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SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission File Number 0-49782

T REIT, Inc.

N/A

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes o          No þ

      As of May 14, 2004, there were 4,642,553 shares of common stock of T REIT, Inc. outstanding.

T REIT, INC.

FORM 10-Q

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PART I — FINANCIAL INFORMATION

      The accompanying March 31, 2004 and 2003 interim financial statements of the Company required to be filed with this Form 10-Q Quarterly Report were prepared by management without audit and commence on the following page, together with the related Notes. In the opinion of management, these interim financial statements present fairly the financial condition, results of operations and cash flows of the Company, but should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2003 included in our Annual Report on Form 10-K previously filed with the Securities and Exchange Commission.

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T REIT, INC.

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

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T REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these consolidated financial statements.

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T REIT, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

The accompanying notes are an integral part of these consolidated financial statements.

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T REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements.

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T REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      T REIT, Inc. (the “Company”) was formed in December 1998 in the Commonwealth of Virginia and operates as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). The Company is in the business of acquiring existing office, industrial, retail and service properties located in several states. As of March 31, 2004, the Company owned real estate investments consisting of one consolidated property and interests in nine unconsolidated properties. The Company acquires properties through its operating partnership, T REIT, L.P., which is wholly owned by the Company.

      The Company is externally advised by an affiliated company, Triple Net Properties, LLC (the “Advisor”), which is primarily responsible for managing the day-to-day operations and assets of the Company. The Advisory Agreement dated February 22, 2000, between the Company and the Advisor is for a one-year term, subject to successive renewals. (See Note 11).

      The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. Such financial statements and accompanying notes are the representations of Company management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying consolidated financial statements.

      The accompanying consolidated financial statements include the accounts of the Company and T REIT, L.P. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain 2003 amounts have been reclassified to conform to the 2004 presentation. This report should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2003.

      Operating properties are held for investment and carried at cost less accumulated depreciation. Cost includes the cost of land and completed buildings and related improvements. Expenditures that increase the service life of properties are capitalized; the cost of maintenance and repairs is charged to expense as incurred.

      Depreciation is generally provided on a straight-line basis over the estimated useful lives of the buildings and improvements, ranging primarily from 15 to 39 years. When depreciable property is retired or disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss reflected in operations.

      In the event that the carrying amount of a property exceeds the sum of the undiscounted cash flows (excluding interest) that are expected to result from the use and eventual disposition of the property, the Company would recognize an impairment loss to the extent the carrying amount exceeded the fair value of the property. The Company estimates the fair value using available market information or other industry valuation techniques such as present value calculations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Property acquisitions have been accounted for in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations.” The fair value of the real estate acquired is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationships, if any, based in each case on their fair values.

      The fair value of the tangible assets of an acquired property (which includes land, building and tenant improvements) is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and tenant improvements based on the Company’s determination of the relative fair values of these assets. Factors considered in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and insurance and other operating expenses during the expected lease-up periods based on current market demand. The Company also estimates costs to execute similar leases including leasing commissions, concessions, legal and other related costs.

      In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) our estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancellable term of the lease. The capitalized above-market and below-market lease values are amortized into rental income over the remaining non-cancellable terms of the respective leases.

      Property held for sale is carried at the lower of cost or estimated fair value less cost to sell and such property is no longer depreciated. The Company classifies operating properties as property held for sale in the period in which all of the following criteria are met:

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

      Variable interest investments in real estate that do not meet consolidation criteria are reflected in the financial statements using the equity method of accounting.

      Certificates of deposit and short-term investments with remaining maturities of three months or less when acquired are considered cash equivalents.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Marketable securities are carried at fair value and consisted of an investment in a public REIT.

      Tenant receivables and unbilled deferred rent receivables are carried net of the allowances for uncollectible current tenant receivables and unbilled deferred rent. Management’s determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, individual tenant receivables considering the tenant’s financial condition, security deposits, letters of credit, lease guarantees and current economic conditions and other relevant factors.

      Financial instruments that potentially subject the Company to a concentration of credit risk are primarily cash and accounts receivable from tenants. Cash is generally placed in money market accounts and the amount of credit exposure to any one party is limited. The Company has cash in financial institutions which is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $100,000 per institution. At March 31, 2004 and December 31, 2003, the Company had cash accounts in excess of FDIC insured limits. Concentration of credit risk with respect to accounts receivable from tenants is limited. The Company performs credit evaluations of prospective tenants, and security deposits are obtained.

      As of March 31, 2004, the Company has investments in five properties located in the State of Texas, two properties located in the State of California, two properties located in the State of Nevada and one property located in the State of Illinois. Accordingly, there is a geographic concentration of risk subject to fluctuations in the economy of each of these States. No single tenant accounted for a significant portion of the Company’s rental income.