne Crossing
Recreational Equipment, Inc.		Sporting Goods		27,000		1216		2015
Woodlake Pointe
Urban Rug Company		Specialty Retail		82,120		65100		~~2013~~2014
LA Fitness		Gym		45,000		35		2028
Woodlake Square
Randall’s		Grocery		59,230		37		2036

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Lease Expirations

The following table shows lease expirations for our two consolidated properties as of December 31, ~~2012~~2013, during each of the next ten years and thereafter, assuming that tenants exercise no renewal options, but do exercise ~~early~~any ~~termination~~early termination rights.

Year of Lease Expiration	Total Number of Leases		GLA		~~Annualized~~ABR ~~Base Rent~~ (1)		Percentage of Total ~~Annualized Base Rent~~ABR
2013		3		12,072	$	252,000		10.6	%
Vacant		-		-		-		-
2014		2		57,~~476~~345		~~120~~130,~~000~~719		5.1	%
2015		1		3,000		7778,~~000~~750		3.3	%
2016		34		2528,~~672~~733		~~482~~554,~~000~~159		~~20.3~~22	%
2017		36		16,425		461,~~000~~009		~~19.4~~18	%
2018		65		3340,~~728~~870		~~502~~734,~~000~~941		~~21.1~~29	%
2019		-1		-2,700		-64,800		~~0.0~~3	%
2020		-		-		-		~~0.0~~-	%
2021		-		-		-		~~0.0~~-	%
2022		3		12,375		~~243~~253,~~000~~315		10.2	%
Thereafter		1		11,884		238,000		10.0	%
2023		1		1,150		31,050		1	%
Totals		22		120,632	$	2,375,000		100.0	%
Thereafter		1		11,990		237,680		9	%
Totals		24		124,588		2,546,423		100	%

(1) ~~Annualized~~ABR ~~base rent~~ is calculated by multiplying (i) monthly base rent as of December 31, ~~2012~~2013, by (ii) 12.

The following table shows lease expirations for our ~~seven~~six non-consolidated ~~properties~~ properties as of December 31, ~~2012~~2013, during each of the next ten years and thereafter, assuming that tenants exercise no renewal options, but do exercise ~~early~~ any early termination rights.

Year of Lease Expiration	Total Number of Leases		GLA		~~Annualized~~ABR ~~Base Rent~~ (1)		Percentage of Total ~~Annualized Base Rent~~ABR
2013 (2)		46		186,327	$	1,642,000		12.3	%
Vacant		-		137,996		-		-
2014		29		56,136		1,175,000		8.8	%
2014 (2)		41		155,052		1,582,261		12	%
2015		3936		~~149~~142,~~003~~588		2,~~398~~205,~~000~~856		~~18.0~~17	%
2016		3029		~~132~~128,~~902~~597		1,~~754~~662,~~000~~506		13.2	%
2017		29		~~101~~97,~~669~~774		1,~~799~~733,~~000~~596		13.5	%
2018		526		1774,~~123~~635		~~269~~1,~~000~~351,729		~~2.0~~11	%
2019		610		1319,~~073~~232		~~264~~363,~~000~~387		~~2.0~~3	%
2020		23		810,~~858~~345		~~122~~223,~~000~~161		~~0.9~~2	%
2021		76		4442,~~898~~698		~~753~~689,~~000~~713		5.7	%
2022		1310		8077,~~119~~388		1,~~536~~214,~~000~~867		~~11.5~~9	%
Thereafter		9		178,167		1,619,000		12.1	%
2023		10		48,810		1,233,815		10	%
Totals		215		968,275	$	13,331,000		100.0	%
Thereafter		2		49,427		667,264		5	%
Totals		202		984,542		12,928,155		100	%

	(1)	~~Annualized~~ABR ~~base rent~~ is calculated by multiplying (i) monthly base rent as of December 31, ~~2012~~2013, by (ii) 12.
	(2)	Includes the expiration of a temporary lease with The Urban Rug Company for 82,120 square feet of Woodlake Pointe.

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ITEM 3. 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 proceeding that a governmental authority is contemplating against us.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information and Holders

As of March 2827, ~~2013~~2014, we had 2,~~844~~833 units outstanding held by 1,~~190~~197 limited partners.

There is no established public trading market for our Units. The Units, which are “restricted securities” as defined in Rule 144 promulgated by the SEC under the Securities Act, must be held indefinitely unless they are subsequently registered under the Securities Act and any applicable state securities laws or unless, upon the advice of counsel satisfactory to us, the Units are sold in a transaction that is exempt from the registration requirements of such laws. We have not agreed to register under the Securities Act for sale by Limited Partners and there were no Units that are being, or have been publicly proposed to be, publicly offered by us. No Units have been sold since we closed the Offering on October 31, 2006.

Distributions

We have reported a cumulative net loss for GAAP and tax purposes, primarily due to the non-cash charges associated with depreciation of our real estate assets. Accordingly, all of the distributions we have paid constitute a return of capital to our Limited Partners for tax purposes. We suspended all distribution payments in July 2009, and do not anticipate reinstating distributions until improvements in the real estate and liquidity markets warrant such reinstatement.

Since our inception, we have redeemed 11.2 Units. As of June 30, 2009, we suspended all future redemptions of Units.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7. 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. See also “Cautionary Note Regarding Forward Looking Statements” preceding Part I of this Annual Report.

OVERVIEW AND EXECUTIVE SUMMARY

We are a Texas limited partnership formed in April 2005 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 General Partner is a Texas corporation and wholly-owned subsidiary of AmREIT, an SEC reporting Maryland corporation ~~that~~whose ~~has~~common ~~a class of~~stock ~~securities~~is listed on the NYSE and that has elected to be taxed as a REIT. AmREIT and its predecessors have sponsored and advised 2021 partnerships, or ~~similar~~ similar investment funds formed for the purpose of investing in properties during their 29-year history. Our General Partner has the exclusive right to manage our business and affairs on a day-to-day basis pursuant to our limited ~~partnership~~ 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~~ 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. Our General Partner invested $1,000 in us in exchange for its general partner interest and invested $800,000 in us in exchange for 32 Units.

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Rental income accounted for 100% of our total revenue during the years ended December 31, ~~2012~~2013, ~~2011~~2012, and ~~2010~~2011, 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. As of December 31, ~~2012~~2013, our properties had an average occupancy ofrate ~~83%, and the average leverage ratio~~ of ~~the properties in which we have an investment was~~ approximately 5588%~~, with 51% of such debt carrying a fixed rate of interest~~.

Our Portfolio and Joint Ventures

As of December 31, ~~2012~~2013, our investments included two wholly-owned properties comprising approximately 125,000 square feet of GLA and ~~seven~~six properties in which we own a non-controlling 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. We acquired all of these properties subsequent to our formation.

Our ~~Olmos~~joint ~~Creek~~ventures ~~mortgage~~are ofstructured ~~$11.2~~as ~~million~~limited ~~matured~~partnerships ~~unpaid~~or onlimited ~~November 1, 2011. The~~liability ~~lender~~companies ~~subsequently~~in ~~sold~~which ~~the~~we ~~note~~own ~~(including~~interests. ~~the~~Each ~~right~~of tothese ~~the~~limited ~~property)~~partnerships inor ~~January~~limited ~~2012,~~liability ~~and~~companies wedirectly ~~entered~~owns ~~into~~one aor ~~settlement~~more ~~agreement~~of ~~with~~ the ~~new~~six ~~owner of~~underlying ~~the~~properties. ~~mortgage~~Each ~~and~~general ~~delivered~~partner ~~the~~or ~~property~~managing tomember ~~the~~is ~~purchaser~~responsible ~~on February 6, 2012 in~~for ~~exchange~~establishing ~~for~~policies aand ~~release~~operating ofprocedures ~~the~~with ~~obligations~~respect ~~under~~to the ~~Olmos~~business ~~Creek mortgage. As a result,~~and weaffairs noof ~~longer~~the ~~own~~underlying ~~this~~ property. WeHowever, ~~recorded~~we aand ~~gain~~each ~~on extinguishment~~ of ~~debt~~our ~~of $1.5~~joint ~~million during the first quarter of 2012, which represents the amount by~~venture ~~which~~partners ~~the~~must ~~balance~~approve ~~owed~~all ~~under~~significant ~~the~~decisions ~~note~~involving ~~payable exceeds~~ the ~~estimated fair value of the property~~properties.

~~Our~~On ~~joint~~September ~~ventures~~18, ~~are~~2013, ~~structured~~our asWoodlake ~~limited~~Square ~~partnerships~~joint orventure ~~limited~~sold ~~liability companies~~the inWoodlake ~~which we own interests. Each of these limited partnerships or~~Square ~~limited~~shopping ~~liability~~center ~~companies~~to ~~directly~~AmREIT ~~owns~~for ~~one or more of the seven underlying properties~~$41.6 ~~Each~~million, ~~general~~and ~~partner~~we orreceived ~~managing~~a ~~member~~distribution ~~is responsible for~~of ~~establishing~~approximately ~~policies~~$1.0 ~~and~~million. ~~operating~~We ~~procedures~~subsequently ~~with~~repaid ~~respect~~approximately to$1.6 ~~the business and~~million ~~affairs~~ of ~~the~~notes ~~underlying~~payable ~~property.~~- ~~However,~~related weparty ~~and~~in ~~each~~September of2013 ~~our~~from ~~joint~~these ~~venture~~distributions and ~~partners~~from ~~must~~cash ~~approve~~on ~~all significant decisions involving the properties~~hand.

On ~~April~~September 1030, ~~2012~~2013, ~~5433~~our ~~Westheimer,~~Woodlake ~~LP,~~Pointe anjoint ~~investment~~venture ~~accounted~~sold ~~for~~a single-tenant ~~under~~building ~~the equity~~and ~~method,~~land ~~sold~~parcel ~~the~~at ~~152-room~~our ~~hotel~~Woodlake Pointe property constructed for a national fitness tenant for $2812.70 million, ~~and~~to ~~the~~an ~~net~~unrelated ~~proceeds were~~third ~~used~~party. toThe ~~pay~~land ~~down~~and ~~the~~building ~~loan~~were secured ~~balance~~by toa $36.86 million. ~~5433~~loan ~~Westheimer,~~that LPthat was repaid in full with proceeds from ~~refinanced~~the ~~this~~sale. ~~note~~We received a distribution of $1.5 million on October 191, ~~2012.~~2013 ~~See~~in connection ~~further~~with ~~discussion~~this insale. ~~Note~~We 4subsequently repaid approximately $650,000 of ~~the~~notes ~~Notes~~payable to- ~~Consolidated~~related ~~Financial~~party ~~Statements~~and ~~regarding~~retained the ~~planned redevelopment~~remainder of ~~this~~the ~~property.~~proceeds as cash on hand.

SUMMARY OF CRITICAL ACCOUNTING POLICIES

Our ~~results~~ results of operations and financial condition, as reflected in the accompanying consolidated financial statements and related footnotes, are subject to management’s evaluation and interpretation of business conditions, retailer performance, changing capital market conditions and other factors, which could affect the ongoing viability of our tenants. Management believes the most critical accounting policies in this regard are revenue recognition, regular evaluation of whether the value of a real estate asset has been impaired, accounting for the investment in real estate assets, ~~and~~ accounting for the investment in non-consolidated entities, allowance for uncollectible accounts and accounting for real estate acquisitions. We evaluate our assumptions and ~~estimates~~ estimates on an on-going basis. We base our estimates on historical experience as well as various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates, perhaps in material adverse ways, and those estimates could be different under ~~different~~ different assumptions or conditions.

Revenue Recognition

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~~ properties provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases, revenue is recognized on a straight-line basis over the terms of ~~the~~ 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 ~~all~~ cases, ~~we have determined that we are the owner of any tenant improvements that we fund pursuant to the lease terms. 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.

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Real Estate ~~Development~~Redevelopment

Expenditures related to the ~~development~~redevelopment of real estate are carried at cost, which includes capitalized carrying charges, acquisition costs and development costs. Carrying charges, primarily interest, real estate taxes, insurance and loan acquisition costs, and direct and indirect development costs related to buildings under ~~construction~~ construction are capitalized as part of construction in progress. The capitalization of such costs ceases at the earlier of ~~one year from~~ the date of completion of ~~major~~ major construction or when the property, or any completed portion, becomes ~~available~~ available for occupancy.

Depreciation

Depreciation is computed using the straight-line method over an estimated useful life of up to 39 years for buildings and site improvements and over the life of the respective leases for tenant improvements. Leasehold estate properties, where we own the building and improvements but not the related ground, are amortized over the life of the lease. The determination of useful lives requires judgment and includes significant estimates which ~~management~~we ~~reassesses~~reassess as circumstances warrant.

Impairment of Long Lived Assets

We 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 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~~For our multi-building retail centers, we consider the ~~assumptions~~entire ~~include~~retail ~~projecting~~center ~~lease~~as the asset group for purposes of our impairment analysis. We review our investments in non-upconsolidated ~~periods,~~entities ~~holding~~for ~~periods,~~impairment based ~~cap~~on ~~rates,~~a similar review of the properties held by the investee entity. No ~~rental~~impairment ~~rates,~~charges ~~operating~~were ~~expenses,~~recognized ~~lease~~during ~~terms,~~the ~~tenant~~years ~~credit-worthiness~~ended December 31, ~~tenant~~2013 and ~~improvement~~2012. ~~allowances~~During the year ended December 31, ~~terminal~~2011, ~~sales~~we ~~value~~recorded ~~and~~a ~~certain~~$2.1 ~~macroeconomic~~million ~~factors~~impairment related to ~~among~~our ~~other~~Olmos ~~assumptions~~Creek toProperty be(See ~~made~~Note ~~for~~3 ~~each~~of ~~property.~~the Notes to the Consolidated Financial Statements).

We performed an impairment assessment on our Olmos Creek property during the third quarter of 2011 given the impending loan maturity in November 2011. We determined that the property was impaired based upon our estimate of its fair value if sold, which was $9.6 million. Accordingly, we recorded an impairment of approximately $2.1 million during the year-ended December 31, 2011. The debt matured unpaid on November 1, 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 new owner on February 6, 2012 in exchange for a release of the obligations under the Olmos Creek mortgage. As a result, we no longer own this property. We recorded a gain on the extinguishment of debt of approximately $1.5 million during the first quarter of 2012, which represents the amount by which the balance owed under the note payable exceeds the estimated fair value of the property.

Investment in Non-Consolidated Entities

As of of December 31, ~~2012~~2013, we had ownership interests in ~~nine~~eight real estate properties, two of which are consolidated into our financial statements. Although we exercise significant influence over the activities of the remaining six ~~seven~~ properties, we do not have a controlling financial interest in them. Accordingly, all of our real estate investments in these properties are reported under the equity method of accounting. Our joint ventures recognize revenues from rents and tenant reimbursements in the same manner as discussed in the “Revenue Recognition” section above; however, we record our percentage interest in the earnings and losses of these entities ~~in our statement of operations~~ on a net basis in equity in losses from non-consolidated entities on our consolidated statements of ~~operations~~comprehensive loss.

We review our investments in non-consolidated entities for other-than-temporary impairment. Accordingly, we review the investments held by the underlying investee entities for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. We determine whether an impairment in value occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the residual value of the investment, with the carrying value of the individual investment. 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 investment. An impairment was recorded on our Woodlake Square property during the year ended December 31, 2010. Our portion of such impairment was approximately $185,000 and was recorded in equity in losses from non-consolidated subsidiaries.

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RESULTS OF OPERATIONS

Factors which may influence our results of operations from period to period include:

Rental Income - The amount of rental income generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from unscheduled lease terminations at levels not less than the existing rental rates. Negative trends in one or more of these factors could adversely affect our rental income in future periods.

Scheduled Lease Expirations - During 2013, 9.6% of the total square footage of our two consolidated properties expires, and 15.5% of the total square footage of our non-consolidated properties expires. Our leasing strategy for 2013 focuses on negotiating renewals for leases scheduled to expire during the year and identifying new tenants or existing tenants seeking additional space to occupy the square footage for which we are unable to negotiate such renewals. 16

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Scheduled Lease Expirations - During 2014, 5.9% of the total square footage of our two consolidated properties expires, and 15.7% of the total square footage of our non-consolidated properties expires. Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the year and identifying new tenants or existing tenants seeking additional space to occupy the square footage for which we are unable to negotiate such renewals.

Comparison of the year ended December 31, 2013, to the year ended December 31, 2012

Revenue. Revenue increased approximately $369,000 for the year ended December 31, 2013, as compared to 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 December 31, 2012 to approximately 100% at December 31, 2013, for our consolidated properties.

Legal and professional. Legal and professional fees decreased approximately $90,000 for the year ended December 31, 2013, as compared to 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.

Depreciation and amortization. Depreciation and amortization expense decreased approximately $94,000 for the year ended December 31, 2013, as compared to 2012. This decrease primarily due to several assets from our Lantern Lane and Westside Plaza becoming fully depreciated or amortized in 2012.

Interest expense. Interest expense decreased $399,000 during the year ended 2013 as compared to the same period in 2012. This decrease is due to loan costs becoming fully amortized for our Lantern Lane property and a lower outstanding balance on our notes payable – related party after repaying $5.9 million during 2013.

Income (loss) from non-consolidated entities. Loss from non-consolidated entities decreased approximately $1.0 million for the year ended December 31, 2013, as compared to 2012. The resulting decrease in loss is primarily related to 1) our portion of the gain on sale of Woodlake Square of approximately $10.4 million with our pro rata share of the gain representing approximately $311,000, 2) a one-time gain on the favorable settlement of an environmental liability by our Casa Linda property, our portion of which was $112,000 and 3) increased income due to lease-up of our non-consolidated properties as compared to the respective period in 2012. Additionally, we incurred a loss of approximately $94,000 as a result of the sale of the 152-room hotel during 2012 by our 5433 Westheimer joint venture with no similar loss in 2013. The decrease in loss was partially offset by our portion of an impairment (approximately $173,000) on the sale of the single-tenant building and land parcel by our Woodlake Pointe joint venture. See further discussion of our sales of our investments in non-consolidated investments as discussed in Notes 4 of the Notes to Consolidated Financial Statements.

Gain on debt extinguishment. During the year ended December 31, 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 year ended December 31, 2013. See Note 3 in the Notes to our Consolidated Financial Statements for further discussion on the disposition of our Olmos Creek property.

Comparison of the year ended December 31, 2012 to the year ended December 31, 2011

Revenue. Revenue increased approximately $309,000 for the year ended December 31, 2012, as compared to 2011 ~~($3~~.1 ~~million in 2012 versus $2.8 million in 2011).~~ The increase was primarily attributable to (i) increases in occupancy at our Lantern Lane property with two new additional tenants representing approximately $186,000 of the increase and (ii) a new tenant at Westside Plaza that took occupancy of the former DSW Shoe Store space after the first quarter of 2011 representing approximately $51,000 of the increase.

Asset management fees – related party. Asset management fees – related party decreased approximately $252,000 for the year ended December 31, 2012 as, as compared to 2011 ~~($235,000 in 2012 versus $487,000 in 2011)~~. Our asset management fees are calculated based upon the net value of our assets which has declined.

Property expense. Property expense increased approximately $6986,000 for the year ended December 31, 2012, as compared to 2011 ~~($944,000 in 2012 versus $875,000 in 2011)~~. This increase was primarily due to approximately $75,000 of non-reimbursable repairs and maintenance at our Lantern Lane property.

Equity in Losses from Non-Consolidated Entities. Equity in losses from non-consolidated entities increased approximately $104,000 for the year ended December 31, 2012 as compared to 2011 ($1.3 million in 2012 versus $1.2 million in 2011). These amounts represent our ownership portion of our joint ventures’ net income or loss for the period. The increase was primarily due to a loss recorded on the sale of the 152-room hotel by our 5433 Westheimer joint venture of approximately $94,000 (representing our portion of the loss) as discussed in Note 4 of the Notes to Consolidated Financial Statements.

Income (Loss) from Discontinued Operations. Income (loss) from discontinued operations increased by $2.2 million during 2012 as compared to 2011 ($1.5 million of income in 2012 versus $715,000 of loss in 2011). Our income from discontinued operations during 2012 was the result of the gain on debt extinguishment of $1.5 million recorded during the first quarter of 2012 when we delivered the Olmos Creek property to the lender as full settlement of the debt. During 2011, we recorded $2.1 million of impairment expense on our Olmos Creek property, which was partially offset by a gain of $1.7 million from the sale of our Market at Lake Houston property. See also Note 3 of the Notes to Consolidated Financial Statements for further discussion of our discontinued operations.

Net (Income) Loss Attributable to Non-Controlling Interest. Net income attributable to non-controlling interest of $671,000 for 2011 represents the gain recognized from the sale of the Market at Lake Houston property in February 2011, a portion of which was attributable to a non-controlling interest. Since we no longer have consolidated subsidiaries in which we own less than 100% of the ownership interest, there was no amount for the year ended December 31, 2012.

Comparison of the year ended December 31, 2011 to the year ended December 31, 2010

Revenue. Revenue decreased approximately $242,000 for the year ended December 31, 2011 as compared to 2010 ($2.8 million in 2011 versus $3.0 million in 2010). The decrease is primarily attributable to the DSW Shoes vacancy at Westside Plaza and the Blockbuster vacancy at Lantern Lane. We subsequently increased occupancy with a new tenant at our Westside Plaza property, although at a rental rate lower than the previous tenant.

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~~Asset~~Equity ~~management~~in ~~fees~~losses –from ~~related~~non-consolidated ~~party~~entities. ~~Asset~~Equity ~~management~~in losses ~~fees~~from –non-consolidated ~~related~~entities ~~party decreased~~increased approximately $~~131~~104,000 for the year ended December 31, ~~2011~~2012, as compared to ~~2010~~2011. ~~($487,000~~These inamounts ~~2011~~represent ~~versus~~our ownership ~~$618,000~~portion inof ~~2010).~~our ~~Our~~joint ~~asset management~~ventures’ ~~fees~~net ~~are~~income ~~calculated~~or ~~based~~loss ~~upon~~for the ~~net~~period. ~~value~~The increase was primarily due to a loss recorded on the sale of the 152-room hotel by our ~~assets~~5433 Westheimer joint venture of approximately $94,000 ~~which~~(representing our ~~decreased~~portion ~~between~~of the ~~2010~~loss) ~~and~~as ~~2011~~discussed ~~periods~~in Note 4 of the Notes to Consolidated Financial Statements.

~~Legal~~Income ~~and~~(loss) ~~Professional~~from ~~Fees~~discontinued operations. ~~Legal~~Income ~~and~~(loss) from ~~professional~~discontinued ~~fees~~ operations increased ~~approximately~~by $~~191,000~~2.2 ~~for~~million during 2012 as compared to 2011. Our income from discontinued operations during 2012 was the ~~year~~result ~~ended~~of the ~~December~~gain ~~31,~~on ~~2011~~debt asextinguishment of $1.5 million recorded during the first ~~compared~~quarter of 2012 when we delivered the Olmos Creek property to ~~2010~~the ~~($385,000~~lender inas full settlement of the debt. During 2011, ~~versus~~we recorded $~~194~~2.1 million of impairment expense on our Olmos Creek property,~~000~~ inwhich ~~2010)~~was partially offset by a gain of $1.7 ~~This~~million ~~increase~~from ~~was~~the sale of our Market at Lake Houston property. See ~~due~~also Note 3 of the Notes to aConsolidated ~~non-recurring~~Financial ~~audit~~Statements offor ~~one~~further discussion of our ~~non-consolidated~~discontinued ~~entities~~operations.

~~Depreciation~~Net ~~and~~(income) ~~Amortization.~~loss ~~Depreciation~~attributable ~~and~~to ~~amortization~~non-controlling Interest. Net ~~decreased~~income ~~approximately~~attributable to non-controlling interest of $~~204~~671,000 for 2011 represents the ~~year~~gain ~~ended~~recognized ~~December~~from ~~31,~~the ~~2011~~sale ~~as compared~~of tothe ~~2010~~Market ~~($1.1~~at ~~million~~Lake Houston property in February 2011, ~~versus~~a ~~$1.3~~portion ~~million~~of inwhich ~~2010). This decrease~~ was ~~primarily~~attributable ~~due~~ to a ~~decrease~~non-controlling interest. inSince ~~amortization~~we ofno ~~in-place~~longer ~~leases~~have ~~as a~~consolidated ~~substantial~~subsidiaries ~~portion~~in ofwhich ~~those~~we ~~costs~~own less ~~became~~than ~~fully~~100% ~~amortized~~of ~~during~~ the ~~first quarter~~ownership ofinterest, ~~2011~~there orwas ~~were~~no ~~written~~amount ~~off~~for ~~due~~the toyear ended ~~tenant~~December ~~vacancies~~31, 2012.

Equity in Losses from Non-Consolidated Entities. Equity in losses from non-consolidated entities decreased approximately $2.4 million for the year ended December 31, 2011 as compared to 2010 ($1.2 million in 2011 versus $3.6 million in 2010). These amounts represent our ownership portion of our joint ventures’ net income or loss for the period. The decrease was due to increased depreciation expense on our Woodlake Square property during 2010. Our joint venture reassessed and shortened the estimated useful lives of various buildings consistent with its plan to demolish such buildings as part of the redevelopment, which led to increased depreciation expense on the property during the period.

Income (Loss) from Discontinued Operations. Income (loss) from discontinued operations increased by $237,000 million during 2011 as compared to 2010 ($715,000 of net loss in 2011 versus $478,000 of loss in 2010). During 2011, we recorded $2.1 million of impairment expense on our Olmos Creek property, which was partially offset by a gain of $1.7 million from the sale of our Market at Lake Houston property. See also Note 3 of the Notes to Consolidated Financial Statements for further discussion of our discontinued operations.

Net (Income) Loss Attributable to Non-Controlling Interest. The net income attributable to non-controlling interest of $671,000 increased approximately $714,000 for the year ended December 31, 2011 as compared to a $43,000 loss in 2010. The increase in income attributable to non-controlling interests was due to the sale of The Market at Lake Houston in the first quarter of 2011. The sale generated a $1.7 million gain, of which 40% was attributable to one of our affiliates that owned a 40% non-controlling interest in the property prior to the sale.

LIQUIDITY AND CAPITAL RESOURCES

AsCash and cash equivalents are our primary sources of liquidity. As of December 31, 2013, ~~2012~~ and ~~2011~~December 31, 2012, our cash and cash equivalents totaled approximately $31.2 million and approximately $13.82 million, respectively.

~~Our~~Over ~~short-term~~the ~~liquidity~~past ~~requirements~~several ~~consist~~years, ~~primarily of operating expenses and other expenditures associated with~~ our ~~properties,~~results ~~regular~~of ~~debt~~operations ~~service requirements, capital expenditures~~ and, ~~potentially,~~valuations ~~acquisitions.~~of ~~We anticipate that~~ our ~~primary long-term liquidity requirements will include, but~~real ~~will~~estate ~~not~~assets behave ~~limited~~been ~~to,~~negatively ~~operating~~impacted ~~expenses,~~by ~~making~~overall ~~scheduled~~economic ~~debt~~conditions ~~service~~from ~~payments,~~the ~~funding renovations~~recent, ~~expansions,~~severe ~~and~~recession. ~~other~~Most ~~significant~~of ~~capital expenditures for~~ our ~~existing~~retail ~~portfolio of~~ properties ~~and~~were ~~acquiring new assets~~purchased ~~compatible~~prior ~~with~~to ~~our~~2008 ~~investment~~when ~~strategy,~~retail ~~subject~~real toestate ~~the~~market ~~availability~~prices ~~of attractive~~were ~~properties~~much higher, and our property ~~ability~~valuations towere ~~consummate~~negatively ~~acquisitions~~impacted ~~on satisfactory~~by ~~terms~~these market dynamics.

~~Historically,~~As a result, we have faced significant liquidity challenges over the last several years. ~~Other~~ However, other than with our Olmos Creek property, (which was delivered to the lender as ~~discussed~~settlement ~~below~~of unpaid debt in February 2012), we ~~have been~~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) ~~sales~~selling of certain of ~~our~~ our properties and investments in non-consolidated entities, (5)see ~~obtaining funds~~Note ~~through~~4 ~~additional~~of ~~borrowings~~the Notes ~~from~~to ~~AmREIT~~Consolidated ~~and/or~~Financial ~~(6)~~Statements ~~selling~~related ~~certain~~to of our investments, ~~including the~~in ~~anticipated~~non-consolidated ~~sale~~entities) ~~of a single tenant building~~ and/or ~~portion~~(5) ofobtaining ~~land~~funds bythrough ~~our~~additional ~~Woodlake~~borrowings ~~Pointe~~from ~~joint venture~~AmREIT. ~~See also Note 4 of the Notes to Consolidated Financial Statements.~~

~~Our~~Specific ~~Olmos~~transactions ~~Creek~~during ~~mortgage~~2013 ofthat ~~$11.2~~improved ~~million~~our ~~matured~~liquidity ~~unpaid~~were onas November 1, 2011. The lender subsequently sold the mortgage (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 purchaser on February 6, 2012 in exchange for a release of the obligations under the Olmos Creek mortgage. As a result, we no longer own this property. follows:


	•	Our PTC/BSQ joint venture refinanced its debt on June 28, 2013, increasing the total debt from $44.4 million to $54.0 million, and we received a distribution from our PTC/BSQ joint venture in the amount of $1.9 million.
	•	On September 18, 2013, our Woodlake Square joint venture sold the Woodlake Square shopping center to AmREIT for $41.6 million, and we received a distribution of approximately $1.0 million.
	•	On September 30, 2013, our Woodlake Pointe joint venture sold a single-tenant building and land parcel at our Woodlake Pointe property for $12.0 million to an unrelated third party. We received a distribution of $1.5 million on October 1, 2013 in connection with this sale.

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.

During 2012, we and MIG IV initiated a lease-up strategy at our Casa Linda property (a 50% joint venture between us and MIG IV). We expect to fund a total of approximately $1.5 million in capital expenditures representing our 50% share of a lease-up strategy at this property. The lease-up strategy includes certain tenant build-out and site improvements. To date, the joint venture has incurred approximately $1.3 million of the planned capital expenditures. Additionally, the joint venture refinanced the $38.0 million mortgage loan on the property on December 27, 2013, with a four-year, non-recourse loan with the opportunity for an additional funding of approximately $4.5 million for the potential acquisition of an adjacent property.

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OnWe ~~November~~continue ~~30,~~to ~~2012,~~work wewith ~~modified~~the debt servicer on the ~~terms~~Westside Plaza debt (see Note 6 of ~~our~~the ~~Lantern~~Notes ~~Lane~~to ~~mortgage~~Consolidated Financial Statements) to ~~extend~~address various ~~the~~alternatives ~~due~~for ~~date~~relief either through reduction of escrow requirements, waiver of penalties and weforgiveness ~~entered~~of ~~into~~principal aor ~~second~~all ~~loan~~of ~~for~~the $2above.2 ~~million~~We believe that we will be successful in ~~net~~this ~~cash proceeds~~endeavor; tohowever, ~~us.~~we Wemay ~~subsequently~~be ~~made~~ultimately called upon to repay a $1portion ~~million~~of ~~payment~~the ondebt ~~our~~in ~~loan~~order to ~~AmREIT on~~successfully ~~December~~renegotiate 4,or refinance ~~2012~~the debt. ~~The~~In ~~remaining~~the ~~cash~~event ~~was~~we ~~retained~~do ~~for~~not ~~working~~have ~~capital~~sufficient ~~needs to~~liquidity ~~fund~~for ~~our~~such ~~portion~~a repayment, ~~(50%)~~we ofmay ~~the~~need ~~lease-up~~to ~~strategy~~look atto our ~~Casa~~General ~~Linda~~Partner ~~property in~~to ~~2013~~borrow ~~(discussed below)~~additional funds.

WeOur 5433 ~~expect~~joint toventure ~~fund~~is ~~approximately~~currently ~~$1.5~~not ~~million~~ in ~~capital~~compliance ~~expenditures~~with ~~over~~its ~~the~~debt ~~next two~~service ~~years~~coverage atratio ~~our~~covenant ~~Casa Linda property (a 50% joint venture between us~~ and ~~MIG IV)~~the ~~representing~~lender ~~our~~may ~~50%~~discontinue ~~share of a lease-up strategy at this property. The~~funding ~~lease-up~~the ~~strategy~~remaining ~~includes~~redevelopment ~~certain~~draws ~~tenant~~provided ~~build-out~~for ~~and~~in ~~site improvements, to support a refinance of~~ the ~~property’s $38~~loan.0 ~~million~~We ~~mortgage~~do ~~that~~not ~~matures January~~believe ~~2014.~~that ~~The~~the joint venture has ~~made~~sufficient ~~progress~~cash ~~with~~on ~~signing new leases, but~~hand ~~additional~~to ~~improvements~~fund ~~and~~remaining ~~vacancy~~development ~~lease-up~~costs ~~are~~solely ~~needed.~~from ~~The~~its ~~joint~~operating ~~venture~~cash ~~will likely~~flows. ~~require~~Based aupon ~~one-year~~current ~~extension~~estimates of ~~the~~fair ~~loan~~value, towe ~~complete this strategy so~~believe that wethere ~~can~~is ~~later~~sufficient ~~accomplish~~equity ain ~~long-term refinance of~~ the property. Wethat ~~believe we~~supports ~~will~~a be successful inrefinancing ~~obtaining~~of athe ~~one-year~~debt ~~extension~~and ~~based~~completing onthe ~~our~~redevelopment. ~~preliminary~~In ~~discussions with~~ the ~~lending~~near ~~agent; however~~term, ~~no assurances can be given that~~ we ~~will~~may be ~~successful~~required into ~~obtaining~~help ~~the~~fund ~~extension. We do not guarantee this debt and~~ our ~~risk~~portion of ~~loss is limited to our investment balance in~~ the ~~Casa~~remaining ~~Linda~~development ~~joint~~through ~~venture~~operating ofcash ~~$2.7~~flows ~~million~~and ~~as of December 31, 2012. We~~potential ~~expect~~additional toloans ~~fund our capital requirements with cash on hand, cash proceeds~~ from ~~the~~ ~~anticipated~~AmREIT. ~~sale~~See ofalso aNote ~~portion~~4 of the ~~land~~Notes ~~and~~to ~~single~~Consolidated ~~tenant~~Financial ~~building at our Woodlake Pointe property (discussed below) and operating cash flows~~Statements.

OnAlthough ~~March~~no ~~15,~~assurance ~~2013,~~can ~~our~~be ~~Woodlake~~given, ~~Pointe~~we ~~joint~~believe ~~venture~~that ~~entered~~we ~~into~~will abe ~~letter~~able ofto generate ~~intent~~liquidity sufficient to ~~sell~~continue ato ~~portion~~execute ofour ~~the~~strategic ~~land~~plan ~~and~~through a combination ~~single~~of ~~tenant~~the ~~building~~foregoing atliquidity ~~our~~initiatives. ~~Woodlake~~Historically, AmREIT has ~~Pointe~~deferred ~~property~~payment ~~for~~of ~~$12.0~~advisory ~~million~~fees toand anpayment ~~unrelated~~of ~~third~~notes ~~party.~~payable ~~The~~– ~~land~~related ~~and~~party ~~building~~to ~~are~~the ~~secured~~extent bysuch adeferral $6of payments was necessary for our continued operation.2 ~~million~~There ~~loan~~is no guarantee that ~~will~~we beand ~~repaid~~our injoint ~~full~~ventures ~~with~~will be ~~proceeds~~successful ~~from~~with the ~~sale.~~above ~~The~~liquidity ~~sale~~initiatives, isand ~~expected~~we may continue to ~~close~~look into AmREIT ~~the~~to ~~second~~provide ~~quarter~~additional ~~of 2013,~~financial ~~and~~support ~~our~~to ~~portion~~us ofto ~~the~~meet ~~net~~our operating cash needs. ~~proceeds~~In ~~(30%)~~the isevent ~~approximately~~our ~~$1.5 million.~~liquidity Weis ~~plan~~not sufficient to ~~use~~execute ~~the~~our ~~proceeds~~strategy, AmREIT tohas ~~fund~~agreed ~~the~~to ~~Casa~~defer ~~Linda~~payments, ~~lease-up~~subject ~~strategy~~to ~~and~~its ~~for~~continued ~~working~~ability ~~capital~~to ~~needs~~do so.

~~There is~~Market noConditions 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 and payable 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. However, AmREIT has agreed that it will not require us to repay the $3.7 million notes payable–related party we owe to AmREIT as of December 31, 2012 until a date subsequent to January 1, 2014, if requiring such repayment would prevent the execution of our strategy or present an unnecessary financial hardship. In the event our liquidity is not sufficient to execute our strategy, AmREIT has agreed to provide financial support and defer payments subject to its continued ability to do so. Although no assurance can be given, we believe that we will be able to generate liquidity sufficient to continue to execute our strategic plan through a combination of the foregoing liquidity initiatives.

~~Even~~Our ~~with~~operations ~~the~~are ~~above,~~sensitive weto ~~may~~changes ~~still~~in ~~incur~~overall ~~individual~~economic ~~setbacks~~conditions ~~and~~that ~~significant losses.~~impact ~~Additionally~~our tenants, weincluding, ~~may~~market beand ~~required~~economic tochallenges ~~perform~~experienced ~~under~~by ~~certain~~the ~~guarantees~~U.S. economy, ofthe ~~our joint~~real ~~ventures~~estate industry or bewithin ~~unable~~our togeographic ~~refinance~~markets ~~certain~~where ~~debt~~our properties asare itlocated. ~~comes~~The ~~due~~U.S. ~~that could~~economy ~~result~~has inimproved ~~lender~~from ~~repossession~~the ofrecent ~~one~~severe recession; orhowever, ~~more~~should ~~properties~~recessionary ~~owned~~conditions byreturn, ussuch conditions ~~and/or~~could ~~our~~prevent ~~joint~~us ~~ventures~~ or wefrom ~~may~~realizing begrowth ~~forced~~or tomaintaining ~~sell~~the ~~one~~value orof ~~more~~ our properties. ~~at a~~Even ~~time~~if ~~when~~such itconditions isdo ~~disadvantageous~~not toimpact dous sodirectly, ~~potentially~~such ~~resulting in losses on~~conditions ~~the~~could ~~disposition~~adversely ofaffect ~~those~~our ~~properties~~tenants.

~~Current~~ While it ~~Market~~is difficult to determine the breadth and duration of financial market ~~Conditions~~problems and the many ways in which they may affect our tenants and our business, a general reduction in the level of tenant leasing or shifts in tenant leasing practices could adversely affect our business, financial condition, liquidity, results of operations, our redevelopment projects and future property dispositions. Additionally, if credit markets and/or debt or equity capital markets contract, our ability to obtain financing on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to refinance existing debt and increase our future interest expense.

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 is still experiencing weakness from the past economic recession, which resulted in increased unemployment, weakening of tenant financial condition, large-scale business failures and tight credit markets. 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. Furthermore, the uncertainty surrounding the rapidly increasing national debt of the United States and continuing global economic uncertainty have kept markets volatile. Our General Partner believes that the retail real estate market is likely to remain depressed into 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.

Our Historical Cash Flows

	For the years ended December 31,
	2012			2011
	2013			2012
Operating activities	$	~~(154~~1,082	)	$	(~~557~~154	)
Investing activities		932,995			~~2,622~~93
Financing activities		1(6,~~416~~044	)		(21,~~896~~416	)

Net cash flows provided by operating activities increased by $1.2 million during the year ended December 31, 2013, as compared to the same period in 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 $702,000, primarily from increased occupancy at our consolidated properties as well as $393,000 from improved collections and deferral of payments.

Net cash flows provided by investing activities increased by $2.9 million during the year ended December 31, 2013, as compared to the same period 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 distributions of approximately $2.5 million we received from the sales of Woodlake Square and the single-tenant building and land parcel at our Woodlake Pointe property. See also Note 4 to the Notes to Consolidated Financial Statements. This was partially offset by advances we made to related parties and additional investments in non-consolidated entities of $1.3 million.

Net cash flows used in financing activities increased by $7.5 million for the year ended December 31, 2013, as compared to the same period in 2012. This increase was primarily due to additional payments made during 2013 on notes payable – related party of $4.9 million compared 2012 and $2.2 million in proceeds received from the refinance of the Lantern Lane debt during 2012 with no such proceeds received in 2013.

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Operating Activities - During the year ended December 31, 2012, net cash flows used in operating activities decreased approximately $403,000 ($154,000 of cash used in operating activities during 2012 versus $557,000 of cash used in operating activities during 2011). This decrease in operating cash outflows was primarily attributable to a reduction in our operating loss, which was driven by additional revenue and occupancy rates at Westside Plaza and Lantern Lane.

Investing Activities - During the year ended December 31, 2012, net cash flows provided by investing activities decreased approximately $2.5 million as compared to 2011 ($93,000 provided by investing activities in 2012 versus $2.6 million in 2011). This decrease in cash inflows was primarily due to net cash proceeds of $4.5 million received from the sale of The Market at Lake Houston property in February 2011, partially offset by an investment of $1.8 million (our 20% funding requirement) in PTC/BSQ Holding Company LLC in order to acquire the vacant anchor building within the Preston Towne Crossing shopping center.

Financing Activities - During the year ended December 31, 2012, net cash flows provided by financing activities increased approximately $4.3 million as compared to 2011 ($1.4 million provided by financing activities in 2012 versus $2.9 million used in financing activities in 2011). In November 2012, we modified our Lantern Lane mortgage to extend the due date, and we entered into a second loan for $2.2 million in net cash proceeds to us. This was partially offset by a $1.0 million payment to AmREIT on our notes payable – related party. During 2011, we made distributions to our non-controlling partner of $1.9 million and distributions to our Limited Partners of $671,000 as a result of the sale of The Market at Lake Houston. During 2011, we also paid loan escrow and loan acquisition costs of approximately $900,000. This was partially offset by net borrowings from AmREIT and from new loans of approximately $900,000 after payment of our original Lantern Lane mortgage.

Future Contractual Obligations

As of December 31, ~~2012~~2013, we had the following contractual long-term mortgage debt obligations (see also Note 6 of the ~~Notes to~~ Consolidated Financial Statements for further discussion regarding the specific terms of our debt) (in thousands):

Scheduled payments by year	Principal		Loan maturities		Interest (1)		Total payments
2013	$	194	$	-	$	1,047	$	1,241
2014	$	205	$	-	$	1,035	$	1,240
2014		205		-		1,035		1,240
2015		91		24,291		700		25,082
2015		90		24,270		700		25,060
Total	$	296	$	24,291	$	1,735	$	26,322
2016 and thereafter		-		-		-		-
Total	$	489	$	24,270	$	2,782	$	27,541

(1) This table includes interest expense for a variable rate loan on our Lantern Lane property. The table assumes that the total balance ($15.0 million) and the interest rates as of December 31, ~~2012~~2013 (3.0%) remain constant through maturity.

Indemnification of General Partner

Our limited partnership agreement provides for indemnification of our General Partner for liabilities incurred by or claims made against our General Partner or its employees or agents in connection with business on our behalf, provided that our General Partner determined in good faith that the conduct which gave rise to the liabilities or claims was within the scope of our General Partner’s authority and was taken to promote our best interests. Amounts to be indemnified include judgments, fines, settlements, litigation expenses and reasonable attorneys’ fees, which may be paid as incurred. Only assets of the Partnership may be reached to indemnify our General Partner, its employees or agents. To the extent that this indemnification applies to liabilities under the Securities Act, such indemnification is contrary to public policy and therefore unenforceable.

Off- Balance Sheet Arrangements

As of December 31, ~~2012~~2013, none of our off-balance sheet arrangements had or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures. However, we own interests in several unconsolidated joint ventures that are accounted for under the equity method as we exercise significant influence over, but do not control, the investee.

We also serve as guarantor on debt in the amount of $187.47 million ~~that is the primary obligation of our non-consolidated joint ventures. Included in this amount is $2.2 million that we guaranteed~~ related to our 5433 Westheimer ~~property~~ ~~and $16.2 million related to our Woodlake Square~~ property. We and our joint venture partner are joint and several guarantors of 25% of ~~the~~this ~~5433 Westheimer~~ debt ~~and fully guarantee the Woodlake Square debt~~. See Note 4 of the Notes to Consolidated Financial Statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPLEMENTARY DATA.

Our consolidated financial statements, including the notes and financial schedule thereto, and the report of our independent auditors are included in this Annual Report on Form 10-K beginning at page F-1 and are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

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ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our General Partner’s CEO and CFO, our principal executive officer and principal financial officer, respectively, our General Partner’s management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the ~~Securities~~ Exchange Act ~~of 1934~~) as of December 31, ~~2012~~ 2013. Based on that evaluation, our General Partner’s CEO and CFO concluded that, as of December 31, ~~2012~~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.

Management’s Annual Report on Internal Control over Financial Reporting

Our General Partner and its affiliates maintain a system of internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, which is a process designed under the supervision of the AmREIT principal executive officer and principal financial officer and effected by AmREIT’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that:


	•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

	•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Partnership and its subsidiaries are being made only in accordance with authorizations of management and directors of our General Partner; and

	•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Our General Partner is responsible for establishing and maintaining adequate internal control over financial reporting, and, with the participation of AmREIT’s CEO and CFO, who are our principal executive officer and principal financial officer, respectively, conducted an evaluation of the effectiveness of AmREIT’s internal control over financial reporting as of December 31, ~~2012~~2013, based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, we believe that our internal control over financial reporting is effective as of December 31, ~~2012~~2013.

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Changes in Internal Control over Financial Reporting

There has been no change to our internal control over financial reporting during the three months ended December 31, ~~2012~~2013, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

We have no directors or executive officers. We are managed by our General Partner, which does not have any employees and relies upon the personnel of AmREIT and its affiliates to perform services for us. Our limited partnership agreement provides that the Partnership will continue until December 31, 2025, unless sooner terminated. As we have no directors and are managed by our General Partner, we have no standing audit, nominating, or compensation committees.

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The following table sets forth certain information regarding the officers and director of our General Partner, all of whom are officers of AmREIT and are expected to make a significant contribution to us.

Name	Age	~~Age~~	Position	~~Position~~
H. Kerr Taylor	63	62	President, Chief Executive Officer and Director	~~President, Chief Executive Officer and Director~~
Chad C. Braun	41	40	Executive Vice President, Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary	~~Executive Vice President, Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary~~
Brett P. Treadwell	44	43	Senior Vice President – Finance	~~Managing Vice President – Finance~~

H. Kerr Taylor. ~~serves~~As asfounder, Chairman of our General Partner’s ~~President, Chief~~Board ~~Executive~~of ~~Officer~~Directors and ~~Director,~~Chief ~~and~~Executive ~~has served in this capacity since the~~Officer, ~~formation~~Mr. ofTaylor ~~the~~is ~~Partnership.~~responsible Hefor isoverseeing the ~~founder~~building of ~~AmREIT and serves as~~ its ~~Chairman~~ offine ~~the~~team ~~Board~~of professionals, ~~Chief~~cultivating ~~Executive~~its ~~Officer~~“5C” ~~and~~corporate ~~President.~~culture, ~~Mr.~~directing ~~Taylor~~its ~~has~~strategic ~~guided~~initiatives ~~the~~and ~~growth~~expanding ofits ~~AmREIT~~investor and ~~its~~partner ~~predecessors for over 29 years~~relationships. ~~His primary~~Since ~~responsibilities~~founding ~~include~~AmREIT ~~overseeing~~in ~~strategic initiatives as well as building~~1985, ~~mentoring~~ ~~and leading AmREIT’s team of professionals.~~ Mr. Taylor has ~~over~~led ~~33 years~~the growth of ~~experience~~its ~~within~~team ~~the~~from ~~real~~three to ~~estate~~more ~~industry,~~than ~~and~~50 professionals, has ~~participated~~grown ~~in over~~its ~~300~~property ~~transactions~~portfolio ~~involving~~to approximately ~~brokerage,~~$1 ~~development~~billion ~~and management~~ of ~~premier~~ real estate ~~projects.~~assets Heand ~~received~~has aincreased ~~Bachelor~~its ofinvestor base ~~Arts~~to ~~degree~~more ~~from Trinity~~than ~~University~~6,000 astockholders ~~Masters Degree in Business Administration from Southern Methodist University~~ and ~~his law degree from South Texas College of Law~~partners. Mr. Taylor iswas ~~chairman~~selected ~~of the board of Pathways for Little Feet~~ and ~~serves as a~~ ~~board~~is ~~member~~qualified ofto ~~Life~~serve ~~House, Inc., Uptown District and~~ as anthe ~~Elder~~chairman of ~~First Presbyterian~~its ~~Church.~~Board ~~Mr.~~of ~~Taylor~~Directors isbecause ~~a lifetime member~~ of ~~the International~~his ~~Council~~intimate knowledge of ~~Shopping~~AmREIT ~~Centers~~ and ~~Urban~~its ~~Land~~affiliated ~~Institute~~companies and ishis aextensive experience ~~member~~within of the ~~Texas~~ ~~Bar~~real ~~Association.~~estate industry.

~~Mr. Taylor~~Education ~~was~~• ~~selected~~Bachelor ~~and~~of isArts ~~qualified~~degree tofrom ~~serve~~Trinity asUniversity ~~the~~• ~~sole~~Masters ~~director~~of Business Administration from Southern Methodist University • Doctor of ~~our General~~Jurisprudence ~~Partner~~from ~~because~~South Texas College of ~~his~~Law ~~intimate~~• ~~knowledge~~Post baccalaureate studies at the College of ~~AmREIT~~Biblical Studies and ~~its~~Harvard ~~affiliated companies~~Business School Industry Commitments • Board member of Houston’s Uptown District • Past board member of Park National Bank (now Frost Bank) • Lifetime member of the International Council of Shopping Centers • Member, Urban Land Institute • Member, Texas Bar Association Community Commitments • Chairman of the Board and ~~his~~founder ~~extensive~~of ~~experience~~Pathways ~~within~~for Little Feet • Past Chairman of the ~~real~~Board ~~estate~~of ~~industry~~LifeHouse of Houston • Past Co-Chairman of the Board of Millennium Relief and Development, Inc. • Elder of First Presbyterian Church and Chairman of its Strategic Planning Committee

Chad C. Braun. ~~serves~~As as our General Partner’s Executive ~~Vice~~ Vice President, Chief ~~Financial~~Operating Officer, Chief ~~Operating~~Financial Officer, Treasurer and Secretary, ~~and~~Mr. ~~has~~Braun ~~served~~is inresponsible ~~this~~for ~~capacity~~leading ~~since~~ the ~~formation~~corporate offinance ~~the~~and ~~Partnership.~~accounting Heteam ~~also~~as ~~serves~~well inas ~~this~~our ~~same~~General ~~position~~Partner’s ~~for~~equity ~~AmREIT~~capital and debt structuring initiatives. Mr. Braun ~~is responsible~~has ~~for~~served ~~corporate~~as ~~finance,~~its ~~equity~~Executive ~~capital~~Vice ~~markets~~President, ~~debt structuring and~~ ~~placement,~~Chief ~~investor~~Financial ~~relations~~Officer, ~~accounting~~Treasurer and ~~SEC~~Secretary ~~reporting,~~since 2002 and heas ~~oversees~~its Chief ~~investment~~Operating ~~sponsorship~~Officer ~~and~~since ~~product~~March ~~creation~~2011. Mr. Braun ~~has~~joined ~~over~~us 18in ~~years~~1999 ofand has helped ~~accounting,~~lead ~~financial~~its ~~and~~growth to approximately $1 billion in real estate ~~experience~~assets. Prior to joining ~~AmREIT~~us in 1999, heMr. Braun served as a manager in the real estate advisory services group at Ernst & Young LLP. Hewhere ~~has~~he provided extensive consulting and audit services to a number of ~~REITs and private~~ real estate ~~companies,~~investment ~~including financial statement audits~~trusts, ~~portfolio~~private ~~acquisition and disposition, portfolio management,~~real ~~merger~~estate ~~integration~~companies and ~~process~~other ~~improvement,~~Fortune ~~financial~~500 ~~analysis and capital markets and restructuring transactions~~companies. Mr. Braun received a Bachelor of Business Administration degree in Accounting and Finance from Hardin Simmons University and subsequently earned the CPA designation and his Series 63, 7, 24 and 27 securities licenses. He is a member of the National Association of Real Estate Investment Trusts and the Texas Society of Certified Public Accountants.


	Education

	•	Bachelor of Business Administration degree in accounting and in finance from Hardin-Simmons University
	•	Certified Public Accountant in the State of Texas

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~~Brett P.~~Industry ~~Treadwell~~Commitments ~~serves~~• asMember, ~~our~~National ~~General~~Association ~~Partner’s~~of ~~Managing Vice~~Real ~~President~~Estate —Investment ~~Finance~~Trusts ~~and~~• ~~has~~Member, ~~served~~Texas inSociety ~~this capacity since the formation~~ of ~~the~~ ~~Partnership.~~Certified HePublic ~~also~~Accountants ~~serves~~Community inCommitments ~~this~~• ~~position~~Vice ~~for~~Chairman, ~~AmREIT.~~Stewardship ~~Within~~Committee ~~AmREIT~~of heMetropolitan isBaptist ~~responsible~~Church ~~for leading AmREIT’s financial reporting team as well as assisting~~ in ~~establishing~~Houston, ~~and~~Texas ~~executing~~• ~~AmREIT’s strategic financial initiatives. He oversees our filings with the SEC~~Member, ~~our~~Finance ~~periodic internal~~& ~~reporting~~Strategic toPlanning ~~management~~Committee ~~and our compliance with the Sarbanes-Oxley Act~~ of ~~2002.~~Cypress ~~Mr.~~Christian ~~Treadwell~~School ~~has over 20 years of accounting and financial experience and prior to joining AmREIT~~ in ~~2004~~Cypress, heTexas ~~served~~• asBoard ~~a senior manager with Arthur Andersen LLP and with PricewaterhouseCoopers~~President, ~~LLP.~~Cypress HeChristian ~~has~~School ~~provided~~in ~~extensive audit services~~Cypress, regularly dealt with both debt and equity offerings for publicly traded and privately owned clients in various industries and has strong experience with SEC reporting and registration statements and offerings. Mr. Treadwell graduated Magna Cum Laude from Baylor University with a Bachelor of Business Administration and subsequently earned the CPA designation.Texas

Brett P. Treadwell. Mr. Treadwell serves as our General Partner’s Senior Vice president of Finance and Chief Accounting Officer. Mr. Treadwell has served in his current positions since joining AmREIT in 2004. He is responsible for overseeing the daily activities of the Finance Team and assist in establishing and executing AmREIT’s strategic financial initiatives. Mr. Treadwell has over 20 years of accounting and financial experience and prior to joining us in 2004, he served as a senior manager with Arthur Andersen LLP and with PricewaterhouseCoopers, LLP. He has provided extensive audit services, regularly dealt with both debt and equity offerings for publicly traded and privately owned clients in various industries and has strong experience with SEC reporting and registration statements and offerings.


	Education

	•	Mr. Treadwell graduated Magna Cum Laude from Baylor University with a Bachelor of Business Administration and subsequently earned the CPA designation

	Industry Commitments

	•	Member, National Association of Real Estate Investment Trusts
	•	Member, Texas Society of Certified Public Accountants

	Community Commitments

	•	Member, Chapelwood United Methodist Church
	•	Member, Audit Committee of Ronald McDonald House
	•	Advisory Board Member - Baylor Business Network of Houston

Section 16(a) Beneficial Ownership Reporting Compliance

Based on a review of Forms 3, 4 and 5 furnished to us under Rule 16a-3(e) of the Exchange Act during the fiscal year ended December 31, ~~2012~~2013, we know of no reporting person who has failed to file on a timely basis, as disclosed in the above forms, any report required by Section 16(a) of the Exchange Act during the fiscal year ended December 31, ~~2012~~2013.

Code of Ethics

We have not adopted a Code of Ethics because we are managed by our General Partner, and therefore, have no officers or employees to whom a Code of Ethics would apply.

ITEM 11. EXECUTIVE COMPENSATION.

We are managed by our General Partner, and we have no directors or executive officers to whom we pay compensation.

See “Item 13. Certain Relationships and Related Transactions, and Director Independence” below for the fees and expenses we pay to our General Partner and its affiliates.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Securities Authorized for Issuance Under Equity Compensation Plans

We do not have any compensation plans under which we are authorized to issue equity securities.

Security Ownership of Certain Beneficial Owners and Management

We know of no person (including a “group” as that term is used in Section 13(d)(3) of the Exchange Act) who is the beneficial owner of more than five percent of our Units.

We have no officers or directors. Our General Partner owns our sole general partner interest and also owns 32 of our Units. None of the officers of our ~~General~~ General Partner own any of our Units.

As of March 2827, ~~2013~~2014, there were 2,~~844~~833 Units owned by 1,~~190~~197 Limited Partners.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Compensation Arrangements

Our General Partner and its affiliates received the payments and fees from us described below. These payments and fees may be higher than payments and fees that would have resulted from an arm’s-length transaction with an unrelated entity.

Type and Recipient	Determination of Amount	For the year ended December 31, 2012	For the year ended December 31, 2011
Asset Management Fee – General Partner	A monthly fee of one-twelfth of 1.0% of net invested capital under management for accounting related services, investor relations, facilitating the deployment of capital, and other services provided by our General Partner to us.	$234,972	$487,339
Development and Acquisition Fees – General Partner	Between 4.0% and 6.0% of project costs depending on the size and the scope of the development.	No amount to report	No amount to report
Property Management and Leasing Fees – ARIC	Property management fees not to exceed 4.0% of the gross rentals for providing management, operating, maintenance and other services. Leasing fees not to exceed 2.0% of base rent on a lease renewal and 6.0% of base rent on an initial lease for procuring tenants and negotiating the terms of the tenant leases.	$302,000	$305,644
Reimbursement of Operating Expenses – General Partner	We reimburse the actual expenses incurred by our General Partner in connection with its provision of administrative services, including related personnel costs.	$390,359	$408,271
Interest expense on notes payable- related party	We incur interest on amounts loaned to us by our General Partner. See Note 6 of the Notes to Consolidated Financial Statements for a discussion of our notes payable- related party.	$332, 226	$200,091
	Liquidating Stage
Distributions of Net Cash Flow – General Partner	Our General Partner is entitled to distributions during the liquidation stage of 1% to our General Partner and 99% to our Limited Partners until our Limited Partners have received cumulative distributions equal to 100% of their invested capital plus an amount equal to 10% per annum uncompounded on their adjusted capital. At such time, our General Partner will receive 100% of distributions made until our General Partner has received cumulative distributions in an amount equal to 40% of net cash flow paid to date of our Limited Partners in excess of their invested capital. Thereafter, our General Partner will receive 40% of distributions and our Limited Partners will receive 60% of distributions.	No amount to report	No amount to report

In addition to the fees noted below, the non-consolidated entities in which we own an investment paid property management and leasing fees of $1.2 million and $1.4 million to one of our affiliated entities the years ended December 31, 2013 and 2012, respectively.


		For the year ended
Type and Recipient	Determination of Amount	December 31, 2013	December 31, 2012

Asset Management Fee – General Partner	A monthly fee of one-twelfth of 1.0% of net invested capital under management for accounting related services, investor relations, facilitating the deployment of capital, and other services provided by our General Partner to us.	$234,972	$234,972

Development and Acquisition Fees – General Partner	Between 4.0% and 6.0% of project costs depending on the size and the scope of the development.	No amount to report	No amount to report

Property Management and Leasing Fees – ARIC	Property management fees not to exceed 4.0% of the gross rentals for providing management, operating, maintenance and other services. Leasing fees not to exceed 2.0% of base rent on a lease renewal and 6.0% of base rent on an initial lease for procuring tenants and negotiating the terms of the tenant leases.	$171,925	$302,000

Reimbursement of Operating Expenses – General Partner	We reimburse the actual expenses incurred by our General Partner in connection with its provision of administrative services, including related personnel costs.	$379,979	$390,359


Interest expense on notes payable- related party	We incur interest on amounts loaned to us by our General Partner. See Note 6 of the Notes to Consolidated Financial Statements for a discussion of our notes payable- related party.	$103,513	$332, 226

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		For the year ended
Type and Recipient	Determination of Amount	December 31, 2013	December 31, 2012

	Liquidating Stage

Distributions of Net Cash Flow – General Partner	Our General Partner is entitled to distributions during the liquidation stage of 1% to our General Partner and 99% to our Limited Partners until our Limited Partners have received cumulative distributions equal to 100% of their invested capital plus an amount equal to 10% per annum uncompounded on their adjusted capital. At such time, our General Partner will receive 100% of distributions made until our General Partner has received cumulative distributions in an amount equal to 40% of net cash flow paid to date of our Limited Partners in excess of their invested capital. Thereafter, our General Partner will receive 40% of distributions and our Limited Partners will receive 60% of distributions.	No amount to report	No amount to report

Joint Ventures with Affiliates

As of December 31, ~~2012~~2013, we have ~~three~~two joint ventures with our affiliates.

In December 2006, we acquired a 50% interest in AmREIT Casa Linda, LP, which owns Casa Linda, the multi-tenant retail property in Dallas, Texas. The remaining 50% is owned by MIG IV.

In August 2007, we acquired a 30% interest in AmREIT Woodlake, LP, which owns Woodlake Square, the multi-tenant retail property in Houston, Texas. The remaining 70% was 40% owned by MIG IV our affiliate, and 30% owned by ARIC. In July 2010, we and our affiliated partners of AmREIT Woodlake, LP entered into a joint venture with a third-party institutional partner wherein the partner acquired a 90% interest in the joint venture. The sale to AEW generated $3.4 million in cash. In connection with the transaction with AEW, we refinanced the Woodlake Square loan with Frost which was due to mature in September 2010 with US Bank. As a result of this transaction, we now hold a 3% interest in Woodlake Square, which carries a promoted interest in profits and cash flows once an 11.65% return is met on the project. AmREIT Woodlake, LP recorded an impairment for the year ended December 31, 2010. Our portion of such impairment was $185,000 and has been recorded in equity in losses from non-consolidated subsidiaries in our consolidated statements of operations. We will continue to account for this investment using the equity method.

In November 2007, we acquired a 30% interest in AmREIT Westheimer Gessner, LP, which owns Woodlake Pointe, a multi-tenant retail property in Houston, Texas. In May 2008, the joint venture acquired an additional tract of land adjacent to Woodlake Pointe property. The remaining 70% is 60% owned by MIG IV, our affiliate, and 10% owned by ARIC.

~~Directors~~ In August 2007, we acquired a 30% interest in AmREIT Woodlake, LP, which owns Woodlake Square, the multi-tenant retail property in Houston, Texas. The remaining 70% was 40% owned by MIG IV our affiliate, and 30% owned by ARIC. In July 2010, we and our affiliated partners of AmREIT Woodlake, LP entered into a joint venture with a third party institutional partner wherein the partner acquired a 90% interest in the joint venture. As a result of this transaction, we held a 3% interest in Woodlake Square. On September 18, 2013, our Woodlake Square joint venture sold the Woodlake Square shopping center to AmREIT for $41.6 million. We received a distribution for approximately $1.0 million and no longer have an investment in this joint venture.

Directors.

We have no directors and are managed by our General Partner. H. Kerr Taylor is the sole director of our General Partner.

Loans from Affiliates

~~During~~As ~~2009,~~part weof ~~borrowed~~our ~~$2.5~~September ~~million~~2011 ~~from~~refinance ~~affiliates~~ of our ~~General~~Lantern ~~Partner~~Lane ~~in order to meet a guaranty agreement that required us~~debt, aswe ~~guarantor~~borrowed ~~of the mortgage of~~an ~~one~~additional ~~of our affiliates, to maintain~~ $31.05 million infrom ~~liquid~~AmREIT, ~~assets~~Inc. ~~Upon evidencing~~in ~~such~~October ~~liquidity~~2011. ~~and~~During ~~attaining~~2012, ~~substantial~~we borrowed ~~completion~~an ofadditional ~~the hotel~~$500, ~~the~~000 ~~lender~~to ~~decreased~~fund the ~~requirement~~payment toof ~~$1.5~~real ~~million.~~estate ~~During 2010~~taxes, weand later repaid $1.0 million ofin ~~the~~notes ~~$2.5~~payable-related ~~million~~party.

AsDuring ~~part of our September 2011 refinance of our Lantern Lane debt~~2013, we ~~borrowed~~repaid ~~an additional~~approximately $1.5.9 million ~~from AmREIT, Inc.~~ in ~~October~~notes ~~2011.~~payable-related ~~During 2012, we borrowed an additional $500,000 to fund the payment of real estate taxes, and later repaid $1~~party.~~0 million.~~

The deferral of fees paid to our General Partner and its affiliates as part of our strategy to manage cash in the near-term are reflected as increases in our notes payable to our General Partner.

AmREIT Realty Investment Corporation

ARIC is a fully integrated real estate development and operating business that is wholly owned by AmREIT, the parent of our General Partner. ARIC employs a full complement of brokers and real estate professionals who provide development, acquisition, brokerage, leasing, construction management, asset and property management services to AmREIT affiliated entities and to third parties. ARIC serves as one of our property managers and is responsible for managing and leasing some of our properties. We pay ARIC property management and leasing fees as described above under “Item 1. Business.” ARIC hires, directs and establishes policies for employees who will have direct responsibility for the operations of each property it manages, which may include but is not limited to on-site managers and building and maintenance personnel. Certain employees of the property manager may be employed on a part-time basis and may also be employed by our General Partner or its affiliates. ARIC also directs the purchase of equipment and supplies and supervises all maintenance activity. The management fee paid to ARIC covers all of its general overhead costs.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

KPMG, LLP, independent registered public accounting firm and certified public accountants (“KPMG”), served as our independent accountants for the fiscal year ended December 31, 2012. The following is an explanation of the fees billed to us by KPMG for professional services rendered for the fiscal years ended December 31, 2012 and 2011.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

KPMG, LLP, independent registered public accounting firm and certified public accountants (“KPMG”), served as our independent accountants for the fiscal year ended December 31, 2013. The following is an explanation of the fees billed to us by KPMG for professional services rendered for the fiscal years ended December 31, 2013 and 2012.

Audit Fees

The aggregate fees billed to us for professional services related to the audit of our annual financial statements, review of financial statements included in our Forms 10-Q, or other services normally provided by KPMG in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, ~~2012~~2013 and ~~2011~~2012, totaled $~~145~~157,~~500~~000 and $~~135~~145,~~600~~500, respectively.

Audit-Related Fees, Tax Fees and All Other Fees

The services that have been performed by KPMG have been limited to audit -related services. Accordingly, we have paid no non-audit related fees, tax fees or other fees to KPMG for the fiscal years ended December 31, ~~2012~~2013 and ~~2011~~2012.

Audit Committee’s Pre-Approval Policies and Procedures

The ~~Company~~ Company does not have an independent audit committee. Our General Partner must ~~approve~~ approve any services to be performed by our independent auditors and has approved all audit fees for the years ended December 31, ~~2012~~2013 and ~~2011~~2012, respectively.

PART IV


ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


1.	Financial Statements. The list of our financial statements filed as part of this Annual Report on Form 10-K is set forth on page F-1.

2.	Financial Statement Schedules. The list of our financial statement schedules filed as part of this Annual Report is set forth on page F-1.

3.	Exhibits.

It is inappropriate for readers to assume the accuracy of, or rely upon any covenants, representations or warranties that may be contained in agreements or other documents filed as Exhibits to, or incorporated by reference in, this report. Any such covenants, representations or warranties may have been qualified or superseded by disclosures contained in separate schedules or exhibits not filed with or incorporated by reference in this report, may reflect the parties’ negotiated risk allocation in the particular transaction, may be qualified by materiality standards that differ from those applicable for securities law purposes, and may not be true as of the date of this report or any other date and may be subject to waivers by any or all of the parties. Where exhibits and schedules to agreements filed or incorporated by reference as Exhibits hereto are not included in these exhibits, such exhibits and schedules to agreements are not included or incorporated by reference herein.

The following exhibits are filed as part of or incorporated by reference in this Annual Report on Form 10-K:

Incorporated by Reference

Exhibit Number

Description

Form

Exhibit

Filing Date

Filed Herewith

Furnished Herewith

3.1

Certificate of Limited Partnership of AmREIT Monthly Income & Growth Fund III, Ltd., dated April 19, 2005.

10-SB

3.1

4/30/2007

3.2

Agreement of Limited Partnership of AmREIT Monthly & Income Growth Fund III, Ltd., effective April 19, 2005, between AmREIT Monthly Income & Growth III Corporation and AmREIT, the initial limited partner.

10-SB

3.2

4/30/2007

10.1

Fixed Rate Note (A Loan), dated May 2, 2005, between Shafer Plaza I, Ltd and JPMorgan Chase Bank, N.A.

10-SB

10.1

4/30/2007

10.2

Fixed Rate Note (B Loan), dated May 2, 2005, between Shafer Plaza I, Ltd and JPMorgan Chase Bank, N.A.

10-SB

10.2

4/30/2007

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10.3	Loan Assumption and Substitution Agreement, dated September 30, 2005, among AmREIT Westside Plaza, LP, AmREIT Monthly Income & Growth Fund III, Ltd., AmREIT, Shafer Plaza I, Ltd., Steven G. Shafer, Wells Fargo Bank, N.A., and CBA-Mezzanine Capital Finance, LLC.	10-SB	10.3	4/30/2007
10.4	Second Amended and Restated Property Management and Leasing Agreement, dated December 28, 2005, between AmREIT Westside Plaza, LP and AmREIT Realty Investment Corporation.	10-SB	10.4	4/30/2007
10.5	Management and Leasing Agreement, dated November 22, 2005, between AmREIT Lake Houston, LP and AmREIT Realty Investment Corporation.	10-SB	10.5	4/30/2007
10.6	Promissory Note, dated December 12, 2005, between AmREIT Lake Houston, LP and Morgan Stanley Mortgage Capital, Inc.	10-SB	10.6	4/30/2007
10.7	Commercial Property Management and Leasing Agreement, dated March 30, 2006, between 5433 Westheimer, LP and Songy Partners Limited.	10-SB	10.7	4/30/2007
10.8	Promissory Note, dated September 28, 2006, between AmREIT Lantern Lane, LP and Differential Development — 1994, Ltd.	10-SB	10.8	4/30/2007
10.9	Management and Leasing Agreement, dated September 28, 2006, between AmREIT Lantern Lane, LP and AmREIT Realty Investment Corporation.	10-SB	10.9	4/30/2007
10.10	Promissory Note, dated December 8, 2006, between AmREIT Casa Linda, LP and Morgan Stanley Mortgage Capital, Inc.	10-SB	10.10	4/30/2007
10.11	Secured Promissory Note, dated September 29, 2006, between AmREIT Olmos Creek, LP and NLI Commercial Mortgage Fund, LLC.	10-SB	10.11	4/30/2007
10.13	Management and Leasing Agreement, dated December 7, 2006, between AmREIT SSPF Preston Towne Crossing, LP and AmREIT Realty Investment Corporation.	10-SB	10.13	4/30/2007
10.14	Management and Leasing Agreement, dated December 7, 2006, between AmREIT SSPF Berkeley, LP and AmREIT Realty Investment Corporation.	10-SB	10.14	4/30/2007
10.15	Loan Assumption Agreement, dated December 7, 2006, among Berkeley Center, Ltd., William L. Hutchinson, AmREIT SSPF Berkeley, LP, AmREIT Monthly Income & Growth Fund III, Ltd. and LaSalle Bank National Association.	10-SB	10.15	4/30/2007
10.16	Loan Assumption Agreement, dated December 7, 2006, among PTC Dunhill Holdings, Ltd., William L. Hutchinson, AmREIT SSPF Preston Towne Crossing, LP, AmREIT Monthly Income & Growth Fund III, Ltd. and LaSalle Bank National Association.	10-SB	10.16	4/30/2007
10.17	Real Estate Sales Contract, effective as of January 14, 2011, between AmREIT Lake Houston, L.P., and AmREIT Realty Investment Corporation.	10-K	10.17	3/31/2011

The following exhibits are filed as part of or incorporated by reference in this Annual Report on Form 10-K:

Incorporated by Reference

Exhibit
Number

Description

Form

Exhibit

Filing Date

Filed
Herewith

Furnished
Herewith

3.1

Certificate of Limited Partnership of AmREIT Monthly Income & Growth Fund III, Ltd., dated April 19, 2005.

10-SB

3.1

4/30/2007

3.2

10-SB

3.2

4/30/2007

10.1

Fixed Rate Note (A Loan), dated May 2, 2005, between Shafer Plaza I, Ltd and JPMorgan Chase Bank, N.A.

10-SB

10.1

4/30/2007

10.2

Fixed Rate Note (B Loan), dated May 2, 2005, between Shafer Plaza I, Ltd and JPMorgan Chase Bank, N.A.

10-SB

10.2

4/30/2007

10.3

Loan Assumption and Substitution Agreement, dated September 30, 2005, among AmREIT Westside Plaza, LP, AmREIT Monthly Income & Growth Fund III, Ltd., AmREIT, Shafer Plaza I, Ltd., Steven G. Shafer, Wells Fargo Bank, N.A., and CBA-Mezzanine Capital Finance, LLC.

10-SB

10.3

4/30/2007

10.4

Second Amended and Restated Property Management and Leasing Agreement, dated December 28, 2005, between AmREIT Westside Plaza, LP and AmREIT Realty Investment Corporation.

10-SB

10.4

4/30/2007

10.5

Commercial Property Management and Leasing Agreement, dated March 30, 2006, between 5433 Westheimer, LP and Songy Partners Limited.

10-SB

10.7

4/30/2007

10.6

Promissory Note, dated September 28, 2006, between AmREIT Lantern Lane, LP and Differential Development — 1994, Ltd.

10-SB

10.8

4/30/2007

10.7

Management and Leasing Agreement, dated September 28, 2006, between AmREIT Lantern Lane, LP and AmREIT Realty Investment Corporation.

10-SB

10.9

4/30/2007

10.8

Promissory Note, dated December 8, 2006, between AmREIT Casa Linda, LP and Morgan Stanley Mortgage Capital, Inc.

10-SB

10.10

4/30/2007

10.9

Secured Promissory Note, dated September 29, 2006, between AmREIT Olmos Creek, LP and NLI Commercial Mortgage Fund, LLC.

10-SB

10.11

4/30/2007

10.10

Management and Leasing Agreement, dated December 7, 2006, between AmREIT SSPF Preston Towne Crossing, LP and AmREIT Realty Investment Corporation.

10-SB

10.13

4/30/2007

10.11

Management and Leasing Agreement, dated December 7, 2006, between AmREIT SSPF Berkeley, LP and AmREIT Realty Investment Corporation.

10-SB

10.14

4/30/2007

10.12

Loan Assumption Agreement, dated December 7, 2006, among Berkeley Center, Ltd., William L. Hutchinson, AmREIT SSPF Berkeley, LP, AmREIT Monthly Income & Growth Fund III, Ltd. and LaSalle Bank National Association.

10-SB

10.15

4/30/2007

Table of Contents

10.18

Term Loan Agreement effective October 7, 2011 between AmREIT Lantern Lane, LP and U.S. Bank National Association.

8-K

10.1

10/12/2011

10.13

Loan Assumption Agreement, dated December 7, 2006, among PTC Dunhill Holdings, Ltd., William L. Hutchinson, AmREIT SSPF Preston Towne Crossing, LP, AmREIT Monthly Income & Growth Fund III, Ltd. and LaSalle Bank National Association.

10-SB

10.16

4/30/2007

10.19

Settlement Agreement effective February 6, 2012 between AmREIT Monthly Income and Growth Fund III, Ltd. and Q Olmos Creek Property, LLC.

8-K

10.1

2/10/2012

10.14

Term Loan Agreement effective October 7, 2011between AmREIT Lantern Lane, LP and U.S. Bank National Association.

8-K

10.1

10/12/2011

10.20

Second Promissory Note effective November, 29, 2012 between AmREIT Lantern Lane, LP and U.S. Bank National Association.

10.15

Second Promissory Note effective Novemebnr 29, 2012 between AmREIT Lantern Lane, LP and U.S. Bank National Association.

10-K

10.20

3/28/2013

31.1

Certification of H. Kerr Taylor pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

10.16

Settlement Agreement effective February 6, 2012 between AmREIT Monthly Income and Growth Fund III, Ltd. and Q Olmos Creek Property, LLC.

8-K

10.1

2/10/2012

31.2

Certification of Chad C. Braun pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.1

Certification of H. Kerr Taylor pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of H. Kerr Taylor pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chad C. Braun pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chad C. Braun pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of H. Kerr Taylor pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chad C. Braun pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

Attached as Exhibit 101 to this Annual Report on Form 10-K are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, 2013 and 2012, (ii) the Consolidated Statements of Comprehensive Loss for the years ended December 31, 2013, 2012 and 2011, (iii) the Consolidated Statements of Partners’ Capital for the years ended December 31, 2013, 2012 and 2011, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011, (v) the Notes to the Consolidated Financial Statements, and (vi) Financial Statement Schedule III.

101.INS*	XBRL Instance Document	X
101.SCH*	XBRL Taxonomy Extension Schema Document	X
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document	X
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document	X
*	Attached as Exhibit 101 to this Annual Report on Form 10-K are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, 2012 and 2011, (ii) the Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010, (iii) the Consolidated Statements of Partners’ Capital for the years ended December 31, 2012, 2011 and 2010, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010, (v) the Notes to the Consolidated Financial Statements, and (vi) Financial Statement Schedule III.
	Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

Table of Contents

SIGNATURES

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

	AmREIT Monthly Income & Growth Fund III, Ltd.	~~AmREIT Monthly Income & Growth Fund III, Ltd.~~
	By: AmREIT Monthly Income & Growth III Corporation, its General Partner	~~By: AmREIT Monthly Income & Growth III Corporation, its General Partner~~
Date: March 28, 2013
Date: March 27, 2014
	By:	~~By:~~/s/ H. Kerr Taylor	~~/s/ H. Kerr Taylor~~
	H. Kerr Taylor	~~H. Kerr Taylor~~
	President, Chief Executive Officer, and Director	~~President, Chief Executive Officer, and Director~~
	By:	~~By:~~/s/ Chad C. Braun	~~/s/ Chad C. Braun~~
	Chad C. Braun	~~Chad C. Braun~~
	Executive Vice President, Chief Financial Officer, Treasurer and Secretary	~~Executive Vice President, Chief Financial Officer, Treasurer and Secretary~~

Table of Contents

AmREIT MONTHLY INCOME AND GROWTH FUND III, LTD. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS

FINANCIAL STATEMENTS:		Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2012 and 2011		F-3
Consolidated Balance Sheets as of December 31, 2013 and 2012		F-3
Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010		F-4
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2013, 2012 and 2011		F-4
Consolidated Statements of Partners’ Capital for the years ended December 31, 2012, 2011 and 2010		F-5
Consolidated Statements of Partners’ Capital for the years ended December 31, 2013, 2012 and 2011		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011		F-6
Notes to Consolidated Financial Statements		F-7
FINANCIAL STATEMENT SCHEDULES:
Schedule III – Consolidated Real Estate Owned and Accumulated Depreciation for the year ended December 31, 2012		S-1
Schedule III – Consolidated Real Estate Owned and Accumulated Depreciation for the year ended December 31, 2013		S-1

All other financial statement schedules are omitted as the required information is either inapplicable or is included in the financial statements or related notes.

F-1

Table of Contents

Report of Independent Registered Public Accounting Firm

The Partners
AmREIT Monthly Income and Growth Fund III, Ltd.:

We have audited the accompanying consolidated balance sheets of AmREIT Monthly Income and Growth Fund III, Ltd. and subsidiaries (the “Partnership”) as of December 31, ~~2012~~2013 and ~~2011~~2012, and the related consolidated statements of ~~operations~~comprehensive loss, partners’ capital and cash flows for each of the years in the three-year period ended December 31, ~~2012~~2013. In connection with our audits of the consolidated financial statements, we have also audited the related financial statement schedule. These consolidated financial ~~statements~~ statements and the financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements and related schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AmREIT Monthly Income and Growth Fund III, Ltd. and subsidiaries as of December 31, ~~2012~~2013 and ~~2011~~2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, ~~2012~~2013 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Houston, Texas March 2827, ~~2013~~2014

F-2

Table of Contents

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)

	2012			2011
	December 31, 2013			December 31, 2012
ASSETS
Real estate investments at cost:
Land	$	11,089		$	1311,~~988~~089
Buildings		21,~~484~~662			2921,~~856~~484
Tenant improvements		1,~~217~~350			~~894~~1,217
		33,790			44,738
		34,101			33,790
Less accumulated depreciation and amortization		(56,~~732~~612	)		(65,~~978~~732	)
		28,058			37,760
		27,489			28,058
Investment in non-consolidated entities		2016,~~749~~825			2220,~~586~~749
Acquired lease intangibles, net		28-			~~340~~28
Net real estate investments		4844,~~835~~314			6048,~~686~~835
Cash and cash equivalents		31,~~170~~203			13,~~815~~170
Tenant and account receivables, net		~~462~~566			~~449~~462
Accounts receivable - related party		~~470~~622			~~102~~470
Notes receivable		~~103~~106			-103
Deferred costs, net		~~710~~566			~~643~~710
Other assets		~~543~~418			~~811~~543
TOTAL ASSETS	$	5447,~~293~~795		$	6454,~~506~~293
LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Notes payable	$	24,~~759~~587		$	3324,~~868~~759
Notes payable - related party		~~5,622~~267			45,~~982~~622
Accounts payable and other liabilities		~~629~~994			~~666~~629
Accounts payable - related party		4924			2049
Acquired below-market lease intangibles, net		4-			494
Security deposits		~~127~~132			~~144~~127
TOTAL LIABILITIES		3126,~~190~~004			3931,~~729~~190
Partners’ capital:
General partner		-			-
Limited partners, 2,833 Units outstanding at
December 31, 2012 and 2011, respectively		23,103			24,777
December 31, 2013 and 2012		21,791			23,103
TOTAL PARTNERS’ CAPITAL		2321,~~103~~791			2423,~~777~~103
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	5447,~~293~~795		$	6454,~~506~~293

See Notes to Consolidated Financial Statements.

F-3

Table of Contents

AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~COMPREHENSIVE LOSS For the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011 (in thousands, except for per Unit data)

	2012			2011			2010
	2013			2012			2011
Revenues:
Rental income from operating leases	$	3,~~067~~436		$	23,~~758~~067		$	32,~~000~~758
Total revenues		3,~~067~~436			23,~~758~~067			32,~~000~~758
Expenses:
General and administrative		~~140~~149			~~113~~140			92113
General and administrative - related party		~~390~~380			~~408~~390			~~437~~408
Asset management fees - related party		235			~~487~~235			~~618~~487
Property expense		~~944~~995			~~875~~988			~~818~~902
Property management fees - related party		~~115~~128			~~104~~115			~~122~~104
Legal and professional		~~352~~262			~~385~~352			~~194~~385
Depreciation and amortization		1,~~110~~016			1,~~066~~110			1,~~270~~066
Total operating expenses		3,~~286~~165			3,~~438~~330			3,~~551~~465
Operating loss		(219	)		(680	)		(551	)
Operating income (loss)		271			(263	)		(707	)
Other income (expense):
Interest and other income		405			1140			811
Interest expense		(1,~~663~~264	)		(1,~~634~~663	)		(1,~~619~~634	)
Equity in losses from non-consolidated entities		(1,325	)		(1,221	)		(3,639	)
Loss from non-consolidated entities		(295	)		(1,325	)		(1,221	)
Margin tax expense		(35	)		(27	)		(17	)
Margin tax benefit		7			9			-
Total other expense		(2,983	)		(2,871	)		(5,267	)
Total other expense, net		(1,547	)		(2,939	)		(2,844	)
Loss before discontinued operations		(3,202	)		(3,551	)		(5,818	)
Loss from continuing operations		(1,276	)		(3,202	)		(3,551	)
Income (loss) from discontinued operations:
Loss from real estate operations		(5	)		(2,449	)		(478	)
Income (loss) from real estate operations		19			(5	)		(2,449	)
Gain on debt extinguishment		~~1,533~~-			-1,533			-
Gain on sale of real estate		-			~~1,734~~-			-1,734
Income (loss) from discontinued operations		~~1,528~~19			~~(715~~1,528	)		(~~478~~715	)
Net loss, including non-controlling interest		(1,~~674~~257	)		(41,~~266~~674	)		(64,~~296~~266	)
Net (income) loss attributable to non-controlling interest		-			(671	)		43
Net income attributable to non-controlling interest		-			-			(671	)
Net loss attributable to partners	$	(1,~~674~~257	)	$	(41,~~937~~674	)	$	(64,~~253~~937	)
Loss from continuing operations per Unit	$	(450.41	)	$	(1,130.25	)	$	(1,253.44	)
Income (loss) from discontinued operations per Unit		6.71			539.36			(489.24	)
Net loss per Unit	$	(443.70	)	$	(590.89	)	$	(1,742.68	)
Weighted average Units outstanding		2,833			2,833			2,833
Net loss per Unit	$	(591	)	$	(1,743	)	$	(2,207	)
Net loss attributable to partners	$	(1,257	)	$	(1,674	)	$	(4,937	)
Equity portion of change in fair value of derivative held by non-consolidated entity		(55	)		-			-
Net comprehensive loss	$	(1,312	)	$	(1,674	)	$	(4,937	)

See Notes to Consolidated Financial Statements.

F-4

Table of Contents

AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL For the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011 (in thousands)

	Partners’ Capital
	General Partner		Limited Partners			~~Accumulatedother~~AOCI ~~comprehensivegain~~of ~~(loss)~~non-consolidated investment			Non-~~controllingInterest~~controlling interest			Total
Balance at December 31, 2009	$	-	$	36,638		$	(79	)	$	1,319		$	37,878
Balance at December 31, 2010	$	-	$	30,385		$	-		$	1,276		$	31,661
Net loss attributable to Partners (1)		-		(6,253	)		-			(43	)		(6,296	)
Increase in fair value of derivative		-		-			79			-			79
Balance at December 31, 2010		-		30,385			-			1,276			31,661
Net loss attributable to Partners (1)		-		(4,937	)		-			671			(4,266	)
Distributions		-		(671	)		-			(1,947	)		(2,618	)
Balance at December 31, 2011	$	-	$	24,777		$	-		$	-		$	24,777
Net loss attributable to Partners (1)		-		(1,674	)		-		$	-			(1,674	)
Balance at December 31, 2012	$	-	$	23,103		$	-		$	-		$	23,103
Net loss attributable to Partners (1)		-		(1,257	)		-			-			(1,257	)
Equity portion of change in fair value of derivative held by non-consolidated entity		-		-			(55	)		-			(55	)
Balance at December 31, 2013	$	-	$	21,846		$	(55	)	$	-		$	21,791

(1) The allocation of net loss attributable to Partners includes a curative allocation to increase the General Partner capital account by $1713, $5017 and $6350 for the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, respectively. The cumulative curative allocation since inception of the Partnership is $~~387~~400. 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.

F-5

Table of Contents

AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011 (in thousands)

	2012			2011			2010
	2013			2012			2011
Cash flows from operating activities:
Net loss, including non-controlling interest	$	(1,~~674~~257	)	$	(41,~~266~~674	)	$	(64,~~296~~266	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Impairment		-			~~2,096~~-			-2,096
Gain on extinguishment of debt		~~(1,533~~-	)		-(1,533	)		-
Gain on sale of real estate		-			~~(1,734~~-	)		-(1,734	)
Equity in losses from non-consolidated entities		~~1,325~~295			1,~~221~~325			31,~~639~~221
Depreciation and amortization		1,~~394~~176			1,~~655~~394			21,~~345~~655
Bad debt (recovery) expense		(3263	)		25(32	)		~~200~~25
Increase in tenant and accounts receivables		(194	)		(37	)		(304	)
(Increase) decrease in tenant and accounts receivables		(58	)		(194	)		(37	)
Decrease (increase) in accounts receivable - related party		~~(388~~239	)		61(388	)		~~(31~~61	)
Increase in deferred costs		(351	)		(169	)		(91	)
Decrease (increase) in deferred costs		-			(351	)		(169	)
Decrease in other assets		256			156			64
Decrease (increase) in other assets		55			256			156
Decrease in accounts payable and other liabilities		(15	)		(534	)		(57	)
Increase (decrease) in accounts payable and other liabilities		342			(15	)		(534	)
Increase in accounts payable - related party		1,075			965			669
Increase (decrease) in accounts payable - related party		348			1,075			965
(Decrease) increase in security deposits		(17	)		4			39
Increase (decrease) in security deposits		5			(17	)		4
Net cash provided by (used in) operating activities		~~(154~~1,082	)		(~~557~~154	)		~~177~~(557	)
Cash flows from investing activities:
Improvements to real estate		(~~537~~369	)		(~~254~~537	)		(~~125~~254	)
Payments received on notes receivable		314			-3			-
Investments in non-consolidated entities		(73	)		(1,988	)		(435	)
Advances to related party		(391	)		-			-
Distributions from non-consolidated entities		700			371			897
Investments in and advances to non-consolidated entities		(913	)		(73	)		(1,988	)
Proceeds from property sale		-			4,493			-
Distributions from non-consolidated entities		4,654			700			371
Net cash provided by investing activities		93			2,622			337
Proceeds from property sale		-			-			4,493
Net cash provided by (used in) investing activities		2,995			93			2,622
Cash flows from financing activities:
Proceeds from notes payable		~~2,200~~-			122,~~800~~200			-12,800
Payments on notes payable		(~~148~~172	)		(~~13,629~~148	)		(~~165~~13,629	)
Proceeds from notes payable - related party		~~501~~-			~~1,450~~501			~~400~~1,450
Payments on notes payable - related party		(15,~~000~~872	)		-(1,000	)		~~(1,400~~-	)
Loan escrow costs		-			~~(540~~-	)		-(540	)
Loan acquisition costs		~~(137~~-	)		(~~360~~137	)		-(360	)
Distributions		-			~~(671~~-	)		-(671	)
Distributions to non-controlling interest		-			~~(1,946~~-	)		-(1,946	)
Net cash provided by (used in) financing activities		1(6,~~416~~044	)		(21,~~896~~416	)		(12,~~165~~896	)
Net increase (decrease) in cash and cash equivalents		(1,~~355~~967	)		~~(831~~1,355	)		(~~651~~831	)
Cash and cash equivalents, beginning of period		13,~~815~~170			21,~~646~~815			32,~~297~~646
Cash and cash equivalents, end of period	$	31,~~170~~203		$	13,~~815~~170		$	21,~~646~~815
Supplemental schedule of cash flow information:
Cash paid during the period for interest	$	~~894~~1,017		$	~~2,206~~894		$	2,~~951~~206
Cash paid during the period for taxes	$	9123		$	91		$	3991
Supplemental schedule of noncash investing and financing activities:
Increase in notes payable - related party for accrued interest	$	1,139		$	976		$	649
Reclassification from accounts payable - related party to notes payable - related party	$	517		$	1,139		$	976
Notes payable assumed by buyer in property disposition	$	-		$	15,675		$	-
Notes payable assumed by buyer in property dispositions	$	-		$	-		$	15,675
Property delivered as settlement of debt	$	~~9,628~~-		$	-9,628		$	-
Construction fees included in accounts payable	$	~~115~~167		$	-115		$	-
Reclass from tenant and accounts receivable to notes receivable	$	106		$	-		$	-
Reclass fom tenant and accounts receivable to notes receivable	$	17		$	106		$	-

See Notes to Consolidated Financial Statements.

F-6

Table of Contents

AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND ~~SUBSIDIARIES NOTES~~ ~~TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2012, 2011 and 2010~~SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013, 2012 and 2011


1.	DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

General

We ~~were~~ are a Texas limited partnership formed on April 19, 2005 to acquire, develop and operate, directly or indirectly through joint venture arrangements, a 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 ~~has~~is apublicly traded ~~class of securities listed~~ on the NYSE and that has elected to be taxed as a REIT. ~~The~~As ~~General~~of ~~Partner maintains~~December ~~its~~31, ~~principal~~2013, ~~place~~our ofinvestments ~~business~~included intwo ~~Houston,~~wholly-owned ~~Texas.~~properties Wecomprised ~~commenced our~~of ~~principal~~approximately ~~operations on June 30~~125,000 ~~2005,~~square ~~when~~feet weof ~~met~~GLA ~~the~~and ~~required~~six ~~minimum~~properties ~~of $2.0 million~~ in ~~our~~which ~~Offering~~we ~~and~~own ~~issued 80 initial Units. We closed~~a ~~the~~non-controlling ~~offering~~interest onthrough ~~October~~joint ~~31,~~ventures ~~2006~~comprising ~~when we had received~~ approximately ~~$71.1 million~~ ~~from~~985,000 ~~the~~square ~~sale~~feet of ~~2,844 Units~~GLA. WeA ~~invested~~majority ~~substantially~~of ~~all~~our ofproperties ~~the~~are ~~net~~located ~~proceeds~~in highly ofpopulated, ~~the~~suburban ~~Offering~~communities in ~~real properties~~Texas.

AsOur ofoperating ~~December~~ period ended on October 31, 2012, and ~~our~~we ~~investments~~have ~~included~~entered ~~two~~into ~~wholly-owned~~our ~~properties~~liquidation ~~comprising approximately~~period. ~~125~~However,~~000~~ ~~square~~an orderly ~~feet~~liquidation of ~~GLA~~all our ~~and~~properties ~~seven~~will ~~properties~~likely intake ~~which~~years for our weGeneral ~~own~~Partner ato ~~non-controlling~~complete ~~interest~~and ~~through~~wind ~~joint~~up ~~ventures~~our ~~comprising~~operations. Because we have entered ~~approximately~~into 1our liquidation period,~~190,000~~ ~~square~~we ~~feet~~will not invest in any new real estate without approval of ~~GLA~~our limited partners. ABecause ~~majority~~liquidation was not imminent as of December ~~our~~31, ~~properties~~2013, the financial statements are ~~located~~ inpresented ~~highly~~assuming ~~populated,~~we ~~suburban~~continue as ~~communities~~a ingoing ~~Texas~~concern.

~~Our~~Economic ~~operating~~Conditions ~~period ended on October 31, 2012,~~ and we have entered into our liquidation period. 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 is still experiencing weakness from the past economic recession, which resulted in increased unemployment, weakening of tenant financial condition, large-scale business failures and tight credit markets. 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. Furthermore, the uncertainty surrounding the rapidly increasing national debt of the United States and continuing global economic uncertainty have kept markets volatile. 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. Because we have entered into our liquidation period, we do not intend to invest in any new real estate. Additionally, because the liquidation was not imminent, as of December 31, 2012, the financial statements are presented assuming we continue as a going concern.Liquidity

~~Liquidity~~ Over the ~~Challenges~~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 has experienced recent improvements in the general economy; however, it is difficult to determine if the improvements experienced in 2013 will continue through 2014 and into the future.

~~Historically, we~~ We have faced significant liquidity challenges over the last several years. However, ~~Other~~other than our Olmos Creek property, which we ~~have~~delivered ~~been~~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) ~~sales~~selling of certain of our properties and investments in non-consolidated entities, (see Note 4) and/or (5) obtaining funds through additional borrowings from ~~AmREIT and/or~~ ~~(6) selling certain of our investments, including the anticipated sale of a single tenant building and portion of land by our Woodlake Pointe joint venture~~AmREIT. ~~See also Note 4.~~

~~Our~~As of ~~Olmos~~December ~~Creek~~31, ~~mortgage~~2013, ofwe have $111.2 million ~~matured~~ ~~unpaid~~in cash on ~~November~~hand 1,and ~~2011.~~our ~~The~~liquidity ~~lender~~is ~~subsequently~~much ~~sold~~improved ~~the~~due ~~mortgage (including~~to the ~~right~~refinance toof the PTC/BSQ ~~property)~~joint inventure ~~January~~debt ~~2012.~~and Wethe ~~entered~~sales ~~into~~of ~~a settlement~~Woodlake ~~agreement~~Square ~~with~~and the ~~new~~single-tenant ~~owner~~building ofand ~~the~~land ~~mortgage~~parcel ~~and~~at ~~delivered the~~our ~~property~~Woodlake toPointe ~~the~~joint ~~purchaser~~venture. onSee ~~February~~also 6,Note ~~2012~~4 related to our investments in ~~exchange~~non-consolidated ~~for~~entities. aDuring ~~release~~2013, ofwe ~~the~~have ~~obligations~~repaid ~~under~~approximately ~~the~~$5.9 ~~Olmos~~million ~~Creek~~of ~~mortgage.~~our Asnotes apayable ~~result,~~– related party and we noresumed ~~longer~~monthly ~~own~~payments ~~this~~of interest, ~~property~~asset management fees and overhead allocations to AmREIT.

~~On November 30,~~ During 2012, we ~~modified~~and ~~the~~MIG ~~terms of~~IV initiated a lease-up strategy at our ~~Lantern~~Casa ~~Lane~~Linda ~~mortgage~~property to(a 50% ~~extend~~joint ~~the~~venture ~~due~~between ~~date,~~us and weMIG ~~entered~~IV). ~~into~~We aexpect ~~new~~to ~~loan~~fund ~~that~~a ~~resulted~~total inof approximately $21.2 5 million in ~~net~~capital ~~cash~~expenditures ~~proceeds~~representing toour us50% share of a lease-up strategy at this property. WeThe ~~subsequently~~lease-up ~~made~~strategy aincludes certain tenant build-out and site improvements. To date, the joint venture has incurred approximately $1.3 million ~~payment on~~of ~~our~~the ~~loan~~planned tocapital ~~AmREIT~~expenditures. onAdditionally, the ~~December~~joint 4,venture ~~2012~~refinanced the $38.0 ~~The~~million ~~remaining~~mortgage ~~cash~~loan ~~was~~on ~~retained~~the ~~for~~property on ~~working~~December ~~capital~~27, ~~needs~~2013, towith ~~fund~~a ~~our~~four-year, ~~portion~~non-recourse ~~(50%)~~loan ofwith the ~~lease-up~~opportunity ~~strategy~~for an atadditional ~~our Casa~~funding ~~Linda~~of ~~property~~approximately in$4.5 ~~2013~~million ~~(discussed~~for ~~below)~~the potential acquisition of an adjacent property.

We ~~expect~~continue to ~~fund~~work ~~approximately~~with ~~$1.5~~the ~~million~~debt inservicer ~~capital~~on ~~expenditures over~~ the ~~next two~~Westside ~~years~~Plaza atdebt ~~our Casa Linda property~~ (asee ~~50%~~Note ~~joint~~6) to ~~venture~~address ~~between~~various usalternatives ~~and~~for ~~MIG IV)~~relief ~~representing~~either ~~our~~through ~~50%~~reduction ~~share~~ of aescrow ~~lease-up strategy at this property. The~~requirements, ~~lease-up~~waiver ~~strategy~~of ~~includes~~penalties ~~certain tenant build-out~~ and ~~site~~forgiveness ~~improvements,~~of ~~to support~~principal aor ~~refinance~~all of the ~~property’s $38~~above.0 ~~million~~We believe ~~mortgage~~ that ~~matures January~~we ~~2014.~~will ~~The~~be ~~joint~~successful ~~venture~~in ~~has~~this ~~made~~endeavor; ~~progress~~however, ~~with~~we ~~signing~~may ~~new leases, but~~be ~~additional~~ultimately ~~improvements~~called ~~and~~upon ~~vacancy~~to ~~lease-up~~repay ~~are needed. The joint venture will likely require~~ a ~~one-year~~portion ~~extension~~ of the ~~loan~~debt toin ~~complete~~order ~~this~~to ~~strategy so~~successfully ~~that~~renegotiate weor ~~can later accomplish a long-term~~ refinance of the ~~property~~debt. WeIn ~~believe~~the event we ~~will~~do benot ~~successful~~have ~~in obtaining a~~sufficient ~~one-year~~liquidity ~~extension~~for ~~based~~such ona ~~our preliminary discussions with the lending agent; however~~repayment, nowe ~~assurances~~may ~~can~~need beto ~~given~~look ~~that~~to weour ~~will~~General bePartner ~~successful~~to borrow inadditional ~~obtaining the extension~~funds. WeAmREIT dohas ~~not~~historically ~~guarantee~~provided ~~this~~loans ~~debt~~ and ~~our~~deferred payments ~~risk~~ of ~~loss~~fees, isin ~~limited~~order to ~~our investment~~provide ~~balance~~financial insupport, ~~the~~subject ~~Casa~~to ~~Linda~~its continued ~~joint~~ability ~~venture~~to ofdo ~~$2.7~~so ~~million~~ as ~~of December~~discussed ~~31, 2012~~below.

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~~On March~~Our ~~15, 2013, our Woodlake Pointe~~ 5433 joint venture ~~entered~~is ~~into~~currently anot ~~letter~~in ~~of intent~~compliance towith ~~sell~~its adebt ~~portion~~service ofcoverage ~~the~~ratio ~~land~~covenant and athe ~~single~~lender ~~tenant~~may ~~building~~discontinue atfunding ~~our~~the remaining redevelopment ~~Woodlake~~ ~~Pointe~~draws ~~property~~provided for ~~$12~~in the loan.0 ~~million~~We todo annot ~~unrelated~~believe ~~third~~that ~~party.~~the ~~The land~~joint ~~and~~venture ~~building~~has ~~are~~sufficient ~~secured~~cash byon ahand ~~$6.2~~to ~~million~~fund ~~loan~~remaining ~~that~~development ~~will~~costs besolely ~~repaid~~from inits operating ~~full~~ ~~with~~cash ~~proceeds~~flows. ~~from~~Based ~~the~~upon ~~sale.~~current ~~The~~estimates ~~sale~~of isfair ~~expected~~value, towe ~~close~~believe that there is sufficient equity in the ~~second quarter~~property ofthat ~~2013,~~supports ~~and~~a ~~our~~successful ~~portion~~refinancing of the ~~net~~debt ~~cash~~and ~~proceeds~~completing ~~(30%)~~the ~~is approximately $1~~redevelopment.5 ~~million.~~In Wethe ~~plan~~near toterm, ~~use~~we ~~the~~may ~~proceeds~~be required to help fund our portion of the ~~Casa~~remaining ~~Linda lease-up~~development ~~strategy~~through operating cash flows and ~~for~~potential ~~working~~additional ~~capital~~loans ~~needs~~from AmREIT (see Note 4).

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~~ 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 ~~and payable~~ 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~~Although ~~2013,~~no ~~we resumed~~assurance ~~monthly~~can ~~payments~~be ~~of interest~~given, ~~asset management fees and overhead~~ ~~allocations~~we tobelieve ~~AmREIT. However, AmREIT has agreed~~ that itwe will ~~not~~be ~~require~~able us to ~~repay~~generate ~~the~~liquidity ~~$3.7~~sufficient ~~million notes payable–related party we owe~~ to ~~AmREIT~~continue ~~as of~~to ~~December~~execute ~~31,~~our ~~2012~~strategic ~~until~~plan through a ~~date~~combination ~~subsequent~~of ~~to January 1, 2014, if requiring such repayment would prevent~~ the ~~execution~~foregoing ~~of our strategy or present an unnecessary~~liquidity ~~financial hardship~~initiatives. In the event our liquidity is not sufficient to execute our strategy, AmREIT has agreed to ~~provide financial support and~~ defer payments, subject to its continued ability to do so. Although no assurance can be given, we believe that we will be able to generate liquidity sufficient to continue to execute our strategic plan through a combination of the foregoing liquidity initiatives.

Strategic Plan

We believe that the retail real estate market is likely to remain at depressed levels in 2013 when compared to pre-recession levels; however, it is difficult to determine the breadth and duration of the unfavorable financial market conditions and how such conditions may affect our tenants and the valuation of our assets. To navigate these challenging market conditions, we and our General Partner have created a strategic plan to maximize the potential value of our real estate portfolio and then execute an orderly, but opportunistic liquidation. ~~The~~ ~~components~~We ~~of this strategic~~ plan ~~are as follows~~to:

• Complete our development and redevelopment projects with a goal to stabilize these projects ~~during~~over ~~2013~~the next 6-12 months. We believe that completing our development and redevelopment projects, including their lease-up and stabilization, will allow us to maximize the ~~potential value and~~ return on these properties upon sale. Our investments in 5433 Westheimer, Woodlake Pointe, and PTC/BSQ represent our assets currently under development or 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 ~~recommence~~re-commence distributions ~~in 2014~~. We believe that ~~upon~~the stabilization of our development and redevelopment properties, coupled with the continued and ~~disciplined~~intense ~~management~~oversight of our operating properties, we will generate ~~sufficient~~ liquidity that could allow us to re-commence distributions to our Limited Partners; however, this will most likely ~~will~~not occur asuntil we begin to sell our real estate assets. • Sell our properties opportunistically, likely beginning in 2014,. ~~after~~Our ~~the~~sales ~~market~~of ~~has~~Woodlake ~~had~~Square aand ~~chance~~Woodlake toPointe ~~recover~~joint ventures are recent examples of our execution of this strategy. ~~Once~~However, once a property is marketed for sale, it may take several months, ~~or even longer,~~ 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 operating properties, but believes that retail property valuations continue~~ to besell ~~depressed,~~our ~~and~~remaining ~~accordingly,~~operating ~~attractive sales opportunities may not exist in the near term~~properties. When deciding whether or when to sell properties, our General Partner will consider ~~many~~ factors ~~including,~~such ~~but~~as ~~not limited to the~~ potential appreciation of ~~property~~ value asand ~~well as the~~ timing of cash flows. As we have now entered the liquidation period, we ~~expect~~will tonot ~~distribute~~be ~~the~~acquiring ~~net~~new ~~proceeds,~~real ifestate ~~any,~~investments. 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 prevent us from generating sufficient cash to meet our current plans and we could incur additional setbacks and significant losses. Additionally, 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 December 31, ~~2012~~2013, we do not have any interests in variable interest entities. All significant inter-company accounts and transactions have been eliminated in consolidation.

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Reclassifications

Certain immaterial reclassifications have been made to our consolidated statements of comprehensive loss for the years ended December 31, 2013, 2012 and 2011, to conform to current period presentation. These items had no impact on previously reported net loss attributable to Partners, our Consolidated Balance Sheet or Consolidated Statement of Cash Flows.

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 increases or decreases 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 ~~all cases, we have determined that we are the owner of any tenant improvements that we fund pursuant to the lease terms.~~ 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~~ therefore begins when the improvements are substantially complete. Revenue from ~~tenant~~ tenant reimbursements of taxes, maintenance expenses and insurance is recognized in the period the related expense is recorded. Accrued rents are included in tenant and accounts receivable, net.

Gains on Sale of Real Estate

Gains and losses on sales of real estate are not recognized under the full accrual method until certain criteria are met. Gains relating to transactions that do not meet the criteria for full accrual method of accounting are deferred and recognized when the full accrual method of accounting criteria are met or by using the installment or deposit methods of profit recognition, as appropriate under the circumstances.

Receivables and Allowance for Uncollectible Accounts

Tenant and Accounts Receivable, Net - Included in tenant receivables 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 ~~general and administrative~~ expense. As of December 31, ~~2012~~2013 and ~~December 31~~2012, ~~2011,~~ our allowance for ~~uncollectible~~ uncollectible accounts related to our tenant receivables was $~~127,000~~0 and $~~410~~127,000, 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.

Real Estate Redevelopment

Expenditures related to the redevelopment 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 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.

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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 once the acquisition of the property is determined to be probable.

Acquired Properties and Acquired Intangibles

We 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 GAAP. Accordingly, we allocate the purchase price of ~~acquired~~each ~~properties~~acquired property 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~~acquire 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 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, upand ~~to 11 years for~~ site improvements and over the term of the lease for tenant improvements. We re-evaluate the useful lives of 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 conditions indicate a potential impairment, and we perform an impairment analysis, as necessary, at the property level. In the case of a property redevelopment, we reassess the useful lives of specific buildings or other improvements to be demolished as part of that redevelopment once the redevelopment is probable of occurring.

Impairment

We review our properties for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including acquired lease intangibles and accrued rental income, may not be recoverable 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~~as ~~the~~of ~~year ended~~ December 31, 2013 and 2012. We performed an impairment assessment on our Olmos Creek Property (See Note 3 of the Notes to the Consolidated Financial Statements) during 2011. We determined that this property was impaired based upon our estimate of its fair value if sold, which was $9.6 million. Accordingly, we recorded an impairment of approximately $2.1 million for the year ended December 31, 2011. See also Fair Value Measurements below.

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Deferred Costs

Deferred costs include deferred leasing costs and loan acquisition costs, net of amortization. Loan acquisition costs are incurred in obtaining financing and are amortized to interest expense over the term of the debt agreements using a method that approximates the effective interest method. Deferred leasing costs consist of external commissions associated with leasing our properties and are amortized to depreciation and amortization expense on a straight-line basis over the lease term. If a lease is terminated early, or a loan is paid in full prior to maturity, the remaining deferred costs will be written off. Accumulated amortization related to loan acquisition costs as of December 31, ~~2012~~2013 and 2012, ~~2011~~ totaled $~~501~~90,000 and $~~358~~501,000, respectively. Accumulated amortization related to leasing costs as of December 31, ~~2012~~2013 and ~~2011~~2012, totaled $~~197~~93,000 and $~~184~~197,000, respectively.

Income Taxes

No provision for U.S. federal income taxes is included in the accompanying consolidated financial statements. As a partnership, we are not subject to federal income tax, and the federal tax effect of our activities is passed through to our partners. We are, however, subject to taxation under the Texas Margin Tax, which is computed by applying the applicable tax rate (1% for the Partnership) to the profit margin, which, generally, will be determined for us as total revenue less a 30% standard deduction. For the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, we ~~recorded~~recognized a margin tax benefit of $357,000, $279,000 and $170,~~000, respectively~~ ~~for margin tax expense~~respectively.

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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 receivables, 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 6 for fair value disclosures of our notes payable.

Non-Recurring Fair Value Measurements, Impairment – As discussed above, we impaired our Olmos Creek property during the third quarter of 2011. We estimated that the fair value of the property was approximately $9.6 million. We determined that this non-recurring fair value measurement falls within Level 3 of the fair value hierarchy.

Interest

Interest is charged to interest expense as it accrues. No interest has been capitalized on any consolidated properties since inception of the Partnership.

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Segments

We determined that we have one reportable segment with activities related to investing in real estate. Our investments in real estate generate rental revenue and other income through the leasing of multi-tenant retail properties, which comprised 100% of our total consolidated revenues for all periods presented. We evaluate operating performance on an individual property level. However, as all of our properties have similar economic characteristics, tenants, products and services, our properties have been aggregated into one reportable segment.

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Operating Leases

Our operating leases generally range from two to twenty-five years and generally include one or more five -year renewal options. A summary of minimum future base rentals to be received, exclusive of any renewals, under noncancelable operating leases in existence at December 31, ~~2012~~2013, is as follows (in thousands):

Year	Minimum future base ~~rents~~rentals
2013	$	2,396
2014	$	2,543
2014		2,258
2015		2,478
2015		2,156
2016		2,183
2016		1,867
2017		1,486
2017		1,230
2018		1,225
Thereafter		68,~~340~~430
	$	1618,~~247~~345

Future minimum rental revenue excludes amounts that may be received from tenants for reimbursements of operating costs, real estate taxes and insurance. Expense reimbursements recognized as revenue totaled $~~882~~1.0 million,~~000,~~ $~~955~~882,000 and $~~1.3~~955,000 ~~million~~ for the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, respectively.

Subsequent Events

We did not have any material subsequent events as of the date of this filing that impacted our consolidated financial statements.


3.	REAL ESTATE DISPOSITIONS AND DISCONTINUED OPERATIONS

Market at Lake Houston - On February 25, 2011, we sold the Market at Lake Houston property to AmREIT, which generated net proceeds of $4.5 million and resulted in a gain of $1.7 million. In conjunction with the sale, AmREIT assumed outstanding debt in the amount of $15.7 million that was secured by the property. This property was owned 60% by the Partnership and 40% by an affiliated fund whose general partner is also a subsidiary of AmREIT. The transaction was completed at fair market value pursuant to an independent appraisal process.

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 recorded an impairment of $2.1 million 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 new owner on February 6, 2012, in exchange for a release 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 (loss) from discontinued operations on the consolidated statements of ~~operations~~comprehensive loss for the year ended December 31, 2012.

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Table of Contents

These disposed properties have been reflected as discontinued operations in the accompanying consolidated statement of ~~operations~~comprehensive loss. The following is a summary of our income (loss) from discontinued real estate operations for the periods ~~presented~~ presented below (~~amounts~~ in thousands):

	For the year ended December 31,
	2012			2011			2010
	2013			2012			2011
Revenues:
Rental income from operating leases	$	91-		$	~~1,391~~91		$	31,~~222~~391
Total revenues		91-			~~1,391~~91			31,~~222~~391
Expenses:
General and administrative		-			12-			1712
Impairment		-			~~2,096~~-			-2,096
Property expense		21(19	)		~~318~~48			~~771~~346
Property management fees - related party		3-			533			~~126~~53
Legal and professional		14-			3214			3732
Depreciation and amortization		31-			~~521~~31			~~1,095~~521
Total operating expenses		69(19	)		~~3,032~~96			23,~~046~~060
Operating income (loss)		2219			(~~1,641~~5	)		(1,~~176~~669	)
Other expense:
Interest expense		-			~~(780~~-	)		(~~1,636~~780	)
Margin tax expense		~~(27~~-	)		~~(28~~-	)		~~(18~~-	)
Total other expense		~~(27~~-	)		~~(808~~-	)		(~~1,654~~780	)
Loss from real estate operations		(5	)		(2,449	)		(478	)
Income (loss) from real estate operations		19			(5	)		(2,449	)
Gain on debt extinguishment		~~1,533~~-			-1,533			-
Gain on sale of real estate		-			~~1,734~~-			-1,734
Income (loss) from discontinued operations	$	~~1,528~~19		$	~~(715~~1,528	)	$	(~~478~~715	)


4.	INVESTMENTS IN NON-CONSOLIDATED ENTITIES

WeAs of December 31, 2013, we have investments in ~~five~~four entities, 5433 Westheimer, Casa Linda, Woodlake Pointe, and PTC/BSQ Holding Company LLC, through which we owned ~~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			~~December 31, 2012~~2013		~~December 31, 2011~~2012
5433 Westheimer		57.5%	%	$	32,~~087~~726	$	3,~~573~~087
Casa Linda		50%	%		23,~~707~~104		32,~~439~~707
Woodlake Pointe		30%	%		43,~~623~~014		4,~~668~~623
PTC/BSQ		20%	%		97,~~882~~960		109,~~477~~882
Woodlake Square		3%	%		~~450~~21		~~429~~450
Total				$	2016,~~749~~825	$	2220,~~586~~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~~ partner share equally in decision -making rights. ~~The debt securing the 5433 Westheimer property matured unpaid in December 2011.~~ On April 10, 2012, 5433 Westheimer, LP sold the 152-room hotel for $28.7 million, and ~~net~~ the net proceeds ~~were~~ 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. ~~The lender extended the remaining debt outstanding through October 31, 2012.~~ On October 19, 2012, 5433 Westheimer, LP refinanced this debt with a five-year term loan in the amount of $8.7 million, ~~including~~which includes amounts to be funded in the form of construction ~~draws~~ ~~related~~draws tofor the ~~planned~~ redevelopment atof the property. We and our joint venture ~~partner~~ partner are joint and several guarantors of 25% of this debt., Weand ~~have~~we ~~initiated~~and our joint venture partner 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. WeAs ~~estimate~~of ~~that~~December 31, ~~the~~2013, ~~redevelopment will cost~~ approximately $610.81 million ~~(including~~ ~~lease-up~~in redevelopment costs), ~~which~~have webeen ~~expect~~incurred out toof ~~fund~~a ~~with~~total ~~the~~expected ~~property’s operating~~cost ~~cash~~of ~~flows~~approximately ~~and~~$11.9 ~~construction~~million ~~draws~~(including ~~under the loan~~lease-up costs).

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Table of Contents

~~Casa~~Our 5433 ~~Linda~~joint -venture Weis ~~own~~currently anot ~~50% interest~~ in ~~AmREIT~~compliance ~~Casa Linda,~~with ~~LP,~~its ~~which~~debt ~~owns~~service acoverage ~~multi-tenant~~ratio ~~retail~~covenant ~~property~~and ~~located~~the inlender ~~Dallas,~~may ~~Texas~~discontinue funding ~~with~~the aremaining ~~combined~~redevelopment ~~GLA~~draws ofprovided ~~325,000~~for ~~square~~in ~~feet~~the loan. ~~The~~We ~~remaining~~do ~~50%~~not isbelieve ~~owned~~that bythe ~~MIG IV,~~joint anventure ~~affiliate~~has ofsufficient ~~our~~cash ~~General~~on ~~Partner.~~hand to ~~The~~fund ~~property~~remaining isdevelopment ~~secured~~costs bysolely afrom ~~$38.0 million,~~its ~~seven-year~~operating ~~mortgage~~cash ~~loan that matures in January 2014~~flows. The loan ~~bears~~ anagreement ~~annual~~between ~~interest~~the ~~rate~~lender ~~of 5.48%~~ and isour ~~interest-only~~joint ~~until~~venture ~~maturity.~~requires ~~During 2012,~~that wethe ~~and~~lender ~~MIG~~be IVnotified ~~initiated~~of aany ~~lease-up~~noncompliance. While we, ~~strategy~~as ~~for~~ the ~~property~~general ~~that includes~~partner ~~certain~~of ~~tenant~~the ~~build-out~~joint ~~and site improvements~~venture, tohave ~~support~~not ayet ~~refinance of~~notified the ~~property’s~~lender, ~~mortgage~~we ~~prior~~expect to ~~maturity.~~do ~~The~~so ~~joint~~in ~~venture has made~~the ~~progress~~near ~~with~~term ~~signing~~in ~~new~~connection ~~leases,~~with ~~but~~our ~~additional~~plan ~~improvements~~to ~~and~~refinance ~~vacancy lease-up~~this ~~is needed~~debt. ~~The~~Based ~~joint~~upon ~~venture~~current ~~will~~estimates ~~likely require a one-year extension~~ of ~~the~~fair ~~loan~~value, towe ~~complete~~believe ~~this strategy so~~ that ~~we can later accomplish a~~there ~~long-term~~is ~~refinance~~sufficient ofequity in the property. Wethat ~~believe~~supports wea ~~will be~~ successful ~~in obtaining~~refinancing aof ~~one-year~~the ~~extension~~debt ~~based~~and oncompleting ~~our~~the ~~preliminary~~redevelopment. ~~discussions~~In ~~with~~ the ~~lending~~near ~~agent; however~~term, nowe ~~assurances~~may ~~can~~ be ~~given~~required ~~that~~to wehelp ~~will~~fund beour ~~successful in~~portion ~~obtaining~~of the ~~extension.~~remaining Wedevelopment dothrough ~~not~~operating ~~guarantee~~cash ~~this~~flows ~~debt~~ and ~~our risk of loss~~potential isadditional ~~limited~~loans tofrom ~~our~~AmREIT. ~~investment~~While ~~balance in~~ the ~~Casa~~lender ~~Linda~~could ~~joint~~take ~~venture~~possession of ~~$2.7 million~~the ~~as of December 31~~property, ~~2012.~~we Wedo ~~expect~~not believe that ~~our~~they ~~portion~~will ofelect ~~these costs (50%)~~ to ~~be incurred as part of this strategy is approximately $1.5 million. We~~ ~~expect~~do toso; ~~fund our capital requirements with cash on hand~~however, ~~cash~~all ~~proceeds~~or ~~from the anticipated sale of~~ a portion of ~~the land and single tenant building at~~ our ~~Woodlake~~ ~~Pointe~~investment ~~property~~of ~~(discussed~~$2.7 ~~below)~~million ~~and~~is ~~operating~~subject ~~cash~~to ~~flows~~risk.

~~Woodlake Pointe -~~ We ~~own a~~also ~~30%~~serve ~~interest~~as ~~in AmREIT Westheimer Gessner, LP, which owns Woodlake Pointe,~~ a ~~multi-tenant~~ ~~retail~~guarantor ~~property located in Houston, Texas with a combined GLA~~ of ~~82,120~~ ~~square~~this ~~feet.~~debt ~~The remaining 70% is owned by affiliated AmREIT entities, MIG IV~~ (~~60%)~~see ~~and~~Note ~~ARIC (10%~~6).; ~~During November 2011~~however, ~~Woodlake Pointe obtained a $6.7 million construction loan to fund its redevelopment. During 2011,~~ we ~~signed~~ ado ~~lease~~not ~~with~~believe athat ~~large national fitness tenant, and~~ we ~~completed construction~~would ofbe arequired ~~45,000~~to ~~square~~perform ~~foot~~under ~~building on~~ the ~~property during 2012. We~~guarantee ~~are~~as inwe ~~discussions~~believe ~~with another anchor tenant for~~ the ~~existing~~fair ~~building.~~value As of ~~December~~ ~~31,~~the ~~2012,~~property ~~Woodlake~~exceeds ~~Pointe~~the ~~had~~amount ~~incurred approximately $5.7 million in redevelopment costs with a total expected cost~~ of ~~approximately~~the $6loan.7 ~~million~~Accordingly, ~~including~~ ~~tenant~~we ~~improvements~~believe ~~and~~that ~~leasing~~our ~~costs.~~potential ~~On March 15, 2013, our~~exposure ~~Woodlake~~is ~~Pointe~~limited ~~joint venture entered into a letter of intent~~ to ~~sell~~our ainvestment ~~portion of~~balance. ~~the~~While ~~land~~we ~~and~~believe athat ~~single~~we ~~tenant~~will ~~building~~be atable ~~our Woodlake Pointe property for $12.0 million~~ to ansuccessfully ~~unrelated~~refinance ~~third~~the ~~party.~~debt, ~~The~~we ~~land~~can ~~and building are secured by~~provide ano ~~$6.2~~assurances ~~million loan~~ that we will be ~~repaid~~able ~~in full with proceeds from the sale. The sale is expected~~ to ~~close~~do inso, ~~the~~or ~~second~~under ~~quarter~~circumstances ~~of 2013,~~ and ~~our~~timing ~~portion~~that ~~of the~~allow ~~net~~us ~~cash proceeds (30%) is approximately $1.5 million. We plan~~ to ~~use~~maximize the ~~proceeds~~ tovalue ~~fund~~of the ~~Casa Linda lease-up strategy and for working capital needs~~property.

~~PTC/BSQ~~Casa Linda - We own a 2050% interest in ~~PTC/BSQ Holding~~AmREIT ~~Company~~Casa ~~LLC~~Linda, LP, which owns ~~three~~a ~~multi-tenant~~324,569 square foot retail ~~properties~~shopping ~~located~~center located in ~~Plano~~Dallas, ~~Texas~~ ~~with a combined GLA of 460,000 square feet~~Texas. The ~~remaining~~property ~~80%~~was ispurchased ~~owned~~from by an unaffiliated third -party. Albertson’s ~~During~~is the ~~second~~largest ~~quarter of 2011~~tenant, weoccupying ~~invested $1.8 million (our funding requirement of 20%) in this holding company in order to acquire the vacant anchor building within the Preston Towne Crossing shopping center. In December 2011~~59,561 ~~the~~square ~~joint~~feet ~~venture refinanced the mortgage loans~~ with a ~~$44.4 million term loan maturing December 27, 2014. The term loan~~lease ~~provides~~scheduled ~~for $7.0 million of capital expenditures, which are held in escrow until the construction costs are incurred. The term loan included $7.0 million held in escrow~~ to ~~fund~~expire ~~capital expenditures for the redevelopment of the anchor building as well as improvements to the remaining shopping center. Redevelopment began~~ in ~~January~~July ~~2012 and is expected to be completed by June 2013~~2016. AsAdditional oftenants ~~December~~include 31Petco, ~~2012~~Starbucks, ~~approximately $6.9 million of planned redevelopment~~ ~~costs~~Wells ~~have been incurred out of a total expected cost of $7.0 million~~Fargo, ~~including tenant improvements and leasing costs. In connection with the planned refinance of this joint venture~~Chili’s ~~debt~~, ~~the~~Just ~~joint~~Fitness ~~venture~~4 isU ~~contemplating additional redevelopment of between $5.0 million~~ and $6Supercuts.0 ~~million.~~The ~~Based on~~property ~~preliminary discussions with a lender, we expect to refinance and increase this debt to $54.0 million with an~~was ~~additional~~originally ~~$4.5~~built ~~million~~between in1946 ~~future available drawings for additional capital improvements~~ and ~~lease-up costs at the properties~~1949. The ~~preliminary~~remaining ~~terms include~~50% ~~a three~~is ~~year~~owned ~~maturity~~by ~~with~~MIG ~~two one-year extension options. Proceeds from~~IV, ~~the~~an ~~expected~~affiliate ~~refinance are to be used for additional capital improvements as well as to return a portion~~ of ~~equity to us and~~ our ~~joint~~General ~~venture partner~~Partner.

~~Woodlake~~During ~~Square~~2012, -we Weand ~~own~~MIG ~~a 3%~~IV ~~interest~~initiated ~~in AmREIT Woodlake Square, LP, which owns~~ a ~~multi~~lease-~~tenant~~up ~~retail property~~strategy ~~located~~at inour ~~Houston,~~Casa ~~Texas~~Linda ~~with a combined GLA of 161,000 square feet~~property. ~~The~~We ~~remaining~~expect ~~97%~~to isfund ~~owned~~a bytotal ~~the~~of ~~third-party~~approximately ~~institutional partner (90%), ARIC (~~$1~~%) and by MIG IV ( 6%)~~.5 ~~Our~~million ~~interest~~ in ~~Woodlake~~capital ~~Square also carries a~~expenditures ~~promoted~~representing ~~interest~~our ~~in profits and cash flows once an 11.65~~50% ~~return~~share isof ~~met~~a onlease-up ~~the project.~~strategy ~~VIF~~at ~~II/AmREIT~~this ~~Woodlake L~~property.~~P.,~~ ~~is the borrower under a $20.9 million~~The ~~loan.~~lease-up ~~The~~strategy ~~maturity~~includes ofcertain ~~the~~tenant ~~new~~build-out ~~loan~~and issite ~~July 2017~~improvements. WeTo date, ~~along~~the ~~with our affiliate MIG IV are~~ joint ~~and~~venture ~~several~~has ~~repayment~~incurred ~~guarantors~~approximately ~~on the loan~~$1.3 Wemillion ~~account~~of ~~for this investment using~~ the ~~equity method given our ability to significantly~~planned ~~influence~~capital ~~the property’s operations~~expenditures. The ~~joint venture commenced redevelopment of this~~ property inis ~~the~~secured ~~third~~by ~~quarter~~a ~~of 2010 and completed the redevelopment in April 2011~~$38.0 ~~On February 23~~million, ~~2012,~~seven-year ~~this~~mortgage loan ~~entity~~scheduled ~~sold~~to amature ~~parcel of land that resulted~~ in aJanuary ~~gain of approximately $437~~2014,~~000.~~ ~~Our~~but 3%was ~~share~~refinanced ofon ~~this~~December ~~gain is included in~~27, ~~our~~2013, ~~equity~~with ina ~~losses~~four-year, ~~from~~ non-~~consolidated~~recourse ~~entities~~loan onwith ~~our~~the ~~consolidated statement~~opportunity offor ~~operations.~~an additional Asfunding of ~~December 31, 2012, Woodlake Square had incurred~~ approximately $64.85 million infor ~~redevelopment~~the ~~costs~~potential acquisition ~~with a total expected cost~~ of ~~approximately~~ ~~$8.3~~an ~~million,~~adjacent ~~including additional tenant improvements and leasing costs~~property.

During 2013, Casa Linda recorded a one-time gain on the favorable settlement of an environmental liability of $224,000, our portion of which was $112,000.

In December of 2013, AmREIT Casa Linda, LP entered into an interest rate cap on its $38.0 million mortgage. The mortgage carries a floating interest rate capped at 3% per annum. The interest rate cap was not designated as a hedge for financial reporting purposes, and our portion of the change in fair value is recognized in income (loss) from non-consolidated entities. For the year ended December 31, 2013, our portion of the increase in fair value totaled $11,000 and is included in income (loss) from non-consolidated entities on our Consolidated Statements of Comprehensive Loss.

Woodlake Pointe - We own a 30% interest in AmREIT Westheimer Gessner, LP, which owns Woodlake Pointe, a multi-tenant retail property located in Houston, Texas with a combined GLA of 82,120 square feet. The remaining 70% is owned by affiliated AmREIT entities, MIG IV (60%) and ARIC (10%). During 2011, we signed a lease with a large national fitness tenant, and we completed construction of a 45,000 square foot building on the property during 2012 for a total redevelopment costs of $6.7 million. On September 30, 2013, our Woodlake Pointe joint venture sold the 45,000 square foot single-tenant building and land parcel at our Woodlake Pointe property for $12.0 million to an unrelated third party. The land and building were secured by a $6.6 million loan that was repaid in full with proceeds from the sale. The joint venture recorded an impairment of $576,000 primarily related to the write-off of accrued rent. We received a distribution of $1.5 million on October 1, 2013 in connection with this sale. We subsequently repaid approximately $650,000 of notes payable - related party and retained the remainder of the proceeds as cash on hand.

PTC/BSQ - We own a 20% interest in PTC/BSQ Holding Company LLC, which owns three multi-tenant retail properties located in Plano, Texas with a combined GLA of 444,000 square feet. The remaining 80% is owned by an unaffiliated third party. We initiated a redevelopment in January 2012, which was substantially completed in the fourth quarter of 2013. As of December 31, 2013, approximately $11.6 million in redevelopment costs have been incurred out of a total expected cost of $11.9 million, including tenant improvements and leasing costs. Our PTC/BSQ joint venture refinanced its debt on June 28, 2013, increasing the total debt from $44.4 million to $54.0 million with an additional $4.5 million available for future capital improvements. The loan has a three-year maturity with two one-year extension options. We received a distribution from our PTC/BSQ joint venture in the amount of $1.9 million and repaid approximately $1.4 million of notes payable-related party.

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Table of Contents

WeIn ~~report~~the ~~our~~second ~~investments~~quarter inof ~~these~~2013, ~~entities~~PTC/BSQ ~~using~~Holding ~~the~~Company ~~equity~~LLC ~~method~~entered into an interest rate swap with a notional amount of ~~accounting~~$54.0 million and a fixed rate of ~~due~~0.6625% in order to ~~our~~manage ~~ability~~the tovolatility ~~exercise~~inherent ~~significant influence~~in ~~over~~its ~~them~~variable-rate mortgage. ~~Combined~~The ~~condensed~~interest ~~financial~~rate ~~information~~swap was designated as a hedge for ~~our~~financial ~~non-consolidated~~reporting ~~entities~~purposes. ~~(at~~Changes ~~100%)~~in isfair ~~summarized~~value of derivatives that qualify as ofcash flow ~~and~~hedges ~~for~~are recognized in other comprehensive income. For the ~~years~~year ended December 31, ~~2012~~2013, our portion of the decrease in fair value totaled $55,000 and ~~2011~~is asincluded ~~follows:~~in “equity portion of change in fair value of derivatives held by non-consolidated entity” on our Consolidated Statements of Comprehensive Loss.

	As of December 31,
Combined balance sheets (in thousands)	2012		2011
Assets
Property, net	$	156,806	$	175,684
Cash		3,477		4,293
Other assets		20,297		26,160
Total assets	$	180,580	$	206,137
Liabilities and partners’ capital
Notes payable	$	93,475	$	114,604
Other liabilities		15,194		14,086
Partners’ capital		71,911		77,447
Total liabilities and partners’ capital	$	180,580	$	206,137
MIG IV share of net assets	$	20,749	$	22,586

Woodlake Square - We owned a 3% interest in the Woodlake Square property, a 205,522 square foot retail shopping center located in Houston, Texas, through a joint venture arrangement with affiliates of our General Partner, MIG IV (6% ownership interest) and ARIC (1% ownership interest) and an unaffiliated third party institutional partner (the remaining 90% ownership interest). The joint venture commenced redevelopment of this property in the third quarter of 2010 and completed the redevelopment in April 2011. On February 23, 2012, the joint venture sold a parcel of land that resulted in a gain of approximately $437,000. Our 3% share of this gain is included in our equity in losses from non-consolidated entities on our consolidated statement of operations. On September 18, 2013, the joint venture sold the shopping center to AmREIT for $41.6 million based on arms-length negotiations between AmREIT and our third party institutional partner that owned a 90% interest in the property. The joint venture recorded a gain on sale of $10.4 million. Our share of this gain is included in our income (loss) from non-consolidated entities. We received a distribution for approximately $1.0 million in connection with this sale.

	For the year ended December 31,
Combined Statements of Operations (in thousands)	2012			2011			2010
Revenues
Total revenues	$	15,270		$	19,604		$	20,850
Expenses
Depreciation and amortization		5,788			6,690			14,145
Interest		4,250			5,006			6,024
Other		7,475			10,849			10,830
Total expenses	$	17,513		$	22,545		$	30,999
Net Loss	$	(2,243	)	$	(2,941	)	$	(10,149	)
MIG IV share of net loss	$	(1,325	)	$	(1,221	)	$	(3,639	)

We report our investments in these entities using the equity method of accounting due to our ability to exercise significant influence over them. Combined condensed financial information for our non-consolidated entities (at 100%) is summarized as of December 31, 2013 and 2012, and for the years ended December 31, 2013, 2012 and 2011 as follows:

Derivative Financial Instruments


	As of December 31,
Combined balance sheets (in thousands)	2013		2012
Assets
Property, net	$	148,774	$	156,806
Cash		4,806		3,477
Other assets		10,726		20,297
Total assets	$	164,306	$	180,580

Liabilities and partners’ capital
Notes payable	$	100,286	$	93,475
Other liabilities		8,441		15,194
Partners’ capital		55,579		71,911
Total liabilities and partners’ capital	$	164,306	$	180,580

MIG III share of net assets	$	16,825	$	20,749

In December 2007, AmREIT Woodlake Square, LP, one of our non-consolidated investment entities, entered into an interest rate swap with a notional amount of $23.8 million and a fixed rate of 5.465% in order to manage the volatility inherent in its variable-rate mortgage. The interest rate swap was designated as a hedge for financial reporting purposes. Changes in fair value of derivatives that qualify as cash flow hedges are recognized in other comprehensive income. This swap transaction was terminated when the underlying mortgage was refinanced in conjunction with the new joint venture agreement on the Woodlake Square property and the balance in accumulated other comprehensive gain was recorded to interest expense at as required by GAAP. For the year ended December 31, 2010, our portion of the increase in fair value totaled $79,000 and was included in accumulated other comprehensive gain (loss) on our consolidated statements of capital.

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Table of Contents


	For the year ended December 31,
Combined Statements of Operations (in thousands)	2013			2012			2011

Revenues
Total revenues	$	15,996		$	15,270		$	19,604

Expenses
Depreciation and amortization		6,004			5,788			6,690
Interest		4,241			4,250			5,006
Other		4,891			7,475			10,849
Total expenses	$	15,136		$	17,513		$	22,545

Net income (loss)	$	860		$	(2,243	)	$	(2,941	)

MIG III share of net income (loss)	$	(295	)	$	(1,325	)	$	(1,221	)


5.	ACQUIRED LEASE INTANGIBLES

We have identified and recorded the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and above- and below-market leases. Acquired lease intangible assets (in-place leases and above-market leases) are amortized over the leases’ remaining terms, which range from 1 year to 13 years. Acquired lease intangible liabilities (below-market leases) are accreted over the leases’ remaining non-cancelable lease term, plus any fixed-rate renewal options, if any, which range from 1 year to 13 years. The amortization (accretion) of above (and below) market leases is recorded as a reduction of (increase in) rental income, and the amortization of in-place leases is included in depreciation and amortization expense.

The table below details our acquired in-place and above- and below-market lease amounts and their respective accumulated amortization as recorded on our ~~consolidated~~ consolidated balance sheets as follows (in thousands):

	As of December 31,
	2012				2011
	2013			2012
Acquired lease intangible assets:
In-place leases	$	1,318		$	21,~~176~~318
In-place leases - accumulated amortization		(1,~~294~~318	)		(1,~~845~~294	)
Above-market leases		210			~~265~~210
Above-market leases - accumulated amortization		(~~206~~210	)		(~~256~~206	)
Acquired lease intangibles, net	$	28-		$	~~340~~28
Acquired lease intangible liabilities:
Below-market leases	$	(408	)	$	(532	)
Below-market leases - accumulated accretion		404			483
Acquired below-market lease intangibles, net	$	(4	)	$	(49	)

The table below details our acquired lease intangible activity for the years ended December 31, 2012 and 2011, respectively (in thousands):


	As of December 31,
	2013			2012
Acquired lease intangible liabilities:
Below-market leases	$	408		$	(408	)
Below-market leases - accumulated accretion		(408	)		404
Acquired below-market lease intangibles, net	$	-		$	(4	)

	For the year ended December 31,
	2012			2011
Acquired lease intangible assets:
Disposals of in-place leases	$	(858	)	$	(1,816	)
Amortization of in-place leases		(115	)		(176	)
Disposals of accumulated amortization of in-place leases		666			1,070
Disposals of above-market leases		(56	)		(4	)
Amortization of above-market leases		(5	)		(23	)
Disposals of accumulated amortization of above-market leases		56			4
Acquired lease intangible liabilities:
Disposals of below-market leases		124			167
Accretion of below-market leases	$	45		$	69
Disposals of accumulated amortization of below-market leases		(124	)		(104	)

The estimated aggregate amortization amounts from acquired lease intangibles for each of the next five years are as follows (in thousands):

Year ending December 31,	Amortization expense (in-place leases)		Rental income (above and below-market leases)
2013	$	24	$	-
2014 and thereafter		-		-
Totals	$	24	$	-

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The following table details our amortization related to in-place leases and above- and below-market leases as well as the presentation of such amounts in our consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011 (in thousands):


		For the year ended December 31,
	Presentation	2013		2012		2011
In-place leases	amortization expense	$	24	$	307	$	922
Above-market leases	reduction of rental income		4		5		23
Below-market leases	increase in rental income		4		45		132


6.	NOTES PAYABLE

Our ~~outstanding~~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 December 31, 2013, the weighted-average interest rate on our fixed-rate debt was 6.1%, and the weighted average remaining life of such debt was 1.42 years. Our outstanding debt due to unrelated, third parties as of December 31, ~~2012~~2013 and ~~December~~ 312012, ~~2011~~ was as follows (~~amounts~~ in thousands):

Notes payable	~~2012~~2013		~~2011~~2012
Lantern Lane	$	15,000	$	1215,~~800~~000
Olmos Creek		-		11,161
Westside Plaza		9,587		9,759
Westside Plaza		9,759		9,907
Total	$	24,587	$	24,759
Total	$	24,759	$	33,868

~~Our~~Lantern ~~Olmos~~Lane ~~Creek~~- ~~mortgage~~Our ofLantern ~~$11.2~~Lane ~~million~~debt ~~matured~~is ~~unpaid~~a onvariable-rate ~~November~~mortgage 1,loan ~~2011.~~that ~~The~~bears ~~lender~~interest ~~subsequently~~at ~~sold~~one-month ~~the~~LIBOR ~~note~~rate ~~(including~~plus ~~the right to the property) in January 2012~~2.75% ~~We entered into a settlement agreement with the new owner of the mortgage~~ and ~~delivered~~matures ~~the property to the new owner on February 6, 2012~~ in ~~exchange~~ ~~for a release of the obligations under the note~~2015. As a result, we no longer own this property. We recorded a gain on the extinguishment of debt of $1.5 million during the first quarter of 2012, which represents the amount by which the balance owed under the note exceeded the estimated fair value of the property.

~~Our~~ Westside Plaza ~~debt~~- isWe aassumed ~~fixed~~two 20-~~rate~~year mortgage loans with a June 2015 maturity as part of the acquisition of this property. The first loan ~~and~~($9.0 million outstanding as of December 31, ~~our~~2013) ~~Lantern~~bears ~~Lane~~interest ~~debt~~at ~~is a~~an ~~variable-~~annual rate ~~mortgage~~of 5.62%. The second loan ($633,000 outstanding as of December 31, 2013) bears interest at an annual rate of 12.75%. We are ~~currently~~ delaying scheduled payments on our Westside Plaza debt, and we ~~are~~continue into ~~negotiations~~ work with the ~~lender~~debt servicer to ~~refinance~~address ~~our~~various alternatives ~~Westside~~for ~~Plaza~~relief ~~debt.~~either ~~Our~~through ~~mortgage~~reduction ~~loans~~of ~~are~~escrow requirements, ~~secured~~reductions byof ~~our~~interest, ~~real~~waiver ~~estate~~of ~~properties~~penalties and ~~may~~forgiveness beof ~~prepaid~~principal, ~~but~~or all ~~could~~of the above. We believe that we will be ~~subject~~successful in this endeavor; however, we may be ultimately called upon to repay a ~~yield-maintenance~~portion ~~premium~~of the debt in order to successfully renegotiate or ~~prepayment~~refinance ~~penalty~~the debt. ~~Our~~In ~~mortgage~~the ~~loans~~event ~~are~~we do not ~~generally~~have ~~due~~sufficient inliquidity ~~monthly~~for ~~installments~~such ofa ~~interest~~repayment, ~~and~~we ~~principal~~may ~~and~~have to look to our ~~mortgages~~General ~~mature in~~Partner ~~2015~~to borrow additional funds. AsAmREIT ofhas historically provided ~~December~~loans ~~31,~~and ~~2012,~~deferred ~~the~~payments ~~weighted-average~~of ~~interest~~fees, ~~rate~~in onorder ~~our~~to ~~fixed-rate~~provide ~~debt was~~financial ~~6.1%~~support, subject ~~and~~to ~~the~~its ~~weighted~~continued ~~average~~ability ~~remaining~~to ~~life~~do ofso ~~such~~(see ~~debt~~Note ~~was 2~~1).4 ~~years.~~

We also serve as guarantor on debt in the amount of $187.47 million, ~~that~~which isrelates ~~the~~to ~~primary~~our ~~obligation~~5433 Westheimer joint venture, of ~~our~~which ~~non-consolidated~~we ~~joint~~own ~~ventures~~57.5%, ~~Included~~and matures in ~~this~~2017. ~~amount~~See isNote ~~$2.2~~4 ~~million~~regarding ~~that~~the westatus ~~guaranteed~~of ~~related~~the ~~to our~~ 5433 ~~Westheimer property~~joint ~~and~~venture ~~$16~~debt.2 ~~million~~While ~~related~~we toserve ~~our~~as ~~Woodlake~~guarantor ~~Square~~on ~~property.~~this Wedebt, ~~and~~we ~~our joint~~do ~~venture~~not ~~partner~~believe ~~are~~that ~~joint~~we ~~and~~would ~~several~~be ~~guarantors~~required ofto ~~25%~~perform ofunder the ~~5433 Westheimer~~guarantee ~~debt~~as ~~and~~we ~~fully~~believe ~~guarantee~~ the ~~Woodlake~~fair ~~Square~~value ~~debt.~~of Wethe ~~have~~property ~~not~~exceeds ~~accrued~~ ~~any~~the ~~liability~~amount ~~with~~of ~~respect~~the toloan. ~~these~~Accordingly, ~~guarantees as~~ we believe itthat ~~is unlikely~~our wepotential ~~would~~exposure beis ~~required~~limited to ~~perform~~our ~~and,~~investment ~~therefore, the fair value of any obligation would be insignificant~~balance.

As of of December 31, ~~2012~~2013, scheduled principal repayments on notes payable were as follows (in thousands):

Scheduled payments by year	Principal		Loan maturities		Total payments
2013	$	194	$	-	$	194
2014	$	205	$	-	$	205
2014		205		-		205
2015		91		24,291		24,382
2015		90		24,270		24,360
Total	$	296	$	24,291	$	24,587
2016 and thereafter		-		-		-
Total	$	489	$	24,270	$	24,759

Notes Payable – Related Party – As of December ~~31, 2012~~ ~~and December~~ 31, ~~2011,~~2013 ~~our notes payable – related party were $5.6 million~~ and ~~$5.0~~ ~~million~~2012, ~~respectively. Approximately $1.0 million of~~ our notes payable – ~~related~~ ~~party is secured by our investment in the Woodlake Pointe property. The increase in our notes payable –~~ related party ~~represents~~were ~~additional borrowings of (i)~~ $~~257~~267,000 during the first quarter of 2012 primarily to fund the payment of real estate taxes, (ii) $244,000 of additional borrowings for working capital needs, (iii) $1.0 million related to the deferral of payment of fees and ~~interest owed to our General Partner and its affiliates as part of our strategy to manage cash in the near-term. We made a~~ $15.~~0 million payment on our~~6 ~~loan to AmREIT on December 4, 2012. Of the total balance at December 4, 2012, $1.8~~ million ~~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 LIBOR plus a spread of 3~~respectively.~~875%,~~ ~~with a floor of 5.375%.~~

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. We estimated the market rate of our fixed-rate debt to be approximately 3.6%, and we estimate that our variable-rate debt fair value approximates its carrying value as of December 31, 2012. We believe 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 and $33.1 million at December 31, 2012 and December 31, 2011, respectively.

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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 $25.0 million and $25.3 million as of December 31, 2013 and 2012, respectively.


7.	CONCENTRATIONS

As of December 31, ~~2012~~2013 and ~~December 31~~2012, ~~2011,~~ 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 ~~year~~years s ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011. Houston is Texas’ largest city and the fourth largest city in the United States.

Following ~~are~~ are the base rents generated by our top five tenants during the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011 (~~amounts~~ in thousands):

	For the year ended December 31,
Tenant	~~2012~~2013		~~2011~~2012		~~2010~~2011
Trend Mall	$	379	$	~~329~~379	$	-329
Rice Food Markets, Inc.		283		292		292
CVS/Pharmacy (1)		230		124		-
Fidelity Investments		~~193~~213		~~186~~193		~~193~~186
Fadis Mediterranean Delight		~~142~~141		~~131~~142		131
CVS Pharmacy		124		-		-
The Fresh Market, Inc. (2)		122		-		-
Totals	$	1,121	$	938	$	616
Rice Food Markets, Inc. (2)		94		283		292
Totals	$	1,179	$	1,121	$	938


	(1)	Rent commenced on a new lease with CVS/Pharmacy during the second quarter of 2012.
	(2)	The Fresh Market, Inc. assumed the Rice Food Markets, Inc.’s lease on July 24, 2013.


8.	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;

	•	second - 100% to the General Partner until it has received cumulative distributions from all sources (other than with respect to its 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.

Non-controlling Interest - Non-controlling interest represents a 40% ownership interest that one of our affiliate investment funds had in a real estate partnership that we consolidated as a result of our 60% controlling financial interest in such partnership. Such partnership sold its only asset, the Market of Lake Houston property, in February 2011.

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9.	RELATED PARTY TRANSACTIONS

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 years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011 (~~amounts~~ in thousands):

	For the year ended December 31,		~~For the year ended December 31,~~
Type of service	Service description & compensation		2012			2011			2010
Service description & compensation	2013			2012			2011
Asset management	1% of the net invested capital under management for accounting-related services, investor relations, facilitating the deployment of capital and other services provided by the General Partner in operating the Partnership		$	234,972		$	487,339		$	617,753
Asset management fees	$	235		$	235		$	487
Development and acquisitions	Between 3% and 6% of project costs for services provided by the affiliate in identifying, evaluating, procuring and, if applicable, developing properties (capitalized as part of real estate assets)			-			-			-
Interest expense - related party		103			332			200
Interest expense on notes payable-related party	We incur interest on amounts loaned to us by our General Partner. See Note 6 for a discussion of our notes payable-related party.			332,226			200,091			162,137
Property management fees(1)		128			118			157
Property management and leasing	Property management fees are not to exceed 4% of gross rentals for providing property management, operating, maintenance and other services required to maintain a quality property. Leasing fees are not to exceed 2% of base rent on a lease renewal and 6% of based rent on an initial lease for procuring tenants and negotiating the terms of the tenant leases			302,000			305,644			338,487
Leasing costs		44			187			160
Administrative costs and reimbursements	These costs represent actual expenses incurred by the General Partner in connection with its provision of administrative services, including personnel costs			390,359			408,271			437,473
Administrative costs reimbursements		380			390			408
	$	890	$	~~1,259,557~~$	1,262	$	~~1,401,345~~$	1,412	$	~~1,555,850~~

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 years ended December 31, 2012, 2011 and 2010, such fees totaled $(1.4) ~~million.~~Amounts ~~$1.4~~include million and $1.2 million, respectively. For more information, see Note 4 regarding investments in non-consolidated entities. On February 25, 2011, we sold the Market at Lake Houston property to AmREIT. For more information, see Note 3 regarding real estate dispositions and discontinued operations.

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 years ended December 31, 2013, 2012 and 2011, such fees totaled $1.2 million, $1.4 million and $1.4 million, respectively (see Note 4 regarding investments in non-consolidated entities). On February 25, 2011, we sold the Market at Lake Houston property to AmREIT (see Note 3). On September 18, 2013, our Woodlake Square joint venture sold the Woodlake Square property to AmREIT (see Note 4).


10.	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 known to be contemplated 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 have not been notified by any governmental authority of any non-compliance, liability or other claim.

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AmREIT MONTHLY INCOME & GROWTH FUND III, LTD. AND SUBSIDIARIES SCHEDULE III - Consolidated Real Estate Owned and Accumulated Depreciation For the year ended December 31, ~~2012~~2013

~~Initial Cost~~

Initial Cost

Total Cost

~~Property Description~~

Property Description

~~Building and Improvements~~

Building and Improvements

~~Land~~

Land

~~Cost Capitalized Subsequent to Acquisition~~

Cost Capitalized Subsequent to Acquisition

~~Building and Improvements~~

Building and Improvements

~~Land~~

Land

~~Total~~

Total

~~Accumulated Depreciation~~

Accumulated Depreciation

~~Date Acquired~~

Date Acquired

~~Encumbrances~~

Encumbrances

~~Westside Plaza~~

Westside Plaza

~~8,631,610~~$

8,631,610

~~4,750,000~~$

4,750,000

~~1,380,334~~$

1,402,133

~~10,002,340~~$

10,024,140

~~4,759,603~~$

4,759,603

~~14,761,944~~$

14,783,743

~~(2,156,139~~$

)(2,474,541

)

~~9/30/2005~~

9/30/2005

~~9,759,494~~$

9,586,723

~~Lantern Lane~~

Lantern Lane

~~11,386,338~~

11,386,338

~~6,308,354~~

6,308,354

~~1,332,747~~

1,622,859

~~12,698,093~~

12,988,205

~~6,329,346~~

6,329,346

~~19,027,439~~

19,317,551

~~(3,576,301~~

)(4,137,142

)

~~9/29/2006~~

9/29/2006

~~15,000,000~~

15,000,000

~~Total~~

Total

~~20,017,948~~$

20,017,948

~~11,058,354~~$

11,058,354

~~2,713,081~~$

3,024,992

~~22,700,433~~$

23,012,345

~~11,088,949~~$

11,088,949

~~33,789,383~~$

34,101,294

~~(5,732,440~~$

)(6,611,683

)

~~24,759,494~~$

24,586,723

Activity within real estate ~~and~~ and accumulated depreciation during the three years ~~in the period~~ ended December 31, 2013, 2012 and 2011 is as follows:

	Cost			~~AccumulatedDepreciation~~Accumulated Depreciation
Balance at December 31, 2009	$	66,724,237		$	6,691,365
Acquisitions / additions		124,467
Disposals		(137,800	)		(118,923	)
Depreciation expense					1,799,324
Balance at December 31, 2010	$	66,710,904		$	8,371,766
Acquisitions / additions		254,325			-
Impairment		(2,096,332	)		(11,391	)
Disposals		(20,130,588	)		(2,728,723	)
Depreciation expense		-			1,345,931
Balance at December 31, 2011	$	44,738,309		$	6,977,583
Acquisitions / additions		516,632			-
Disposals		(11,465,558	)		(2,176,682	)
Depreciation expense		-			931,539
Balance at December 31, 2012	$	33,789,383		$	5,732,440
Acquisitions / additions		311,911			-
Depreciation expense		-			879,243
Balance at December 31, 2013	$	34,101,294		$	6,611,683

S-1

Filing Compare · AmREIT Monthly Income & Growth Fund III Ltd