S-11

As filed with the Securities and Exchange Commission on January 10, 2006

Registration No. 333-            

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-11

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

NNN APARTMENT REIT, INC.

(Exact Name of Registrant as Specified in its Governing Instruments)

1551 N. Tustin Avenue, Suite 200

Santa Ana, California 92705

(714) 667-8252

(Address, Including Zip Code, and Telephone Number,

including Area Code, of Registrant’s Principal Executive Offices)

Louis J. Rogers

President

NNN Apartment REIT, Inc.

1551 N. Tustin Avenue, Suite 200

Santa Ana, California 92705

(714) 667-8252

(714) 667-6843 (Telecopy)

(Name, Address, Including Zip Code, and Telephone Number,

Including Area Code, of Agent for Service)

Copies to:

Deborah Schwager Froling, Esq.
Hirschler Fleischer, A Professional Corporation
701 E. Byrd Street
Richmond, Virginia 23219
(804) 771-9500
(804) 644-0957 (Telecopy) Stanley J. Olander, Jr., Chief Executive Officer
NNN Apartment REIT, Inc.
1606 Santa Rosa Road, Suite 109
Richmond, Virginia 23229
(804) 225-7790
(804) 225-7833 (Telecopy)

      Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

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

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

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

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

CALCULATION OF REGISTRATION FEE

		Proposed Maximum	Proposed Maximum
Title of Securities Being	Amount to be	Offering	Aggregate Offering	Amount of
Registered	Registered(1)	Price per Share	Price(2)	Registration Fee
Common Stock, $.01 par value per share	100,000,000 shares	$10.00	$1,000,000,000	$107,000.00
Common Stock, $.01 par value per share	5,000,000 shares	$9.50	$47,500,000	$5,082.50

(1)	Includes 100,000,000 shares offered to the public and 5,000,000 shares offered to stockholders pursuant to our distribution reinvestment plan, all of which are being offered pursuant to the prospectus contained in this registration statement.
(2)	Estimated solely for the purpose of determining the registration fee in accordance with Rule 457(o) of the Securities Act of 1933.

      The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such dates as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed or supplemented. We cannot sell any of the securities described in this prospectus until the registration statement that we have filed to cover the securities has become effective under the rules of the Securities and Exchange Commission. This prospectus is not an offer to sell the securities, nor is it a solicitation of an offer to buy the securities, in any state where an offer or sale of the securities is not permitted.

SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JANUARY 10, 2006

PROSPECTUS

NNN APARTMENT REIT, INC.

Maximum Offering of 105,000,000 Shares of Common Stock

Minimum Offering of 200,000 Shares of Common Stock

     We are offering and selling to the public up to 100,000,000 shares for $10.00 per share and up to 5,000,000 shares to be issued pursuant to our distribution reinvestment plan under which our stockholders may elect to have distributions reinvested in additional shares at $9.50 per share. The minimum purchase is generally 100 shares, or $1,000, except in North Carolina and Minnesota, which require higher minimum purchases. We are a newly formed Maryland corporation that intends to qualify as a real estate investment trust, or REIT, for federal income tax purposes.

      This investment involves a high degree of risk. You should purchase shares only if you can afford a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 13 for a discussion of material risk factors relevant to an investment in our common stock, including, but not limited to, the following:

•  We are a blind pool investment opportunity. As of the date of this prospectus, we do not own any properties and our advisor has not identified any properties for us to acquire. If we are unable to acquire suitable properties, or suffer a delay in making any acquisitions, we may not have any cash flow available for distribution to you as a stockholder.

•  We have not committed any of the net proceeds of the offering to any specific investment. Investors will not be able to evaluate the economic merits of any investments we make with our net proceeds. We may be unable to invest the net proceeds on acceptable terms to investors, or at all.

•  Many of our officers and non-independent directors have substantial conflicts of interest because they also serve as officers, managers and directors of our advisor, our dealer manager and their affiliates, that may compete with our company for the time and attention of these executives.

•  We will rely totally on our advisor, an affiliate of some of our officers and directors, to manage our business and assets, and the agreements between our advisor and us and between our advisor’s affiliates and us were not negotiated at arm’s- length and require us to pay substantial compensation to our advisor and its affiliates.

•  If we raise substantially less than the maximum offering, we may not be diversified and your investment will be subject to fluctuations on specific properties.

•  We may incur debt up to 300% of our net assets, which could lead to an inability to pay distributions to our stockholders; additionally, distributions payable to our stockholders may include a return of capital.

•  If we do not qualify as a REIT for federal income tax purposes, we will be taxed as a corporation.

•  We may be required to borrow money, sell assets or issue new securities for cash to pay our distributions.

•  There will be no public market for our common stock. Thus, you may not be able to resell your shares at the offering price, or at all, and there are significant restrictions on the ownership, transfer and redemption of your shares.

This Offering	Per Share		Total Minimum		Total Maximum
Public Price	$	10.00	$	2,000,000	$	1,000,000,000
Selling Commissions	$	0.70	$	140,000	$	70,000,000
Marketing Allowance ($0.25) and Accountable Due Diligence Expense Reimbursement ($0.05)	$	0.30	$	60,000	$	30,000,000
Proceeds to NNN Apartment REIT, Inc.	$	9.00	$	1,800,000	$	900,000,000

     After payment of total offering expenses, we estimate that 88.5% of the gross offering proceeds will be available for investments, excluding real estate commissions and acquisition expenses of up to 6.0% of the purchase price of the properties.

     Neither the Securities and Exchange Commission, the Attorney General of the State of New York nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

     The use of forecasts in this offering is prohibited. Any representation to the contrary and any predictions, written or oral, as to the amount or certainty of any present or future cash benefit or tax consequence which may flow from your investment in our shares of common stock is prohibited.

     The securities dealers in this offering must sell the minimum number of securities offered, or 200,000 shares, if any are sold. The securities dealers are required only to use their best efforts to sell the maximum number of securities offered, or 100,000,000 shares. A securities dealer may not complete a sale of our shares to you until at least five business days after the date you receive a copy of the final prospectus. That securities dealer must also send you a confirmation of your purchase. NNN Capital Corp., the dealer manager, is an affiliate of our company and of our advisor. Anthony W. Thompson, who is chief executive officer and chairman of the board of Triple Net Properties, LLC, the parent and manager of our advisor, is a director of our dealer manager and owns 85% of the capital stock of our dealer manager. Louis J. Rogers, our chairman of the board and our president and president of our advisor and Triple Net Properties, is a director of our dealer manager and owns 10% of the capital stock of our dealer manager. Affiliates may purchase shares in this offering net or partially net of selling commissions and reimbursements, but no shares purchased by affiliates will be counted towards the minimum amount needed to break escrow.

•  We will sell shares until the earlier of                   , 2008, or the date on which the maximum offering has been sold.

•  Your investment will be placed in an interest-bearing escrow account with CommerceWest Bank, as escrow agent, with interest accruing to the benefit of investors. No funds will be disbursed in accordance with this prospectus until we have received and accepted subscriptions for at least 200,000 shares.

•  If we do not sell 200,000 shares before                   , 2007, this offering will be terminated and our escrow agent will send a refund of your investment with interest and without deduction for escrow expenses within three business days of the termination of this offering.

The date of this Prospectus is                     , 2006

TABLE OF CONTENTS

		Page
INVESTOR SUITABILITY STANDARDS			vi
	Ensuring Our Suitability Standards Are Adhered To		vii
	Escrow Account		vii
QUESTIONS AND ANSWERS ABOUT THIS OFFERING			viii
PROSPECTUS SUMMARY			1
	Our Company and Our Advisor		1
	Our Business and Objectives		1
	Summary Risk Factors		2
	Our Property Acquisition Strategy		4
	Other Real Estate Investments		5
	Legal Proceedings		5
	Regulation		5
	The Dealer Manager		6
	This Offering		6
	Use of Proceeds		6
	Distributions		6
	Summary Financial Information		7
	Compensation to Our Advisor, the Dealer Manager and their Affiliates		7
	Conflicts of Interest		9
	Organizational Chart for Our Company and Our Advisor		11
	Organizational Chart for Our Advisor’s Affiliates		12
RISK FACTORS			13
	No Properties Owned; No Properties Identified For Investment		13
	No Operating History		14
	No Market for Our Common Stock		14
	Conflicts of Interest		14
	Restrictions on Proposed Share Repurchase Plan		17
	Federal Income Tax Requirements		18
	SEC Investigation of Triple Net Properties, LLC		19
	Total Reliance on Our Advisor		19
	Advisor’s Broad Discretion in Allocating Proceeds		20
	Lack of Investment Diversification		20
	Distributions May Include a Return of Capital		20
	Acquisition Risks		20
	Joint Venture Arrangements		21
	Limited Working Capital		23
	Borrowings May Increase Our Business Risks		23
	Our Ability to Change Policies Without a Stockholder Vote; Limitation on Debt		24
	Possible Adverse Consequences of Limits on Ownership and Transfer of Our Shares		24
	Potential Anti-Takeover Effects		25
	Dilution		25
	Dilution and the Operating Partnership		26

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		Page
	Seller Financing by Our Company May Delay Liquidation or Reinvestment		26
	Negative Characteristics of Real Estate Investments		26
	Effects of ERISA Regulations		29
ESTIMATED USE OF PROCEEDS OF THIS OFFERING			30
OUR COMPANY			31
INVESTMENT OBJECTIVES AND POLICIES			32
	Our Business and Objectives		32
	Types of Investments		34
	Our Acquisition Standards		35
	Property Acquisition		37
	Joint Ventures		38
	Description of Our Leases		39
	Our Operating Partnership		39
	Our Policies With Respect to Borrowing		39
	Sale or Disposition of Properties		40
	Our Long Term Investment Objectives		41
	Changes in Our Investment Objectives		41
	Investment Limitations		42
	Making Loans and Investments in Mortgages		42
	Investment in Securities		43
	Appraisals		43
	Reserves		44
	Other Policies		44
	Distribution Policy		44
MANAGEMENT OF OUR COMPANY			46
	General		46
	The Directors and Executive Officers		46
	Committees of Our Board of Directors		49
	Director Compensation		50
	Executive Officer Compensation		51
	Compensation Committee Interlocks and Insider Participation		51
	2006 Incentive Award Plan		51
	Securities Subject to the 2006 Plan		51
	Awards Under the 2006 Plan		51
	Automatic Grants of Restricted Stock to Non-Officer Directors		53
	Amendment and Termination of the 2006 Plan		53
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			53
OUR ADVISOR			54
	Management		55
	The Advisory Agreement		55
TRIPLE NET PROPERTIES, LLC			57
COMPENSATION TABLE			58
	Additional Payments for Additional Services		66
	Limitation on Reimbursements		66

ii

		Page
	Limitation on Acquisition-Relat Compensation		ed 67
	Limitation on Operating Expenses		67
	Additional Important Information on Compensation to Our Affiliates		68
PRIOR PERFORMANCE SUMMARY			68
CONFLICTS OF INTEREST			98
	Competition for the Time and Service of Our Advisor and Its Affiliates		98
	Process for Resolution of Conflicting Opportunities		98
	Acquisitions From Our Advisor and Its Affiliates		99
	We May Purchase Properties From Persons With Whom Affiliates of Our Advisor Have Prior Business Relationships		99
	Our Advisor May Have Conflicting Fiduciary Obligations in the Event Our Company Acquires Properties with Our Advisor’s Affiliates		99
	Property Management Services may be Rendered by Our Advisor or its Affiliates		99
	Receipt of Commissions, Fees and Other Compensation by Our Advisor		99
	Non-Arm’s-Length Agreements; Conflicts; Competition		100
	Legal Counsel for Our Company and Our Advisor is the Same Law Firm		100
	NNN Capital Corp. is Participating as Dealer Manager in the Sale of Our Common Stock		100
SUMMARY OF DISTRIBUTION REINVESTMENT PLAN			100
	General		101
	Investment of Distributions		101
	Participant Accounts, Fee and Allocation of Shares		101
	Administration		101
	Reports to Participants		101
	Election to Participate or Terminate Participation		102
	Federal Income Tax Considerations		102
	Amendments and Termination		102
PROPOSED SHARE REPURCHASE PLAN			103
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			105
	General		105
	Results of Operations		105
	Liquidity and Capital Resources		105
	Distributions		106
	Funds From Operations		106
PRINCIPAL STOCKHOLDERS			107
DESCRIPTION OF CAPITAL STOCK			107
	General		107
	Common Stock		107
	Stockholder Voting		108
	Preferred Stock		108
	Issuance of Additional Securities and Debt Instruments		109
	Restrictions on Ownership and Transfer		109

iii

		Page
IMPORTANT PROVISIONS OF MARYLAND CORPORATE LAW AND OUR CHARTER AND BYLAWS			111
	Our Charter and Bylaws		111
	Stockholders’ Meetings		111
	Our Board of Directors		111
	Fiduciary Duties		112
	Limitation on Organizational and Offering Expenses		112
	Limitation of Liability and Indemnification		112
	Defenses Available		114
	Inspection of Books and Records		114
	Restrictions on Roll-Up Transactions		115
	Anti-Takeover Provisions of the MGCL		116
	Subtitle 8		117
	Dissolution or Termination of Our Company		118
	Transactions with Affiliates		118
	Advance Notice of Director Nominations and New Business		118
SHARES AVAILABLE FOR FUTURE SALE			118
AGREEMENT OF LIMITED PARTNERSHIP			118
	Management		119
	Transferability of Interests		119
	Capital Contribution		119
	Redemption Rights		120
	Special Limited Partner		120
	Operations		121
	Distributions		122
	Allocations		123
	Term		124
	Tax Matters		124
FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS A REIT			124
	Taxation of Our Company		125
	Requirements for Qualification		126
	Income Tests		127
	Rents and Interest		127
	Failure to Satisfy Income Tests		129
	Prohibited Transaction Rules		129
	Asset Tests		130
	Distribution Requirements		130
	Record Keeping Requirements		131
	Failure to Qualify		131
	Taxation of Taxable U.S. Stockholders		132
	Taxation of U.S. Stockholders on the Disposition of the Common Stock		132
	Capital Gains and Losses		133
	Information Reporting Requirements and Backup Withholding		133
	Taxation of Tax-Exempt Stockholders		133

iv

		Page
	Taxation of Non-U.S. Stockholders		134
	Other Tax Consequences		135
ERISA CONSIDERATIONS			136
PLAN OF DISTRIBUTION			138
	Shares Issued Publicly to Residents of Our Sales States		138
	Shares Issued Under DRIP		142
SALES LITERATURE			142
EXPERTS			142
REPORTS TO STOCKHOLDERS			143
LEGAL MATTERS			143
LEGAL PROCEEDINGS			143
ADDITIONAL INFORMATION			143
INDEX TO FINANCIAL STATEMENT			F-1
EXHIBIT A      Prior Performance Tables
EXHIBIT B      Subscription Agreement
EXHIBIT C      Distribution Reinvestment Plan
EXHIBIT D      Proposed Share Repurchase Plan
EXHIBIT 1.1
EXHIBIT 1.2
EXHIBIT 3.1
EXHIBIT 3.2
EXHIBIT 3.3
EXHIBIT 3.4
EXHIBIT 3.5
EXHIBIT 4.1
EXHIBIT 10.4
Exhibit 23.3

v

INVESTOR SUITABILITY STANDARDS

      An investment in our company involves significant risk. An investment in our common stock is suitable only for persons who have adequate financial means and desire a relatively long-term investment with respect to which they do not anticipate any need for immediate liquidity.

      We intend to offer our shares for sale to the residents of the District of Columbia and all states, except Pennsylvania. We refer to these states as the sales states.

      Some of our sales states may have established suitability standards that are less rigorous than those described in this prospectus. We reserve the right to sell to investors in those states that meet such state’s suitability standards but may not necessarily meet our suitability standards described in this prospectus. On the other hand, some of the states in which we intend to sell have established suitability standards for individual investors and subsequent transferees that are more rigorous than those set by our company. We must adhere to those state standards when selling to investors in such states.

      If you are an individual, including an individual beneficiary of a purchasing individual retirement account, or IRA, or if you are a fiduciary, such as a trustee of a trust or corporate pension or profit sharing plan, or other tax-exempt organization, or a custodian under a Uniform Gifts to Minors Account, you must represent that you meet our investor suitability standards, as set forth in the Subscription Agreement attached as Exhibit B to this prospectus, including the following:

•  that you or, in the case of a fiduciary, that the fiduciary account or the donor who directly or indirectly supplies the funds to purchase our common stock have a minimum annual gross income of $45,000 and a net worth of not less than $45,000; or

•  that you or, in the case of a fiduciary, that the fiduciary account or the donor who directly or indirectly supplies the funds to purchase our common stock have a net worth of not less than $150,000.

      Net worth in all cases excludes an investor’s home, home furnishings and automobiles.

      Several states have established suitability standards different from those we have established. In these states, shares will be sold only to investors who meet the special suitability standards set forth below:

      Arizona, California, Iowa, Kansas, Massachusetts, Michigan, North Carolina and Tennessee: Investors must have either (1) a net worth of at least $225,000 or (2) gross annual income of $60,000 and a net worth of at least $60,000.

      Arizona, Kansas, Massachusetts, Missouri, Nebraska and Ohio: In addition to meeting the suitability requirements described above, an investor’s investment in our common stock cannot exceed 10% of that investor’s net worth.

      Maine: Investors must have either (1) a minimum net worth of at least $50,000 and gross annual income of at least $50,000 or (2) a minimum net worth of at least $200,000.

      New Hampshire: Investors must have either (1) a net worth of at least $250,000 or (2) a net worth of at least $125,000 and an annual gross income of at least $50,000.

      The minimum purchase is 100 shares of our common stock, or $1,000, except in Minnesota, which requires a minimum investment of 250 shares, or $2,500, and North Carolina, which requires a minimum investment of 500 shares, or $5,000. We will not permit transfers of less than the minimum required purchase. Only in very limited circumstances may you transfer, fractionalize or subdivide your shares so as to retain less than the minimum number of our shares. For purposes of satisfying the minimum investment requirement for retirement plans, unless otherwise prohibited by state law, a husband and wife may jointly contribute funds from their separate IRAs provided that each such contribution is made in increments of

vi

at least $100. However, please note that your investment in our company will not, in itself, create a retirement plan for you and that, in order to create a retirement plan, you must comply with all applicable provisions of the federal income tax laws. After you have purchased the minimum investment, any additional investments must be made in increments of at least $100, except for purchases of shares under our distribution reinvestment plan, which may be in lesser amounts.

Ensuring Our Suitability Standards Are Adhered To

      In order to assure adherence to the suitability standards described above, requisite suitability standards must be met as set forth in the Subscription Agreement, including the Subscription Agreement Signature Page. We and each person selling common stock on our behalf are required to (1) make reasonable efforts to assure that each person purchasing our common stock is suitable in light of such person’s age, educational level, knowledge of investments, financial means and other pertinent factors and (2) maintain records for at least six years of the information used to determine that an investment in our common stock is suitable and appropriate for each investor. Our agreements with the selling broker dealers require such broker dealers to (a) make inquiries diligently as required by law of all prospective investors in order to ascertain whether an investment in our company is suitable for the investor and (b) transmit promptly to us all fully completed and duly executed Subscription Agreements.

      In addition, by signing the Subscription Agreement Signature Page, you represent and warrant to us that you have received a copy of this prospectus, that you meet the net worth and annual gross income requirements described above and, if applicable, that you will comply with requirements of California law summarized in Exhibit B with respect to resale of our shares of common stock. These representations and warranties help us to ensure that you are fully informed about an investment in our company and that we adhere to our suitability standards. In the event you or another stockholder or a regulatory authority attempted to hold our company liable because stockholders did not receive copies of this prospectus or because we failed to adhere to each state’s investor suitability requirements, we will assert these representations and warranties made by you in any proceeding in which such potential liability is disputed in an attempt to avoid any such liability. By making these representations, you will not waive any rights that you may have under federal or state securities laws.

Escrow Account

      Subscription proceeds will be placed in an interest-bearing account with the escrow agent until subscriptions for at least the minimum offering of 200,000 shares aggregating at least $2,000,000 have been received and accepted by us.

      Shares purchased by our advisor, its officers or employees or its affiliates or shares issued to or purchased by our officers or directors will not be counted in calculating the minimum offering. Subscription proceeds held in the escrow account will be invested in obligations of, or obligations guaranteed by, the United States government or bank money-market accounts or certificates of deposit of national or state banks that have deposits insured by the Federal Deposit Insurance Corporation, including certificates of deposit of any bank acting as depository or custodian for any such funds, as directed by our advisor. This will occur from the time the investment is deposited with the escrow agent until:

•  you are accepted by us as a stockholder; or

•  one year from the time the offering period began, whichever comes first.

      Subscribers may not otherwise withdraw funds from the escrow account.

vii

QUESTIONS AND ANSWERS ABOUT THIS OFFERING

      Below are some of the more frequently asked questions and answers related to REIT offerings of this type. Please see the Prospectus Summary and the remainder of this prospectus for more comprehensive information about our offering.

Q:	What is a REIT?
A:	REIT stands for “real estate investment trust.” In general, a REIT is a company that:
	• pools the capital of many investors to acquire or provide financing for real estate properties;
	• allows individual investors to invest in a diversified real estate portfolio managed by a professional management team;
	• is required to pay distributions to investors of at least 90% of its taxable income (excluding net capital gains) each year; and
	• avoids the federal “double taxation” treatment of income that results from investments in a corporation because a REIT is not generally subject to federal corporate income taxes on its net income, if it complies with certain income tax requirements.
Q:	What is NNN Apartment REIT, Inc.?
A:	NNN Apartment REIT, Inc. is a Maryland corporation formed in December 2005, which intends to elect to be taxed as a REIT for federal income tax purposes. Our company’s primary business strategy is to (1) purchase and hold a diverse portfolio of apartment communities with strong and stable cash flow and growth potential in select U.S. metropolitan areas and (2) preserve our stockholders’ capital.
Q:	Are there any risks involved in an investment in your shares?
A:	An investment in our shares involves a high degree of risk. You should carefully consider the information set forth in the “Risk Factors” section, beginning on page 13, for a discussion of the material risk factors relevant to an investment in our common stock. Some of the more significant risks of an investment in our shares include the following:
	• We are a blind pool investment opportunity. As of the date of this prospectus, we do not own any properties and our advisor has not identified any properties for us to acquire. If we are unable to acquire suitable properties, or suffer a delay in making any acquisitions, we may not have any cash flow available for distribution to you as a stockholder.
	• We have not committed any of the net proceeds of the offering to any specific investment. Investors will not be able to evaluate the economic merits of any investments we make with our net proceeds. We may be unable to invest the net proceeds on acceptable terms to investors, or at all.
	• Many of our officers and non-independent directors have substantial conflicts of interest because they also serve as officers, managers and directors of our advisor, our dealer manager and their affiliates, that may compete with our company for the time and attention of these executives.
	• We will rely totally on our advisor, an affiliate of some of our officers and directors, to manage our business and assets, and the agreements between us and our advisor and between us and our advisor’s affiliates were not negotiated at arm’s-length and require us to pay substantial compensation to our advisor and its affiliates.
	• If we raise substantially less than the maximum offering, we may not be diversified and your investment will be subject to fluctuations on specific properties. The resulting lack of property and geographic diversification would materially increase the risk involved in purchasing our shares.
	• We may incur debt up to 300% of our net assets, which could lead to an inability to pay distributions to our stockholders; additionally, distributions payable to our stockholders may include a return of capital.
	• If we do not qualify as a REIT for federal income tax purposes, we will be taxed as a corporation.
	• We may be required to borrow money, sell assets or issue new securities for cash to pay our distributions.

viii

	• There will be no public market for our common stock. Thus, you may not be able to resell your shares at the offering price, or at all, and there are significant restrictions on the ownership, transfer and redemption of your shares.
Q:	Who will choose and manage your real estate investments?
A:	NNN Apartment REIT Advisor, LLC, or our advisor, will make recommendations on all property acquisitions to our board of directors. Our board of directors, including a majority of our independent directors, must approve all of our property acquisitions. Our advisor or its affiliates will receive, among other fees, an asset management fee for supervising the third party management and operation of properties that we acquire and a real estate commission for the due diligence, selection and acquisition of properties that we acquire.
	Our advisor is a subsidiary of Triple Net Properties, LLC, or Triple Net Properties, and is also partially owned by certain members of the management of Triple Net Properties, through NNN Apartment Management, LLC, and ROC Realty Advisors, LLC. Triple Net Properties is the manager of our advisor and, therefore, will be able to exert control over its operations and, consequently, our operations.
Q:	Who is Triple Net Properties?
A:	Triple Net Properties, a Virginia limited liability company formed in 1998, currently manages a growing portfolio of over 27.8 million square feet of commercial properties, including 2.1 million square feet of apartment community properties. Since its formation, Triple Net Properties has acquired over 185 properties for its investors with a market value of over $3.7 billion and has disposed of 57 properties, which were sold for approximately $956 million. At December 31, 2005, Triple Net Properties and its affiliates managed properties in 23 states, have acquired over nine apartment communities representing over 2,400 apartment units for investors, and have over 340 employees in Triple Net Properties’ corporate headquarters located in Santa Ana, California, and numerous satellite offices. Triple Net Properties owns a 50% managing member interest in our advisor.
	Anthony W. “Tony” Thompson, the chairman of the board and chief executive officer of Triple Net Properties, has over 30 years experience in the acquisition, financing and management of commercial real estate, including two other public REITs and several apartment communities.
	Louis J. Rogers, our president and chairman of the board and the president of both our advisor and Triple Net Properties, has over 20 years of experience as an attorney in the formation and operation of REITs, acquisitions and dispositions of real estate, and associated business and tax planning.
Q.	Who is ROC Realty Advisors?
A.	ROC Realty Advisors, LLC, or ROC Realty Advisors, is a real estate acquisition advisor formed in 2005 by three former executives of Cornerstone Realty Income Trust, Inc., a New York Stock Exchange traded REIT owning apartments throughout the southern and western United States. Cornerstone Realty Income was sold to another public company in April 2005. Stanley J. Olander, Jr., Gus G. Remppies and David L. Carneal are the members of ROC Realty Advisors and were the president, chief investment officer and chief operating officer, respectively, of Cornerstone Realty Income Trust. They have extensive experience in the acquisition, financing and operations of apartment communities. At the time of its sale, Cornerstone Realty Income Trust owned approximately 24,000 apartment units and had a total market capitalization of approximately $1.5 billion. ROC Realty Advisors owns a 25% non-managing member interest in our advisor.
Q:	Who is NNN Apartment Management, LLC?
A:	NNN Apartment Management, LLC, or NNN Apartment Management, is a Virginia limited liability company formed in December 2005 and owns a 25% non-managing member interest in our advisor. NNN Apartment Management is comprised of certain executive officers of Triple Net Properties, who are also executive officers of ours and our advisor, including Louis J. Rogers, our president and chairman of the board, Scott D. Peters, our executive vice president and chief financial officer, and Andrea R. Biller, our secretary. Mr. Peters is also the executive vice president and chief financial officer of each of our

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	advisor and Triple Net Properties; chief executive officer of G REIT, Inc. and executive vice president and chief financial officer of T REIT, Inc., two public non-traded REITs; and, since July 1996, has served as senior vice president, chief financial officer and a director of Golf Trust America, Inc., a publicly traded REIT. Ms. Biller is also general counsel of each of our advisor and Triple Net Properties; executive vice president and secretary of G REIT; and has practiced securities law for fifteen years, including five years with the Securities and Exchange Commission in Washington, D.C.
Q:	What conflicts of interest will your advisor face?
A:	Our officers and directors and the owners, officers and directors of our advisor are also involved in the advising and ownership of other REITs and various public and private real estate entities, which may give rise to conflicts of interest. In particular, certain of the owners and officers of our advisor are involved in the management and advising of four public companies, G REIT, Inc., T REIT, Inc., NNN 2002 Value Fund, LLC and NNN 2003 Value Fund, LLC, that may compete with our company for the time and attention of these executives, as well as other private entities that may compete with our company or otherwise have similar business interests. Some of our officers and directors are also officers and directors of our advisor and affiliates of our advisor, including: Triple Net Properties, the parent and manager of our advisor; NNN Capital Corp., our dealer manager; and Triple Net Properties Realty, Inc., or Realty, which will provide real estate brokerage and other services for our properties. Certain of our officers are also affiliates of ROC Realty Advisors, which, through a joint venture with Triple Net Properties, NNN/ ROC Apartment Holdings, LLC, owns several entities that master lease properties sponsored by Triple Net Properties under its tenant-in-common, or TIC, syndication program. See “Conflicts of Interest” in the prospectus summary.
	These conflicts of interest could limit the time and services that our officers and directors and our advisor and its officers and directors devote to our company, because of the similar services they will be providing to other real estate entities. Conflicts of interest related to investment opportunities presented to both our advisor and other real estate entities that are advised or sponsored by Triple Net Properties could impair our ability to compete for acquisitions and tenants with these entities.
Q:	How many real estate properties do you currently own?
A:	We currently do not own any properties. We expect to use substantially all of the net proceeds from this offering to acquire a diversified portfolio of apartment communities in select U.S. metropolitan markets. Because we have not yet identified any specific properties to purchase, we are considered to be a blind pool investment.
Q:	How will NNN Apartment REIT own its real estate properties?
A:	We expect to own all of our real estate properties through our operating partnership, NNN Apartment REIT Holdings, L.P., or subsidiaries of our operating partnership. We organized our operating partnership to own, operate and manage real estate properties on our behalf. NNN Apartment REIT, Inc. is the sole general partner of our operating partnership. Our advisor will be the initial limited partner of our operating partnership.
Q:	What is an UPREIT?
A:	UPREIT stands for “Umbrella Partnership Real Estate Investment Trust.” An UPREIT is a REIT that holds all or substantially all of its properties through a partnership in which the REIT holds a general partner and/or limited partner interest, approximately equal to the value of capital raised by the REIT through sales of its capital stock. Using an UPREIT structure may give us an advantage in acquiring properties from persons who may not otherwise sell their properties because of unfavorable tax results. Generally, a sale of property directly to a REIT is a taxable transaction to the selling property owner. In an UPREIT structure, a seller of a property who desires to defer taxable gain on the sale of his property may transfer the property to the UPREIT in exchange for limited partnership units in the partnership and defer taxation of gain until the seller later exchanges his limited partnership units on a one-for-one basis for REIT shares or for cash pursuant to the terms of the limited partnership agreement.

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	The benefits of our UPREIT structure include the following:
	• We believe our structure will provide us with access to capital for refinancing and growth. Because an UPREIT structure includes a partnership as well as a corporation, we can access the markets through our operating partnership issuing equity or debt as well as our company issuing capital stock or debt securities. Sources of capital include the common stock sold in this offering and possible future issuances of debt or equity through public offerings or private placements.
	• Our structure will allow stockholders through their ownership of common stock, and the limited partners through their ownership of limited partnership units, an opportunity to participate in the growth of the real estate market through a diversified and ongoing business enterprise.
	• The UPREIT structure will provide property owners who transfer their real properties to our operating partnership in exchange for limited partnership units the opportunity to defer the tax consequences that otherwise would arise from a sale of their real properties and other assets to us or to a third party. This will allow us to acquire assets without using as much of our cash and may allow us to acquire assets that the owner would otherwise be unwilling to sell because of tax considerations.
Q:	What is the experience of your key executives?
A:	Stanley J. (“Jay”) Olander, Jr., our chief executive officer and a director of our company as well as the chief executive officer of our advisor, has been an executive in the real estate industry for more than 25 years. Previously, he served as president and chief financial officer and a member of the board of directors of Cornerstone Realty Income Trust, Inc., a New York Stock Exchange-listed REIT that had a market capitalization of over $1.5 billion and owned over 24,000 apartment units when it merged with Colonial Properties Trust in April 2005. He served in those positions until the company merged with Colonial Properties Trust. Mr. Olander has been responsible for the acquisition and financing of approximately 40,000 apartment units. Mr. Olander will be considered a promoter of our company.
	Louis J. Rogers, our president and chairman of the board and the president of our advisor, has also served since September 2004 as president of Triple Net Properties, the parent and manager of our advisor and an advisor to diversified real estate investment companies and funds. Mr. Rogers has been with the law firm of Hirschler Fleischer since 1988, became a shareholder in 1994, and, since January 2005, has served as senior counsel. Mr. Rogers’ law practice focused on the formation and operation of real estate investments and acquisitions and financings for real estate transactions. In connection with the offering, Mr. Rogers will not serve as an attorney on behalf of Hirschler Fleischer or render any legal advice but will serve solely in his capacities with our company and our advisor. Mr. Rogers will be considered a promoter of our company.
Q:	If I buy shares of NNN Apartment REIT common stock, will I receive distributions and how often?
A:	To maintain our qualification as a REIT, we are required to make annual aggregate distributions to our stockholders of at least 90% of our taxable income (excluding net capital gains). We intend to make distributions to our stockholders on a monthly basis. We have not established an initial distribution level.
Q:	How will you calculate the payment of distributions to stockholders?
A:	We will calculate our monthly distributions on a daily basis to stockholders of record so your distribution benefits will begin to accrue immediately upon becoming a stockholder.
Q:	Can I reinvest my distributions in additional shares of common stock?
A:	Yes, you may elect to participate in our distribution reinvestment plan by checking the appropriate box on the Subscription Agreement, or by filling out an enrollment form we will provide you at your request. The purchase price for shares purchased under the distribution reinvestment plan will be $9.50 per share.
Q:	Will the distributions I receive be taxable as ordinary income?
A:	Generally, distributions that you receive, including distributions reinvested pursuant to our distribution reinvestment plan, or DRIP, should be taxed as ordinary income to the extent that they are from current or accumulated earnings and profits. We expect that some portion of your distributions may not be subject to tax in the year in which they are received because depreciation expense reduces the

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	amount of taxable income but does not reduce cash available for distribution. The portion of your distribution which is not subject to tax immediately is considered a return of capital for tax purposes and will reduce the tax basis of your investment. This, in effect, defers a portion of your tax until your investment is sold or NNN Apartment REIT is liquidated, at which time you will be taxed at capital gains rates. However, because each investor’s tax considerations are different, we suggest that you consult with your tax advisor.
Q:	What will you do with the proceeds raised in this offering?
A:	We intend to use substantially all of the net proceeds from this offering to acquire a diversified portfolio of apartment communities in select U.S. metropolitan markets. We intend to invest a minimum of 88.5% of the gross offering proceeds to acquire such properties. The remainder of the gross offering proceeds will be used to pay fees and expenses of this offering and acquisition-related expenses.
Q:	How will the payment of fees and expenses affect my invested capital?
A:	The payment of fees and expenses will not reduce your invested capital. Your initial invested capital amount will remain $10 per share and your distributions will be based on your $10 per share investment.
Q:	What kind of offering is this?
A:	We are offering the public up to 100,000,000 shares of our common stock on a “best efforts” basis.
Q:	How does a “best efforts” offering work?
A:	When securities are offered to the public on a “best efforts” basis, the brokers participating in the offering are only required to use their best efforts to sell the securities and have no firm commitment or obligation to purchase any securities. Therefore, no specified dollar amount is guaranteed to be raised.
Q:	How long will this offering last?
A:	The offering will not last beyond                     , 2008, two years from the date of this prospectus.
Q:	Who can buy shares of your common stock?
A:	You can buy shares of our common stock pursuant to this prospectus provided that you have either (1) a net worth of at least $45,000 and an annual gross income of at least $45,000, or (2) a net worth of at least $150,000. For this purpose, net worth does not include your home, home furnishings or personal automobiles. Please note that these minimum levels may be higher in certain states, so you should read the more detailed description in the Investor Suitability Standards section of this prospectus.
Q:	Is there any minimum investment required?
A:	Yes. Generally, the minimum purchase is 100 shares of our common stock, or $1,000, except in Minnesota, which requires a minimum investment of 250 shares, or $2,500, and North Carolina, which requires a minimum investment of 500 shares, or $5,000.
Q:	How do I subscribe for shares of NNN Apartment REIT common stock?
A:	In order to purchase shares of our common stock in this offering, you must review this prospectus in its entirety and complete a Subscription Agreement for a specific number of shares. You will need to pay for the shares at the time you subscribe.
Q:	What happens if you do not sell at least 200,000 shares to the public?
A:	If we do not sell at least 200,000 shares to the public before                     , 2007, we will terminate this offering and stop selling shares. In such event, the escrow agent would return your funds, including interest, within three business days of the termination of this offering.
Q:	If I buy shares of common stock in this offering, how can I sell them?
A:	At the time you purchase the shares of common stock, they will not be listed for trading on any national securities exchange or national market system. In fact, there will not be any public market for the shares when you purchase them and we cannot be sure if one will ever develop. As a result, it may be difficult to find a buyer for your shares and realize a return on your investment. You may sell your

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	shares to any buyer unless such sale would violate federal or state securities laws or cause any person or entity to directly or indirectly own more than 9.9% of our outstanding stock or more than 9.9% in value or in number of shares, whichever is more restrictive, of our outstanding common stock or otherwise violate certain restrictions set forth in our charter.
Q:	Does NNN Apartment REIT have a share repurchase plan?
A:	Our board of directors has approved a proposed share repurchase plan that will not become effective until the earlier of (1) the grant of exemptive relief from the Securities and Exchange Commission related to restrictions on an issuer bidding for its securities during a distribution and receipt of formal or informal relief from the issuer tender offer rules or (2) the termination or close of this offering and receipt of formal or informal relief from the issuer tender offer rules. Even when one of these conditions is met, our board of directors may choose not to implement the share repurchase plan or may amend its terms. Under the proposed plan, after you have held your shares for at least one year, you may be able to have your shares repurchased by us. However, shares repurchased under the proposed plan will be purchased at our sole discretion and at prices lower than the $10.00 per share offering price: $9.00 during the offering period, between $9.25 and $9.75 for the three years following the offering period and $10.00 thereafter. The board of directors, in its sole discretion, may suspend or terminate the share repurchase plan at any time or refuse to authorize the repurchase of shares, and may also waive the one-year holding period in the event of the death or disability of a stockholder.
Q:	Does the company intend to list its common stock? If not, is there any other planned liquidity event?
A:	We will seek to list our shares of common stock on a national securities exchange or have them quoted on a national market system if and when our board of directors determines that such listing would be in the best interests of our stockholders. If we do not list our shares of common stock on a national securities exchange or include them on a national market system before 2013, our board of directors will either seek stockholder approval of (a) an extension of this listing deadline or (b) the liquidation of our company and distribution of the net proceeds to our stockholders.
Q:	Will I receive notification as to how my investment is doing?
A:	You will receive periodic reports on the performance of your investment with us, including:
	• an annual report that updates and details your investment;
	• an annual report, including audited financial statements, as filed with the Securities and Exchange Commission;
	• an annual IRS Form 1099-DIV; and
	• supplements to the prospectus, as such may required by the federal securities laws.
Q:	When will I get my tax information?
A:	We intend to mail your Form 1099-DIV tax information by January 31 of each year.
Q:	Who can I contact to answer my questions?
A:	If you have any questions regarding the offering or if you would like additional copies of this prospectus, you should contact your registered representative or:

       Investor Services Department

       NNN Apartment REIT Advisor, LLC

       1551 N. Tustin Ave., Ste. 200

       Santa Ana, CA 92705

       Telephone: (877) 888-7348 or (714) 667-8252

       Facsimile: (714) 667-6843

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PROSPECTUS SUMMARY

      This summary highlights all material information from this prospectus. Because it is a summary, it may not contain all the information that is important to you. To fully understand this offering, you should carefully read this entire prospectus, including the “Risk Factors” section beginning on page 13.

Our Company and Our Advisor

      NNN Apartment REIT, Inc. is a recently formed Maryland corporation. We have not yet qualified as a REIT for federal income tax purposes, but intend to do so for our first full taxable year.

      NNN Apartment REIT Advisor, LLC, or our advisor, is a newly formed Virginia limited liability company that will serve as advisor for our company. Our advisor is a subsidiary of Triple Net Properties, LLC, or Triple Net Properties, and is also partially owned by certain members of the management of Triple Net Properties through NNN Apartment Management, LLC, or NNN Apartment Management, and by ROC Realty Advisors, LLC, or ROC Realty Advisors. Key members of the management of Triple Net Properties and ROC Realty Advisors will provide us with extensive experience in the real estate industry through their roles with our advisor.

      We will operate in an umbrella partnership REIT structure, in which our subsidiary operating partnership (or entities wholly-owned by our operating partnership) will own all of the properties that we acquire. Our operating partnership is NNN Apartment REIT Holdings, L.P., a recently formed Virginia limited partnership, and we are its sole general partner and will become a limited partner once the net proceeds of this offering are contributed to our operating partnership. Our advisor is a special limited partner in our operating partnership entitling it to specified incentive distributions. Our advisor has also purchased 22,223 shares of our common stock at $9.00 per share, or $200,007, to satisfy the requirements of the North American Securities Administrators Association, or NASAA. References in this prospectus to “us,” “we” or “our company” refer to NNN Apartment REIT, Inc. and our operating partnership, NNN Apartment REIT Holdings, L.P., unless the context otherwise requires, and “our advisor” means NNN Apartment REIT Advisor, LLC.

      The principal executive offices of our company and our advisor are located at 1551 N. Tustin Avenue, Suite 200, Santa Ana, California 92705. The principal property management offices of our company are located at 1606 Santa Rosa Road, Suite 109, Richmond, Virginia 23229. The address of our dealer manager is 4 Hutton Centre Drive, Suite 700, South Coast Metro, California 92707. Our toll-free telephone number is (877) 888-7348 and the telephone number of our dealer manager is (714) 667-8252.

Our Business and Objectives

      Our objective is to acquire quality apartment communities so we can provide our stockholders with:

•  stable cash flow available for distribution to our stockholders;

•  preservation of capital; and

•  growth of income and principal without taking undue risk.

      We believe the following will be key factors for our success in meeting our objectives.

Following Demographic Trends and Population Shifts to Find Attractive Tenants in Quality Apartment Community Markets

      According to the U.S. Census Bureau, nearly one half of total U.S. population growth between 2000 and 2030 will occur in three states: Florida, California and Texas, each gaining more than 12 million people. Included in the top five growth states are Arizona and North Carolina, projected to add 5.6 million and 4.2 million people, respectively. Accordingly, we will emphasize property acquisitions in regions of the United States that seem likely to benefit from the ongoing population shift and/or are poised for strong economic growth. We believe these markets will likely attract quality tenants who have good income and

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strong credit profiles and choose to rent an apartment rather than buy a home because of their life circumstances.

Outsourcing of Property Management

      We believe that generally outsourcing our property management will be a significant factor in supporting our key management and portfolio objectives to the benefit of our stockholders by:

•  Focusing on Our Strengths: We believe that outsourcing property management will benefit our stockholders by allowing our advisor’s management to focus on purchasing quality, income-producing properties using their acquisition experience and extensive industry relationships, rather than using our resources to build an extensive property management infrastructure.

•  Focusing on Quality Properties: We believe outsourcing property management to a regionally focused and locally experienced firm may give us the flexibility to purchase fewer but higher quality apartment properties in an area or region by leveraging that property management firm’s greater economies of scales.

•  Focusing on Quality Tenant Attraction and Retention: By seeking to retain the best property managers in a region or market, we intend to maximize the quality of services offered to attract and retain tenants who are prepared to potentially pay a premium in rent for those services.

•  Focusing on Networking and Business Synergies to Enhance Property Acquisitions: We believe building relationships with locally attuned management firms may allow us to purchase “off market” properties at attractive terms and/or prices, aid in tenant retention or execute pre-purchase leasing agreements that will help us meet occupancy objectives in a new property.

•  Focusing on Building Property Value: We believe that selecting a “best of class” property manager can enhance a property’s resale value by offering a better maintained property with a more satisfied and stable tenant base to prospective purchasers.

      We believe that most of our properties will be managed by third party property managers. However, our advisor or its affiliates may manage certain of our properties, when our advisor determines that it is in our best interests to do so.

Leveraging the Experience of Our Management

      We believe that a critical success factor in property acquisition lies in possessing the flexibility to move quickly when an opportunity presents itself to buy or sell a property. We believe that employing highly qualified industry professionals will allow us to better achieve this objective.

      Each of our key executives has considerable experience building successful real estate companies. As an example, one of our principals, Mr. Olander, has been responsible for the acquisition and financing of approximately 40,000 apartment units, has been an executive in the real estate industry for more than 25 years, and previously served as president and chief financial officer and a member of the board of directors of Cornerstone Realty Income Trust, Inc. Likewise, Messrs. Remppies and Carneal are the former chief investment officer and chief operating officer, respectively, of Cornerstone Realty Income Trust, where they oversaw the growth of that company. From year end 1997, when the company’s shares were listed on the New York Stock Exchange, Cornerstone Realty Income Trust grew from owning approximately 12,000 apartments mainly concentrated in four major markets to owning approximately 24,000 apartments across 18 major markets in 2004 when its merger with Colonial Properties Trust was announced. This growth represented a 100% increase in total assets over seven years and an average growth of over 14% per year.

Summary Risk Factors

      An investment in our common stock involves a number of risks. We urge you to carefully consider the matters discussed under “Risk Factors” beginning on page 13 before investing in our company. Such risks

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include, among several others, those described below. However, while the material risks are listed in this Prospectus Summary, you should consider carefully all of the other information included in this prospectus before you decide to purchase any shares of our common stock, including the matters discussed in the section entitled “Risk Factors.”

•  As of the date of this prospectus, we do not own any properties and our advisor has not identified any properties for us to acquire. Therefore, we are a blind pool investment opportunity. We have not committed any of the net proceeds of the offering to any specific investment. Investors will not be able to evaluate the economic merits of any investments we make with our net proceeds. We may be unable to invest the net proceeds on acceptable terms to investors, or at all. If we are unable to acquire suitable properties, or suffer a delay in making any acquisitions, we may not have any cash flow available for distribution to you as a stockholder.

•  Many of our officers and non-independent directors have substantial conflicts of interest because they also serve as officers, managers and directors of our advisor, the dealer manager and their affiliates, that may compete with our company for the time and attention of these executives.

•  Any existing or future agreements between us and our advisor, the dealer manager and their affiliates, including agreements relating to their compensation, were not and will not be reached through arm’s-length negotiations. Such agreements may not solely reflect your interests as a stockholder of our company.

•  We will rely on our advisor, an affiliate of some of our officers and directors, to manage our business and properties and the success of our business will depend on the ability of our advisor to manage our day-to-day operations. Any adversity experienced by our advisor or in our relationship with our advisor could disrupt the operation of our properties and materially decrease our earnings.

•  To the extent we sell substantially less than the maximum number of shares, we may not have sufficient funds after the payment of offering and related expenses to acquire a diverse portfolio of properties. The resulting lack of property and geographic diversification would materially increase the risk involved in purchasing our common stock.

•  Triple Net Properties, the parent and manager of our advisor, also serves as an advisor to two publicly registered REITs, G REIT, Inc. and T REIT, Inc., and as the manager of two other publicly registered entities, NNN 2002 Value Fund, LLC and NNN 2003 Value Fund, LLC, that acquire office buildings. Triple Net Properties also serves in similar capacities for a number of other private programs and properties. These relationships will result in further conflicts of interest between our company and some of our officers and directors, who work for our advisor and also work for Triple Net Properties. These and other conflicts may result in such officers and directors taking actions and making decisions that do not solely reflect your interests as a stockholder of our company.

•  We have the ability to incur debt up to 300% of our net assets, which could lead to an inability to pay distributions to our stockholders if our debt service payments exceed our operating cash flow.

•  Any distributions we pay to our stockholders may include a return of capital and not a return on your capital.

•  If we are unable to qualify as a REIT for federal income tax purposes, we will be subject to corporate level taxation and we would not be required to pay any distributions to our stockholders.

•  If we do not have sufficient cash flow to pay our distributions to stockholders, we may be required to borrow money, sell assets or issue new securities for cash to pay our distributions.

•  There is no public market for our common stock and it will not be listed on a national securities exchange or quoted on a national market system. It is not likely that there will be an active trading market for our common stock. You may not be able to easily resell your shares or to resell your

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	shares at a price that is equal to or greater than the price you paid for them. There are significant restrictions on the ownership, transfer and redemption of your shares.
•	Because the dealer manager is an affiliate of our company and our advisor, you cannot consider the dealer manager’s due diligence investigation of our company to be an independent review of our company. That due diligence review may not be as meaningful as a review conducted by an unaffiliated broker dealer.
•	Our board of directors has the ability to issue and set the terms of up to 50 million shares of preferred stock, including having superior dividend rights to our common stockholders, without your approval, which may deter or prevent a sale of our company in which you could profit.

If we are unable to effectively manage the impact of these and other risks, our ability to meet our investment objectives will be substantially impaired. In turn, the value of your common stock and our ability to make distributions to you will be materially reduced.

Our Property Acquisition Strategy

      Our company’s primary business strategy is to (1) purchase and hold a diverse portfolio of apartment communities with strong and stable cash flow and growth potential in select U.S. metropolitan areas and (2) preserve our stockholders’ capital. Areas and states we will especially focus on include, but are not limited to, Florida, Texas, Nevada, and other metropolitan areas in the mid-Atlantic, southeast and southwest regions of the United States that seem likely to benefit from the ongoing population shift discussed above or are poised for strong economic growth. However, we may invest in other markets as well, and there is no limitation on the geographic areas in which we may acquire apartment communities. We will generally seek to acquire well located and well constructed properties where the average income of the tenants generally exceeds the average income for the metropolitan area in which the community is located.

      Our primary investment focus will be existing Class A apartment communities that produce immediate rental income. However, we may acquire newly developed communities with some lease-up risk if we believe the investment will result in long-term benefits for our stockholders. We will generally purchase newer properties, less than five years old, with reduced capital expenditure requirements and high occupancy. However, we may purchase older properties, including properties that need capital improvements or lease-up to maximize their value and enhance stockholder returns. We do not anticipate a significant focus on such properties.

      We may also consider purchasing apartment communities that include land or development opportunities as part of the purchase package. Such acquisitions will be no more than 10% of the aggregate portfolio value, and our company’s intent is to transfer development risk to the developer. Acquisitions of this type, while permitted, are not anticipated and do not represent a primary objective of our acquisition strategy.

      We are currently negotiating and anticipate entering into a $75 million secured revolving line of credit with Wachovia Bank, N.A., which we believe will allow us to secure acquisition contracts faster after we identify a strategic property, and will be an attractive, compelling feature of our bids, especially to sellers seeking to complete a sale quickly.

      We believe that our strategy for apartment community acquisitions will benefit our company and our stockholders for the following reasons:

•  We intend to preserve capital through selective acquisitions and professional management, whereby we intend to increase rental rates, maintain high economic occupancy rates, reduce tenant turnover, make value- enhancing and income producing capital improvements where appropriate, and control operating costs and capital expenditures.

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•  We intend to purchase apartment properties in growth markets, at attractive prices relative to replacement cost, and obtain immediate income from tenant rents with the potential for appreciation in value over time.

      As of the date of this prospectus, we do not own any properties. Because we have not yet identified any specific properties to purchase, we are considered to be a blind pool investment. We intend to acquire properties with the net proceeds of this offering. As we acquire properties, we will provide supplements to this prospectus to describe those properties.

      We anticipate that the purchase price of properties we acquire will vary widely depending on a number of factors, including size and location. In addition, the cost to our company will vary based on the amount of debt we incur in connection with financing the acquisition. If only the minimum offering amount is sold, we will not be able to purchase a diverse portfolio of properties and may only be able to purchase one property. If the maximum offering amount is sold, we will likely acquire a substantial number of properties; however, it is difficult to predict with precision the actual number of properties that we will actually acquire because the purchase prices of properties varies widely and our investment in each will vary based on the amount of leverage we use.

Other Real Estate Investments

      Although we anticipate that our focus will be on apartment communities, our charter and bylaws do not preclude us from acquiring other types of properties. We may acquire other real estate assets, including, but not limited to, income producing commercial properties, such as retail shopping centers and office buildings. The purchase of any apartment community or other property type will be based upon the best interests of our stockholders as determined by our board of directors. Regardless of the mix of properties we may own, our primary business objectives are to maximize stockholder value by acquiring apartment communities that have strong and stable cash flow and growth potential and to preserve capital.

Legal Proceedings

      We are not presently subject to any material litigation. To our knowledge, there is no material litigation threatened against us. We may become subject in the future to litigation, including routine litigation arising in the ordinary course of business.

      On September 16, 2004, Triple Net Properties, the parent and manager of our advisor, learned that the SEC is conducting an investigation referred to as “In the matter of Triple Net Properties, LLC.” The SEC has requested information from Triple Net Properties relating to disclosure in public and private securities offerings sponsored by Triple Net Properties and its affiliates, or the Triple Net securities offerings. The SEC also has requested information from NNN Capital Corp., the dealer manager for the Triple Net securities offerings and the dealer manager of our offering. The SEC has requested financial and other information regarding the Triple Net securities offerings and the disclosures included in the related offering documents from each of Triple Net Properties and NNN Capital Corp. This investigation could result in the assertion of fines, penalties or administrative remedies. At this time, Triple Net Properties cannot assess the outcome of the investigation by the SEC.

      Triple Net Properties believes it has and intends to continue to cooperate fully with the SEC but expects this will continue to be a time consuming and costly process. The SEC investigation could adversely impact our advisor’s ability to perform its duties to our company because Triple Net Properties is the parent and manager of our advisor.

Regulation

      Our apartment communities may be subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, activity centers and other common areas. We intend to acquire the necessary permits and approvals under present laws, ordinances and regulations to operate our business.

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The Dealer Manager

      An affiliate of our advisor, NNN Capital Corp., will assist us in selling our common stock under this prospectus by serving as the dealer manager of this offering. Since August of 1986, the dealer manager has assisted various syndicated real estate investment trusts, limited partnerships, limited liability companies and other real estate entities in raising money to invest in real estate. Louis J. Rogers, our president and chairman of the board of directors and our advisor’s president, and Anthony W. Thompson, the chairman of the board and chief executive officer of Triple Net Properties, the parent and manager of our advisor, currently own 10% and 85%, respectively, of the outstanding capital stock of the dealer manager, and both are directors of the dealer manager.

This Offering

      We are offering for sale to the residents of the states listed in this prospectus a maximum of 100,000,000 shares and a minimum of 200,000 shares of our common stock. Each share has a purchase price of $10.00. The minimum number of shares you may purchase is 100, except in states which require a higher minimum purchase. This offering is being conducted on a “best efforts” basis, which means that the securities dealers participating in this offering are under no obligation to purchase any of the shares and, therefore, no specified dollar amount is guaranteed to be raised. If we do not sell 200,000 shares before                     , 2007, this offering will be terminated and our escrow agent will send a refund of your investment with interest and without deduction for escrow expenses within three business days of the termination of this offering.

      In addition, we expect to issue up to 5,000,000 shares to stockholders who elect to participate in our distribution reinvestment plan.

Use of Proceeds

      We will use the net proceeds of this offering to purchase suitable properties, to repay debt that we may assume when acquiring properties and to pay the amounts due to our advisor and the dealer manager.

Distributions

      If we qualify as a REIT, as anticipated, we must distribute at least 90% of our annual taxable income (excluding net capital gains) to our stockholders. Because we have not identified any properties which we intend to acquire, we cannot give any assurances as to when or if we will make distributions. However, when we have actually acquired properties, and such properties are generating sufficient cash flow, we intend to pay regular monthly distributions to our stockholders out of our cash available for distribution, in an amount determined by our board of directors. We estimate that it may take up to the end of the first full quarter after the minimum offering escrow breaks before we will begin paying distributions. The amount of distributions will depend upon a variety of factors, including:

•  our cash available for distribution;

•  our overall financial condition;

•  our capital requirements;

•  the annual distribution requirements applicable to REITs under the federal income tax laws; and

•  such other considerations as our board of directors may deem relevant.

      Our company provides or intends to provide the following programs to facilitate investment in our shares and to provide limited liquidity for stockholders:

•  the distribution reinvestment plan; and

•  the proposed share repurchase plan.

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Summary Financial Information

      We are newly formed and do not have a history of operations.

Compensation to Our Advisor, the Dealer Manager and their Affiliates

      We will pay our advisor, the dealer manager and their affiliates substantial amounts for assisting us in this offering and sale of our common stock and for managing our business and assets.

      In connection with the sale of our common stock in this offering, the dealer manager will receive the following fees:

		Amount if		Amount if
Description of Fee	Calculation of Fee	Minimum Sold		Maximum Sold
• Selling Commission	7.0% of gross offering proceeds.	$	140,000	$	70,000,000
• Marketing Allowance and Accountable Due Diligence Expense Reimbursement	3.0% of gross offering proceeds as follows: 2.5% for non-accountable marketing allowance and 0.5% for accountable bona fide due diligence expense reimbursement.	$	60,000	$	30,000,000
• Other Organizational and Offering Expenses	Our advisor may advance, and we will reimburse it for, organizational and offering expenses incurred on our behalf in connection with this offering. We estimate such expenses will be approximately 1.5% of the gross proceeds of this offering.	Actual amounts will be based on actual funds advanced. We estimate that a total of $30,000 will be reimbursed if the minimum offering is sold and $15,000,000 will be reimbursed if the maximum offering is sold.

      In connection with the management of our business and properties, we will pay our advisor or an affiliate the following fees:

		Amount if	Amount if
Description of Fee	Calculation of Fee	Minimum Sold	Maximum Sold
• Real estate commission and reimbursement of acquisition expenses	For its services in connection with the due diligence, selection and acquisition of a property, our advisor or one of its affiliates may receive a real estate commission from our company equal to up to 3.0% of the purchase price of the property acquired or up to 4.0% of the total development cost of any development property acquired, as applicable. We will also reimburse our advisor for expenses related to selecting, evaluating and acquiring properties. The reimbursement of acquisition expenses and real estate commissions cannot exceed 6.0% of the purchase price for a property or the total development cost of a property, as applicable.	Actual amounts depend upon the purchase price of properties acquired or the total development cost of properties acquired for development and, therefore, cannot be determined at the present time.

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		Amount if	Amount if
Description of Fee	Calculation of Fee	Minimum Sold	Maximum Sold
• Asset management fee	We will pay our advisor an annual asset management fee for managing our day-to-day operations, which will be equal to either 0.75% or 1.0% of our average invested assets, depending upon the ratio of our Funds From Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, or NAREIT, to the gross offering proceeds. The asset management fee will be calculated and payable monthly in cash or shares, at the option of our advisor, based on the return ratio as of the last preceding quarter end.	Actual amounts depend upon the assets invested by our company and, therefore, cannot be determined at the present time.
• Property management fee	Realty, an affiliate of our advisor, may serve as the property manager of certain of our properties and will receive up to 4.0% of the monthly gross income generated by those properties, some of which may be re-allowed to a third party property manager.	Actual amounts depend upon the gross income of the properties and, therefore, cannot be determined at the present time.
• Construction management fee	To the extent it provides a substantial amount of services in connection with the construction management of one or more of our properties, we will pay our advisor or one of its affiliates a construction management fee equal to 5.0% of any amount (including professional services) up to $25,000, 4.0% of any amount over $25,000 but less than $50,000 and 3.0% of any amount in excess of $50,000 which is expended in any calendar year for construction or repair at our properties.	Actual amounts depend upon amounts expended for construction or repair at our properties, and, therefore, cannot be determined at the present time.

      Upon the disposition of any property, we will pay our advisor or an affiliate the following fee:

		Amount if	Amount if
Description of Fee	Calculation of Fee	Minimum Sold	Maximum Sold
• Disposition fee	To the extent it provides a substantial amount of services in connection with the sale of one or more of our properties, Realty, an affiliate of our advisor, or one of its affiliates will receive fees equal to the lesser of 3.0% of the sale price or 50.0% of the sales commission that would have been paid to a third party sales broker.	Actual amounts depend upon the sales price of properties and, therefore, cannot be determined at the present time.

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      Our advisor is also entitled to certain distributions with respect to its status as a special limited partner in our operating partnership, as follows:

		Amount if	Amount if
Description of Fee	Calculation of Fee	Minimum Sold	Maximum Sold
• Incentive distribution upon sales	Equal to 10.0% of the net proceeds of the sale of the property after we have received, and paid to our stockholders, the sum of: • the amount of capital we invested in our operating partnership allocable to such property; • any shortfall in the recovery of our invested capital with respect to prior sales of properties; and • any shortfall in our 8.0% annual cumulative, non-compounded return on the capital we invested in our operating partnership. Until such time as stockholders receive such 8.0% return, our advisor will not receive any incentive distributions. There is no assurance we will be able to pay an annual 8.0% return to our stockholders. Thus, the 8.0% return is disclosed solely as a measure for our advisor’s incentive compensation.	Actual amounts depend upon the sales price of properties and, therefore, cannot be determined at the present time.

      All of this compensation is more fully described under “Compensation Table.” Except as described above, we do not intend to pay our affiliates in shares of our common stock or units of limited partnership interests in our operating partnership for the services they provide to us, but we reserve the right to do so if our board of directors, including a majority of our independent directors, determines in its good faith that it is in our company’s best interest to do so.

Conflicts of Interest

      Our officers and directors and the owners and officers of our advisor are also involved in the advising and ownership of other REITs and various real estate entities, which may give rise to conflicts of interest. In particular, certain of the owners and officers of our advisor are involved in the management and advising of G REIT, Inc., T REIT, Inc., NNN 2002 Value Fund, LLC and NNN 2003 Value Fund, LLC, that acquire office buildings and may compete with our company for the time and attention of these executives, as well as other private entities that may compete with our company or otherwise have similar business interests. Some of our officers and directors are also owners, officers and directors of our advisor and affiliates of our advisor, including: Triple Net Properties, the parent and manager of our advisor; NNN Capital Corp., our dealer manager; and Realty, which will provide real estate brokerage and other services for our properties. Certain of our officers are also affiliates of ROC Realty Advisors, which, through a joint venture with Triple Net Properties, NNN/ ROC Apartment Holdings, LLC, owns several entities that master lease properties sponsored by Triple Net Properties under its tenant in common syndication program. Ownership of these various entities by our officers and directors and the owners, officers and directors of our advisor is set forth above in the sections entitled “Organizational Chart for

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Our Company and Our Advisor” and “Organizational Chart for Our Advisor’s Affiliates.” The following chart sets forth the positions each of these persons holds with the entities affiliated with us and our advisor:

Name	Entity	Title
Anthony W. Thompson	Triple Net Properties, LLC	Chief Executive Officer and Chairman of the Board of Managers
	Triple Net Properties Realty, Inc.	Chief Executive Officer and Chairman of the Board of Directors
	NNN Capital Corp.	Director
Louis J. Rogers	NNN Apartment REIT, Inc.	President and Chairman of the Board
	NNN Apartment REIT Advisor, LLC	President
	Triple Net Properties, LLC	President and Member of Board of Managers
	Triple Net Properties Realty, Inc.	Director
	NNN Capital Corp.	Director
Stanley J. Olander, Jr.	NNN Apartment REIT, Inc.	Chief Executive Officer and Director
	NNN Apartment REIT Advisor, LLC	Chief Executive Officer
David L. Carneal	NNN Apartment REIT, Inc.	Executive Vice President and Chief Operating Officer
	NNN Apartment REIT Advisor, LLC	Executive Vice President and Chief Operating Officer
Gus G. Remppies	NNN Apartment REIT, Inc.	Executive Vice President and Chief Investment Officer
	NNN Apartment REIT Advisor, LLC	Executive Vice President and Chief Investment Officer
Scott D. Peters	NNN Apartment REIT, Inc.	Executive Vice President and Chief Financial Officer
	NNN Apartment REIT Advisor, LLC	Executive Vice President and Chief Financial Officer
	Triple Net Properties, LLC	Executive Vice President, Chief Financial Officer and Member of the Board of Managers
Andrea R. Biller	NNN Apartment REIT, Inc.	Secretary
	NNN Apartment REIT Advisor, LLC	General Counsel
	Triple Net Properties, LLC	General Counsel
	NNN Capital Corp.	Director

      These conflicts of interest could limit the time and services that our officers and directors and our advisor and its officers devote to our company, because of the similar services they will be providing to other real estate entities. Conflicts of interest related to investment opportunities presented to both our advisor and other real estate entities that are advised or sponsored by Triple Net Properties could impair our ability to compete for acquisitions and tenants with these entities.

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Organizational Chart for Our Company and Our Advisor

      The following chart shows the ownership of our company and our advisor as of the date of the commencement of the offering.

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Organizational Chart for Our Advisor’s Affiliates

      The following chart shows the ownership of the various entities that are affiliated with our Advisor’s Affiliates as of the date of the commencement of the offering.

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RISK FACTORS

      Before you invest in our common stock, you should be aware that your investment is subject to various risks, including those described below. You should carefully consider these risks together with all of the other information included in this prospectus before you decide to purchase any shares of our common stock.

No Properties Owned; No Properties Identified For Investment

We currently do not own any properties and must acquire properties before we can generate cash flow to pay distributions to you as a stockholder.

      As of the date of this prospectus, we do not own any properties and are considered to be a blind pool investment opportunity. Our advisor has neither identified nor placed under contract any properties for us to acquire. We cannot give you any information as to the identification, location, operating histories, lease terms or other relevant economic and financial data regarding the properties that we will purchase with the net proceeds of this offering. You will not be able to evaluate the merits of any investments made with the net proceeds of this offering prior to these investments being made. We may experience a delay between your purchase of our shares and our purchase of properties. Such a delay will result in a delay in the benefits to you, if any, of an investment in our company, including delay in the payment of any distributions to you as a stockholder.

      Our success is totally dependent on our ability to acquire properties. Thus, your investment is subject to the risks attendant to real estate acquisitions, such as:

•  the risk that properties may not perform in accordance with expectations, including projected occupancy and rental rates;

•  the risk that we may overpay for properties; and

•  the risk that we may have underestimated the cost of improvements required to bring an acquired property up to standards established for its intended use or its intended market position.

We will face competition from other apartment communities, which may limit our profitability and returns to our stockholders.

      The residential apartment community industry is highly competitive. This competition could reduce occupancy levels and revenues at our apartment communities, which would adversely affect our operations. We expect to face competition from many sources. We will face competition from other apartment communities both in the immediate vicinity and the geographic market where our apartment communities will be located. Overbuilding of apartment communities may occur. If so, this will increase the number of apartment units available and may decrease occupancy and apartment rental rates. In addition, increases in operating costs due to inflation may not be offset by increased apartment rental rates.

      We will also face competition for investment opportunities. These competitors may be other real estate investment trusts and other entities that may have substantially greater financial resources than we do. We will also face competition for investors from other residential apartment community real estate investment trusts and real estate entities.

There may be delays in our investments in real property, and this delay may decrease the return to stockholders.

      We may experience delays in finding suitable apartment communities to acquire. Pending investment of the proceeds of this offering in real estate, and to the extent the proceeds are not invested in real estate, the proceeds may be invested in permitted temporary investments such as U.S. government securities, certificates of deposit or commercial paper. The rate of return on those investments has fluctuated in recent years and may be less than the return obtainable from real estate or other investments.

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No Operating History

Our company and our advisor are newly formed and have not yet commenced business operations.

      Our company was incorporated in December 2005 and our advisor was formed in December 2005. Neither has any prior operating history. Our business is subject to the risks inherent in the establishment of a new business enterprise. Because our company and our advisor were only recently formed and have engaged in no operations as of the date of this prospectus, we can provide you with only limited financial information and no operational information with respect to our company or our advisor or any properties that would be available from an institution with a history of operations. We cannot assure you that we will ever operate profitably.

We are not diversified and are dependent on our investment in a single asset class.

      Our current strategy is to acquire interests primarily in apartment communities in select metropolitan areas throughout the United States. As a result, we are subject to the risks inherent in investing in a single asset class. A downturn in demand for residential apartments may have more pronounced effects on the amount of cash available to us for distribution or on the value of our assets than if we had diversified our investments across different asset classes.

No Market for Our Common Stock

The absence of a public market for our common stock will make it difficult for you to sell your shares.

      Prospective stockholders should view our common stock as illiquid and must be prepared to hold their shares of common stock for an indefinite length of time. Before this offering, there has been no public market for our common stock, and initially we do not expect a market to develop. We have no current plans to cause our common stock to be listed on any securities exchange or quoted on any market system or in any established market either immediately or at any definite time in the future. While we, acting through our board of directors, may attempt to cause our common stock to be listed or quoted if the board of directors determines this action to be in our stockholders’ best interests, there can be no assurance that this event will ever occur. Stockholders may be unable to resell their shares of common stock at all, or may be able to resell them only at a later date at a substantial discount from the purchase price. Thus, our common stock should be considered a long-term investment. In addition, there are restrictions on the transfer of our common stock. In order to qualify as a REIT, our shares must be beneficially owned by 100 or more persons and no more than 50% of the value of our issued and outstanding shares may be owned directly or indirectly by five or fewer individuals. Our charter provides that no person may own more than 9.9% of the issued and outstanding shares of our stock or more than 9.9% in value or in number of shares, whichever is more restrictive, of the issued and outstanding shares of our common stock. Any purported transfer of our shares that would result in a violation of either of these limits will result in such shares being transferred to a trust for the benefit of a charitable beneficiary or such transfer being declared null and void.

The per-share offering price of our common stock has been established arbitrarily by us and may not reflect the true value of our common stock; therefore investors may be paying more for a share than such share is actually worth.

      If we were to list the shares of our common stock on a national securities exchange or national market system, the share price might drop below our stockholder’s original investment. Prospective investors should not assume that the per share offering price of our common stock reflects the intrinsic or realizable value of the common stock or otherwise reflect our value, earnings or other objective measures of worth.

Conflicts of Interest

      Throughout this prospectus, references to affiliates of a person generally mean:

•  any person directly or indirectly owning, controlling or holding, with the power to vote, 10% or more of the outstanding voting securities of such other person;

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•  any person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other person;

•  any person directly or indirectly controlling, controlled by or under common control with such other person;

•  any executive officer, director, manager, trustee or general partner of such other person; and

•  any legal entity for which such person acts as an executive officer, director, manager, trustee or general partner.

The conflicts of interest described below may mean our company will not be managed solely in your best interests as a stockholder.

      Many of our officers and non-independent directors and our advisor’s officers will have conflicts of interest in managing our business and properties. Thus, they may make decisions or take actions that do not solely reflect your interests as a stockholder. Our officers and directors and the owners and officers of our advisor are also involved in the advising and ownership of other REITs and various real estate entities, which may give rise to conflicts of interest. In particular, certain of the owners and officers of our advisor are involved in the management and advising of G REIT, Inc., T REIT, Inc., NNN 2002 Value Fund, LLC and NNN 2003 Value Fund, LLC, that acquire office buildings and may compete with our company for the time and attention of these executives, as well as other private entities that may compete with our company or otherwise have similar business interests. Additionally, some of our officers and directors are also owners and officers of our advisor and affiliates of our advisor with whom we will do business.

      Anthony W. Thompson is the chief executive officer and chairman of the board of managers of Triple Net Properties, the parent and manager of our advisor; the chief executive officer and chairman of the board of directors of Realty, which will provide real estate brokerage and other services for our properties; and a director of NNN Capital Corp., our dealer manager. Mr. Thompson owns 36% of Triple Net Properties, which, in turn, holds 50% of the membership interest in our advisor and in NNN/ ROC Apartment Holdings, LLC, an entity that owns several entities that master lease properties sponsored by Triple Net Properties. Mr. Thompson also owns 84% of the common stock of Realty and 85% of the capital stock of NNN Capital Corp.

      Louis J. Rogers is our president and chairman of the board; the president of our advisor; the president and a member of the board of managers of Triple Net Properties; and a director of NNN Capital Corp. Mr. Rogers owns 2% of Triple Net Properties, 16% of the common stock of Realty and 10% of the capital stock of NNN Capital Corp. Mr. Rogers is also a member of NNN Apartment Management, which owns 25% of the membership interest of our advisor.

      Stanley J. Olander, Jr. is our chief executive officer and a director of our company as well as a director of our company. Mr. Olander is also a member of ROC Realty Advisors, which owns 25% of the membership interest of our advisor and 50% of NNN/ ROC Apartment Holdings, LLC.

      David L. Carneal is our executive vice president and chief operating officer and the executive vice president and chief operating officer of our advisor. Mr. Carneal is also a member of ROC Realty Advisors, which owns 25% of the membership interest of our advisor and 50% of the membership interest of NNN/ ROC Apartment Holdings, LLC.

      Gus G. Remppies is our executive vice president and chief investment officer and the executive vice president and chief investment officer of our advisor. Mr. Remppies is also a member of ROC Realty Advisors, which owns 25% of the membership interest of our advisor and 50% of the membership interest of NNN/ ROC Apartment Holdings, LLC.

      Scott D. Peters is our executive vice president and chief financial officer; the executive vice president and chief financial officer of our advisor; and the executive vice president and chief financial officer and a member of the board of managers of Triple Net Properties. Mr. Peters is also a member of NNN Apartment Management, which owns 25% of the membership interest of our advisor.

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      Andrea R. Biller is our secretary; the general counsel of our advisor; the general counsel of Triple Net Properties; and a director of NNN Capital Corp. Ms. Biller is also a member of NNN Apartment Management, which owns 25% of the membership interest of our advisor.

      As officers, directors, managers and partial owners of entities with which we do business or with interests in competition with our own interests, these individuals will experience conflicts between their fiduciary obligations to our company and their fiduciary obligations to, and pecuniary interests in, our advisor, the dealer manager and their affiliated entities. These conflicts of interest could:

•  limit the time and services that some of our officers devote to our company and the affairs of our advisor, because they will be providing similar services to Triple Net Properties, G REIT, T REIT, 2002 Value Fund and 2003 Value Fund and other real estate entities, and

•  impair our ability to compete for acquisition of properties with other real estate entities that are also advised by Triple Net Properties and its affiliates.

      If our advisor or its affiliates breach their fiduciary or contractual obligations to our company, or do not resolve conflicts of interest, we may not meet our investment objectives, which could reduce our expected cash available for distribution to our stockholders. For example, our advisor has a duty to us to present us with the first opportunity to purchase any Class A income-producing apartment communities placed under contract by our advisor or its affiliates that satisfy our investment objectives. If our advisor did not comply with our right of first opportunity, this may result in some attractive properties not being presented to us for acquisition. This may adversely affect our results of operations and financial condition.

      Additionally, Realty expects to own a significant interest in a title insurance agency joint venture with unaffiliated third party title insurance professionals that will provide title and escrow services in connection with our acquisition, financing and sale of properties. Our company expects that it will pay a material amount of title insurance premiums to this joint venture on an annual basis.

The absence of arm’s-length bargaining may mean that our agreements are not as favorable to you as a stockholder as they otherwise would have been.

      Any existing or future agreements between us and our advisor, the dealer manager or their affiliates were not and will not be reached through arm’s-length negotiations. Thus, such agreements may not solely reflect your interests as a stockholder. For example, the advisory agreement, our agreement with the dealer manager and the terms of the compensation to our advisor and the dealer manager were not arrived at through arm’s-length negotiations. The terms of such agreements and compensation may not solely reflect your interests as a stockholder and may be overly favorable to the other party to such agreements, including in terms of the substantial compensation to be paid to these parties under these agreements.

Our advisor may be entitled to receive significant compensation in the event of our liquidation or in the event of a termination of the advisory agreement in connection with the listing of our common stock.

      In the event of a partial or full liquidation of our assets, our advisor will be entitled to receive an incentive distribution equal to 10% of the net proceeds of the liquidation, after our company has received and paid to our stockholders the sum of the capital invested in the operating partnership allocable to the liquidated properties, any shortfall in the recovery of invested capital with respect to any prior sales of properties and any shortfall in the 8% return to stockholders. Additionally, in the event of a termination of our advisory agreement in connection with the listing of our common stock, the advisory agreement provides that our advisor will receive compensation pursuant to such termination as agreed to by our independent directors and our advisor. Further, we may chose to redeem our advisor as a special limited partner in our operating partnership, which would entitle it to receive cash or, if agreed by our company and our advisor, shares of common stock of our company or units of limited partnership interests in our operating partnership equal to the amount that would be payable as an incentive distribution upon sales of properties, which equals 10% of the net proceeds if we liquidated all of our assets at fair market value, after our company has received and paid to our stockholders the sum of the capital invested

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in the operating partnership allocable to the properties, any shortfall in the recovery of invested capital with respect to any prior sales of properties and any shortfall in the 8% return to stockholders. Finally, upon the termination of our advisory agreement as a result of the internalization of our advisor into our company, the advisory agreement provides that the independent directors and our advisor will negotiate the compensation to be payable to the advisor pursuant to such termination.

The business and financial due diligence investigation of our company was conducted by an affiliate. That investigation might not have been as thorough as an investigation conducted by an unaffiliated third party, and might not have uncovered facts that would be important to a potential investor.

      Because the dealer manager is an affiliate of our advisor and Triple Net Properties, and because Mr. Rogers, our president and chairman of the board, and Mr. Thompson, the chairman and chief executive officer of Triple Net Properties, are owners and directors of the dealer manager, you cannot consider the dealer manager’s due diligence investigation of our company to be an independent review. The dealer manager’s due diligence review may not be as meaningful as a review conducted by an unaffiliated broker dealer and may not have uncovered facts that would be important to a potential investor.

Restrictions on Proposed Share Repurchase Plan

You are limited in your ability to sell your shares pursuant to the proposed share repurchase plan and repurchases will be made at our sole discretion.

      Our board of directors has approved the proposed share repurchase plan but such plan will not become effective until the earlier of (1) the completion or termination of this offering, which may last until           , 2008, and receipt of formal or informal relief from the issuer tender offer rules or (2) the receipt by us from the Securities and Exchange Commission of exemptive relief from rules restricting issuer purchases during distributions and formal or informal relief from the issuer tender offer rules, which relief we may never obtain. Even when one of these conditions is met, our board of directors could choose not to implement the proposed share repurchase plan or to amend its proposed terms without stockholder approval. Our board would also be free to amend or terminate the plan following its adoption without stockholder approval.

      The proposed share repurchase plan includes numerous restrictions that would limit your ability to sell your shares. You must hold your shares for at least one year, present at least 25% of your shares for repurchase and until three years following this offering, repurchases will be made for less than you paid, among other restrictions and limitations. Our board of directors may waive the one-year holding period in the event of the death or disability of a stockholder. Shares will be redeemed quarterly, at our discretion, on a pro rata basis, and will be limited during any calendar year to five percent (5.0%) of the weighted average number of shares outstanding during the prior calendar year. Funds for the repurchase of shares will come from the proceeds we receive from the sale of shares under our distribution reinvestment plan. In addition, our board of directors reserves the right to amend, suspend or terminate our share repurchase plan at any time. Therefore, in making a decision to purchase shares, you should not assume that you will be able to sell any of your shares back to us pursuant to our share repurchase plan, and you also should understand that the repurchase prices during the first three years following this offering will not correlate to the value of our real estate holdings or other assets. If our board of directors terminates our share repurchase plan, you may not be able to sell your shares even if you deem it necessary or desirable to do so.

Our stockholders’ interests may be diluted in various ways, which may result in lower returns to our stockholders.

      The board of directors is authorized, without stockholder approval, to cause us to issue additional shares of our common stock or to raise capital through the issuance of preferred stock, options, warrants and other rights, on terms and for consideration as the board of directors in its sole discretion may determine, subject to certain restrictions in our charter in the instance of options and warrants. Any such issuance could result in dilution of the equity of the stockholders. The board of directors may, in its sole discretion, authorize us to issue common stock or other equity or debt securities, (1) to persons from

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whom we purchase apartment communities, as part or all of the purchase price of the community, or (2) to our advisor in lieu of cash payments required under the advisory agreement or other contract or obligation. The board of directors, in its sole discretion, may determine the value of any common stock or other equity or debt securities issued in consideration of apartment communities or services provided, or to be provided, to us, except that while shares of common stock are offered by us to the public, the public offering price of the shares will be deemed their value.

      We have adopted the 2006 Incentive Award Plan, under which we may grant stock options, restricted stock and other performance awards to our officers, employees, consultants and independent directors. The effect of these grants, including the subsequent exercise of stock options, could be to dilute the value of the stockholders’ investments.

      In addition, we are implementing a distribution reinvestment plan in connection with this offering, involving the issuance of additional shares of common stock by us at $9.50 per share of common stock. Shares purchased pursuant to our distribution reinvestment plan will be dilutive to the value of the stockholders’ investments.

Federal Income Tax Requirements

The requirement to distribute at least 90% of our taxable income may require us to borrow, sell assets or issue additional securities for cash.

      In order to qualify as a REIT, we must distribute each calendar year to our stockholders at least 90% of our taxable income, other than any net capital gain. To the extent that we distribute at least 90% but less than 100%, of our taxable income in a calendar year, we will incur no federal corporate income tax on our distributed taxable income. In addition, we will incur a 4% nondeductible excise tax if the actual amount we distribute to our stockholders in a calendar year is less than a minimum amount specified under federal income tax law. We intend to distribute at least 90% of our taxable income to our stockholders each year so that we will satisfy the distribution requirement and avoid corporate income tax and the 4% excise tax. However, we could be required to include earnings in our taxable income before we actually receive the related cash. That timing difference could require us to borrow funds to meet the distribution requirement and avoid corporate income tax and the 4% excise tax in a particular year.

      The REIT minimum distribution requirements may require us to borrow, sell assets or issue additional securities for cash to make required distributions, which would increase the risks associated with your investment in our company.

Our failure to qualify as a REIT would subject us to corporate income tax and would materially impact our earnings.

      We intend to operate in a manner so as to qualify as a REIT for federal income tax purposes. Qualifying as a REIT will require us to meet several tests regarding the nature of our assets and income on an ongoing basis. However, we currently own no properties and have no properties under contract for purchase. A number of the tests established to qualify as a REIT for tax purposes are factually dependent. Therefore, you should be aware that while we intend to qualify as a REIT, it is not possible at this early stage to assess our ability to satisfy these various tests. Therefore, we cannot assure you that our company will in fact ever qualify as a REIT.

      If we fail to qualify as a REIT in any year, we would pay federal income tax on our taxable income. We might need to borrow money or sell assets to pay that tax. Our payment of income tax would decrease the amount of our income available to be distributed to our stockholders. In addition, we no longer would be required to distribute substantially all of our taxable income to our stockholders. Unless our failure to qualify as a REIT is excused under relief provisions of the federal income tax laws, we could not re-elect REIT status until the fifth calendar year following the year in which we failed to qualify.

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SEC Investigation of Triple Net Properties, LLC

The ongoing SEC investigation of Triple Net Properties could adversely impact our advisor’s ability to perform its duties to our company.

      On September 16, 2004, Triple Net Properties, the parent and manager of our advisor, learned that the SEC is conducting an investigation referred to as “In the matter of Triple Net Properties, LLC.” The SEC has requested information from Triple Net Properties relating to disclosure in public and private securities offerings sponsored by Triple Net Properties and its affiliates, or the Triple Net securities offerings. The SEC also has requested information from NNN Capital Corp., the dealer manager for the Triple Net securities offerings and the dealer manager of our offering. The SEC has requested financial and other information regarding the Triple Net securities offerings and the disclosures included in the related offering documents from each of Triple Net Properties and NNN Capital Corp. This investigation could result in the assertion of fines, penalties or administrative remedies. At this time, Triple Net Properties cannot assess the outcome of the investigation by the SEC.

      Triple Net Properties believes it has and intends to continue to cooperate fully with the SEC but expects this will continue to be a time consuming and costly process. The SEC investigation could adversely impact our advisor’s ability to perform its duties to our company because Triple Net Properties is the parent and manager of our advisor.

Total Reliance on Our Advisor

Our ability to operate profitably will depend upon the ability of our advisor and its management team.

      We will rely on our advisor to manage our business and assets. Our advisor will make all decisions with respect to the management of our company. Thus, the success of our business will depend in large part on the ability of our advisor to manage our day-to-day operations. Any adversity experienced by our advisor or problems in our relationship with our advisor could adversely impact the operation of our properties and, consequently, our cash flow and ability to make distributions to our stockholders.

Our advisor may terminate the advisory agreement, which would require us to find a new advisor.

      Either we or our advisor can terminate the advisory agreement upon 60 days written notice to the other party. However, if the advisory agreement is terminated in connection with the listing of our common stock on a national securities exchange or national market system, the advisory agreement provides that our advisor will receive compensation pursuant to such termination as agreed to by our independent directors and our advisor. Further, we may choose to redeem our advisor as a special limited partner in our operating partnership, which would entitle it to receive cash or, if agreed by our company and our advisor, shares of common stock of our company or units of limited partnership interest in our operating partnership equal to the amount that would be payable to the advisor pursuant to the “incentive distribution upon sales” described under the heading “Compensation Table” if we liquidated all of our assets for their fair market value. Finally, upon the termination of our advisory agreement as a result of the advisor’s internalization into our company, the advisory agreement provides that our independent directors and our advisor will agree on the compensation payable to the advisor pursuant to such termination.

      If our advisor was to terminate the advisory agreement, we would need to find another advisor to provide us with day-to-day management services or have employees to provide these services directly to us. There can be no assurances that we would be able to find a new advisor or employees or enter into agreements for such services on acceptable terms.

If our advisor cannot retain the services of its key employees, their replacements may not manage our company as effectively.

      We depend on our advisor to retain its key officers and employees, but most of such individuals do not have an employment agreement with our advisor or its affiliates. Our advisor’s key employees are

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Stanley J. Olander, Jr., Gus G. Remppies, David L. Carneal, Louis J. Rogers, Scott D. Peters and Andrea R. Biller. The loss of any or all of Messrs. Olander, Remppies, Carneal, Rogers or Peters or Ms. Biller, and our advisor’s inability to find, or any delay in finding, a replacement with equivalent skill and experience, could adversely impact our ability to acquire properties and the operation of our properties.

Advisor’s Broad Discretion in Allocating Proceeds

Stockholders will have little, if any, control over how the proceeds from this offering are spent.

      Our advisor is responsible for the day-to-day operations of our company and has broad discretion over the use of proceeds from this offering. Accordingly, you should not purchase shares of our common stock unless you are willing to entrust all aspects of the day-to-day management to our advisor, who will manage our company in accordance with the advisory agreement. In addition, our advisor may retain independent contractors to provide various services for our company, and you should note that such contractors will have no fiduciary duty to you or the other stockholders and may not perform as expected or desired.

Lack of Investment Diversification

The effect of adverse conditions at specific properties will be magnified to the extent we are able to acquire only a limited number of properties.

      A lack of diversity in the properties in which we invest could increase your risk in investing in our company. If we only sell the minimum amount of this offering, we will not be able to purchase a diverse portfolio of properties and may only be able to purchase one property or a partial interest in one property as a co-investor. In that event, our performance and the returns to you as a stockholder will depend directly on the success of that limited number of properties. Adverse conditions at that limited number of properties or in the location in which the properties exist would have a direct negative impact on your return as a stockholder.

Distributions May Include a Return of Capital

      Distributions payable to stockholders may include a return of capital, rather than a return on capital. To the extent that our distributions exceed our current and accumulated earnings and profits, such amounts will constitute a return of capital for federal income tax purposes, to the extent of a stockholder’s basis in his stock, and thereafter will constitute capital gain.

Acquisition Risks

Our inability to find funding for acquisitions could prevent us from realizing our objectives and would adversely impact the distributions we pay to our stockholders and the value of your investment in our company generally.

      We may not be able to obtain financing to acquire properties, which would limit the number of properties we could acquire and subject your investment to further risk. If, as expected, we qualify as a REIT, we will be required to distribute at least 90% of our taxable income (excluding net capital gains) to our stockholders in each taxable year, and thus our ability to retain internally generated cash is limited. Accordingly, our ability to acquire properties or to make capital improvements to or remodel properties will depend on our ability to obtain debt or equity financing from third parties or the sellers of properties.

      If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the loans become due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. We may be unable to refinance properties. If any of these events occurs, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our ability to raise more capital.

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      Further, we cannot assure you that we will receive any proceeds from our distribution reinvestment plan or, if we do, that such proceeds will be available or adequate to acquire properties.

We are likely to incur mortgage and other indebtedness, which may increase our business risks.

      Significant borrowings by us increase the risks of an investment in our company. If there is a shortfall between the cash flow from properties and the cash flow needed to service our indebtedness, then the amount available for distributions to our stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. If any mortgages or other indebtedness contain cross-collateralization or cross-default provisions, a default on a single loan could affect multiple properties.

      Additionally, when providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, merge with another company, discontinue insurance coverage, or replace our advisor. These or other limitations may limit our flexibility and our ability to achieve our operating plans. In particular, we are currently negotiating and anticipate entering into a secured revolving line of credit with Wachovia Bank, N.A. to use for our future acquisitions, which we anticipate will have the significant restrictions and covenants. Our failure to meet these restrictions and covenants could result in an event of default under our line of credit and result in the foreclosure of some or all of our properties.

      Furthermore, we may give full or partial guarantees to lenders of mortgage debt on behalf of the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity.

Competition with entities who have greater financial resources could make it more difficult for us to acquire attractive properties and achieve our investment objectives.

      We compete for investment opportunities with entities with substantially greater financial resources. These entities may be able to accept more risk than our board of directors believes is in our best interests. This competition may limit the number of suitable investment opportunities offered to us. This competition also may increase the bargaining power of property owners seeking to sell to us, making it more difficult for us to acquire properties. In addition, we believe that competition from entities organized for purposes similar to ours may increase in the future.

Joint Venture Arrangements

Any joint venture arrangements may not reflect solely our stockholders’ best interests.

      The terms of any joint venture arrangements in which we acquire or hold properties or other investments may not solely reflect your interests as a stockholder. We may acquire an interest in a property through a joint venture arrangement with our advisor, one or more of our advisor’s affiliates or unaffiliated third parties. In joint venture arrangements with our advisor or its affiliates, our advisor will have fiduciary duties to both our company and its affiliate participating in the joint venture. The terms of such joint venture arrangement may be more favorable to the other joint venturer than to you as a stockholder of our company, although our company may not invest in joint ventures with our advisor, our directors or any of their affiliates unless a majority of the directors (including a majority of the independent directors) not otherwise interested in the transaction approve the transaction as being fair and reasonable to our company and our stockholders and on substantially the same terms and conditions as those received by the other joint venturers.

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Investing in properties through joint ventures subjects that investment to increased risk.

      Such joint venture investments may involve risks not otherwise present, including, for example:

•  the risk that our co-venturer or partner in an investment might become bankrupt;

•  the risk that such co-venturer or partner may at any time have economic or business interests or goals which are inconsistent with our business interests or goals; or

•  the risk that such co-venturer or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, such as selling a property at a time when it would have adverse consequences for our stockholders.

      Actions by such a co-venturer or partner might have the result of subjecting the applicable property to liabilities in excess of those otherwise contemplated and may have the effect of reducing our cash available for distribution. It also may be difficult for us to sell our interest in any such joint venture or partnership in such property.

Investment Company Act

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act.

      We do not intend to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act including, but not limited to:

•  limitations on capital structure;

•  restrictions on specified investments;

•  prohibitions on transactions with affiliates; and

•  compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations.

      In order to maintain our exemption from regulation under the Investment Company Act, we must engage primarily in the business of buying real estate, and these investments must be made within a year after this offering ends. If we are unable to invest a significant portion of the proceeds of this offering in properties within one year of the termination of this offering, we may avoid being required to register as an investment company by temporarily investing any unused proceeds in government securities with low returns. This would reduce the cash available for distribution to our stockholders and possibly lower your returns.

      To maintain compliance with the Investment Company Act exemption, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forego opportunities to acquire interests in properties that we would otherwise want to acquire and would be important to our investment strategy. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of us and liquidate our business.

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Limited Working Capital

We will have limited sources of working capital.

      We may not be able to fund our working capital needs. If, as expected, we qualify as a REIT, we will be required to distribute at least 90% of our taxable income (excluding net capital gains) to our stockholders in each taxable year. However, depending on the size of our operations, we will require a minimum amount of capital to fund our daily operations. We may have to obtain financing from either affiliated or unaffiliated sources to meet such cash needs. There is no assurance that this financing will be available or, if available, that the terms will be acceptable to us.

Borrowings May Increase Our Business Risks

As we incur indebtedness, the risk associated with your investment in our company will increase.

      The risk associated with your investment in our company depends upon, among other factors, the amount of debt we incur. We intend to incur indebtedness in connection with our acquisition of properties. We may also borrow for the purpose of maintaining our operations or funding our working capital needs. Lenders may require restrictions on future borrowings, distributions and operating policies. We also may incur indebtedness if necessary to satisfy the federal income tax requirement that we distribute at least 90% of our taxable income (excluding net capital gains) to our stockholders in each taxable year. Borrowing increases our business risks.

      Debt service increases the expense of operations since we will be responsible for retiring the debt and paying the attendant interest, which may result in decreased cash available for distribution to you as a stockholder. In the event the fair market value of our properties were to increase, we could incur more debt without a commensurate increase in cash flow to service the debt. In addition, our directors can change our policy relating to the incurrence of debt at any time without stockholder approval.

We may incur indebtedness secured by our properties, which may subject our properties to foreclosure.

      Incurring mortgage indebtedness increases the risk of possible loss. Most of our borrowings to acquire properties will be secured by mortgages on our properties. If we default on our secured indebtedness, the lender may foreclose and we could lose our entire investment in the properties securing such loan which could adversely affect distributions to stockholders. For federal tax purposes, any such foreclosure would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage and, if the outstanding balance of the debt secured by the mortgage exceeds the basis of the property to our company, there could be taxable income upon a foreclosure. To the extent lenders require our company to cross-collateralize our properties, or our loan agreements contain cross-default provisions, a default under a single loan agreement could subject multiple properties to foreclosure.

Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to make cash distributions to our stockholders.

      A change in economic conditions could result in higher interest rates which could increase debt service requirements on variable rate debt and could reduce the amounts available for distribution to you as a stockholder. A change in economic conditions could cause the terms on which borrowings become available to be unfavorable. In such circumstances, if we are in need of capital to repay indebtedness in accordance with its terms or otherwise, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments.

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Our Ability to Change Policies Without a Stockholder Vote; Limitation on Debt

Most of our policies described in this prospectus, including the limits on debt, may be changed or eliminated by our board of directors at any time without a vote of the stockholders.

      Most of our major policies, including policies intended to protect you as a stockholder and the policies described in this prospectus with respect to acquisitions, financing, limitations on debt and investment limitations, have been determined by our board of directors and can be changed at any time without a vote of our stockholders or notice to you as a stockholder. Therefore, these policies and limitations may not be meaningful to protect your interests as a stockholder.

Possible Adverse Consequences of Limits on Ownership and Transfer of Our Shares

The limitation on ownership of our stock will prevent you from acquiring more than 9.9% of our stock or more than 9.9% of our common stock and may force you to sell stock back to us.

      Our charter limits direct and indirect ownership of our capital stock by any single stockholder to 9.9% of the value of outstanding shares of our capital stock and 9.9% of the value or number (whichever is more restrictive) of outstanding shares of our common stock. We refer to these limitations as the ownership limits. These ownership limits do not apply to our advisor. Our charter also prohibits transfers of our stock that would result in (1) our capital stock being beneficially owned by fewer than 100 persons, (2) five or fewer individuals, including natural persons, private foundations, specified employee benefit plans and trusts, and charitable trusts, owning more than 50% of our capital stock, applying broad attribution rules imposed by the federal income tax laws, (3) our company directly or indirectly owning 9.9% or more of one of our tenants, or (4) before our common stock qualifies as a class of “publicly-offered securities,” 25% or more of our common stock being owned by ERISA investors. If you acquire shares in excess of the ownership limits or in violation of the restrictions on transfer, we:

•  may consider the transfer to be null and void;

•  will not reflect the transaction on our books;

•  may institute legal action to enjoin the transaction;

•  will not pay dividends or other distributions to you with respect to those excess shares;

•  will not recognize your voting rights for those excess shares; and

•  may consider the excess shares held in trust for the benefit of a charitable beneficiary.

      If such shares are transferred to a trust for the benefit of a charitable beneficiary, you will be paid for such excess shares a price per share equal to the lesser of the price you paid or the “market price” of our stock. Unless shares of our common stock are then traded on a national securities exchange or quoted on a national market system, the market price of such shares will be a price determined by our board of directors in good faith. If shares of our common stock are traded on a national securities exchange or quoted on a national market system, the market price will be the average of the last sales prices or the average of the last bid and ask prices for the five trading days immediately preceding the date of determination.

      If you acquire our stock in violation of the ownership limits or the restrictions on transfer described above:

•  you may lose your power to dispose of the stock;

•  you may not recognize profit from the sale of such stock if the “market price” of the stock increases; and

•  you may incur a loss from the sale of such stock if the “market price” decreases.

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Potential Anti-Takeover Effects

Limitations on share ownership and transfer may deter a sale of our company in which you could profit.

      The limits on ownership and transfer of our equity securities in our charter may have the effect of delaying, deferring or preventing a transaction or a change in control of our company that might involve a premium price for your common stock or otherwise be in your best interest as a stockholder. The ownership limits and restrictions on transferability will continue to apply until our board of directors determines that it is no longer in our best interest to continue to qualify as a REIT.

Our power to issue preferred stock may include a preference in distributions superior to our common stock and also may deter or prevent a sale of our company in which you could profit.

      Our power to issue preferred stock and other securities without your approval also could deter or prevent someone from acquiring our company, even if a change in control were in your best interests as a stockholder. Our charter authorizes our board of directors to issue up to 50 million shares of preferred stock. Our board of directors may establish the preferences and rights, including a preference in distributions superior to our common stockholders, of any issued preferred stock designed to prevent, or with the effect of preventing, someone from acquiring control of our company.

Maryland takeover statutes may deter others from seeking to acquire our company and prevent you from making a profit in such transaction.

      Maryland law contains many provisions such as the business combination statute and the control share acquisition statute that are designed to prevent, or with the effect of preventing, someone from acquiring control of our company. Our bylaws exempt our company from the control share acquisition statute (which eliminates voting rights for certain levels of shares that could exercise control over us) and our board of directors has adopted a resolution opting out of the business combination statue (which prohibits a merger or consolidation of us and a 10% stockholder for a period of time). However, if the bylaw provisions exempting our company from the control share acquisition statute or the board resolution opting out of the business combination statute were repealed, these provisions of Maryland Law could delay or prevent offers to acquire our company and increase the difficulty of consummating any such offers, even if such a transaction would be in our stockholders’ best interests. See “Important Provisions of Maryland Law and Our Charter and Bylaws.”

Dilution

Your investment in our company will be diluted immediately by $1.00 per share.

      The offering price is $10.00 per share. After the payment of selling commissions, marketing allowance and accountable due diligence expense reimbursement, we will receive $9.00 per share. As a result of these expenses, you will experience immediate dilution of $1.00 in book value per share or 10.0% of the offering price, not including other organizational and offering expenses. To the extent that you do not participate in any future issuance of our securities, you also will experience dilution of your ownership percentage in our company.

Several potential events could cause the fair market and book value of your investment in our company to decline.

      Your investment in our company could be diluted by a number of factors, including:

•  future offerings of our securities, including issuances under our distribution reinvestment plan and up to 50 million shares of any preferred stock that our board may authorize;

•  private issuances of our securities to other investors, including institutional investors;

•  issuances of our securities under our 2006 Incentive Award Plan; or

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•  redemptions of units of limited partnership interest in our operating partnership in exchange for shares of our common stock.

Dilution and our Operating Partnership

Our advisor may receive economic benefits from its status as a special limited partner without bearing any of the investment risk.

      Our advisor is a special limited partner in our operating partnership. The special limited partner is entitled to receive, among other distributions, an incentive distribution of net sales proceeds of properties after we have received and paid to our stockholders the threshold return. We will bear all of the risk associated with the properties but, as a result of the incentive distributions to our advisor, we will not be entitled to all of our operating partnership’s proceeds from a property sale.

Seller Financing by Our Company May Delay Liquidation or Reinvestment

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

      If we liquidate our company, you may experience a delay before receiving your share of the proceeds of such liquidation. In a forced or voluntary liquidation, we may sell our properties either subject to or upon the assumption of any then outstanding mortgage debt or, alternatively, may provide financing to purchasers. We may take a purchase money obligation secured by a mortgage as partial payment. We do not have any limitations or restrictions on our taking such purchase money obligations. To the extent we receive promissory notes or other property instead of cash from sales, such proceeds, other than any interest payable on those proceeds, will not be included in net sale proceeds until and to the extent the promissory notes or other property are actually paid, sold, refinanced or otherwise disposed of. In many cases, we will receive initial down payments in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years. Therefore, you may experience a delay in the distribution of the proceeds of a sale until such time.

Negative Characteristics of Real Estate Investments

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

      Our investments in residential apartment properties will be subject to varying degrees of risk that generally arise from the ownership of real estate. The underlying value of our properties and the ability to make distributions to you depend upon the ability of the tenants of our properties to generate enough income to pay their rents in a timely manner. Their inability to do so may be impacted by employment and other constraints on their personal finances, including debts, purchases and other factors. Additionally, the ability of commercial tenants of commercial properties we may buy would depend upon their ability to generate income in excess of their operating expenses to make their lease payments to us. Changes beyond our control may adversely affect our tenants’ ability to make lease payments and consequently would substantially reduce both our income from operations and our ability to make distributions to you. These changes include, among others, the following:

•  changes in national, regional or local economic conditions;

•  changes in local market conditions; and

•  changes in federal, state or local regulations and controls affecting rents, prices of goods, interest rates, fuel and energy consumption.

      Due to these changes or others, tenants and lease guarantors, if any, may be unable to make their lease payments. A default by a tenant, the failure of a tenant’s guarantor to fulfill its obligations or other premature termination of a lease could, depending upon the size of the leased premises and our advisor’s

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ability to successfully find a substitute tenant, have a materially adverse effect on our revenues and the value of our common stock or our cash available for distribution to our stockholders.

      If we are unable to find tenants for our properties, or find replacement tenants when leases expire and are not renewed by the tenants, our revenues and cash available for distribution to our stockholders will be substantially reduced.

Increased construction of similar properties that compete with our properties in any particular location could adversely affect the operating results of our properties and our cash available for distribution to our stockholders.

      We may acquire properties in locations which experience increases in construction of properties that compete with our properties. This increased competition and construction could:

•  make it more difficult for us to find tenants to lease units in our apartment communities or space in our commercial properties;

•  force us to lower our rental prices in order to lease units in our apartment communities or space in our commercial properties; and

•  substantially reduce our revenues and cash available for distribution to our stockholders.

Lack of diversification and liquidity of real estate will make it difficult for us to sell underperforming properties or recover our investment in one or more properties.

      Our business will be subject to risks associated with investment solely in real estate. Real estate investments are relatively illiquid. Our ability to vary our portfolio in response to changes in economic and other conditions will be limited. We cannot assure you that we will be able to dispose of a property when we want or need to. Consequently, the sale price for any property may not recoup or exceed the amount of our investment.

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

      We do not own any properties as of the date of this prospectus. However, when we begin to purchase properties during the early stage of our operations, it is likely that our portfolio will lack geographic diversity due to the acquisition of a single or small number of properties. Geographic concentration of properties will expose us to economic downturns in the areas where our properties are located. A regional recession in any of these areas could adversely affect our ability to generate or increase operating revenues, attract new tenants or dispose of unproductive properties.

Costs required to become compliant with the Americans with Disabilities Act at our properties may affect our ability to make distributions to you.

      We may acquire properties that are not in compliance with the Americans with Disabilities Act of 1990, or the ADA. We would be required to pay for improvement to the properties to effect compliance with the ADA. Under the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. The ADA requirements could require removal of access barriers and could result in the imposition of fines by the federal government or an award of damages to private litigants. We could be liable for violations of such laws and regulations by us or our tenants. State and federal laws in this area are constantly evolving. In fact, the United States Department of Justice is expected to issue new ADA regulations that could impact existing buildings. Any such changes in state or federal laws in this area could place a greater cost or burden on us as landlord of the properties we acquire. In addition, although we generally do not expect to engage in substantial renovation or construction work, any new construction at a property would need to be ADA compliant and a certain percentage of the construction costs may need to be allocated to the property’s overall ADA compliance.

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Discovery of previously undetected environmentally hazardous conditions may decrease our revenues and the return on your investment.

      Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost to remove or remediate hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which 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 that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including asbestos-containing materials into the air. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to you.

Losses for which we either could not or did not obtain insurance will adversely affect our earnings.

      We could suffer a loss due to the cost to repair any damage to properties that are not insured or are underinsured. There are types of losses, generally of a catastrophic nature, such as losses due to terrorism, wars, earthquakes or acts of God, that are either uninsurable or not economically insurable. We may acquire properties that are located in areas where there exists a risk of hurricanes, earthquakes, floods or other acts of God. Generally, we will not obtain insurance for hurricanes, earthquakes, floods or other acts of God unless required by a lender or our advisor determines that such insurance is necessary and may be obtained on a cost-effective basis. If such a catastrophic event were to occur, or cause the destruction of one or more of our properties, we could lose both our invested capital and anticipated profits from such property.

The recharacterization of any purchase and leaseback transactions as a financing could cause us to lose properties without full compensation.

      If a seller/lessee in a purchase and leaseback transaction in which we are the buyer/lessor declares bankruptcy, we could suffer a material loss due to recharacterization of our ownership of that property as financing. We intend to enter into purchase and leaseback transactions, in which we will purchase a property from an entity and lease such property back to that same entity. In the event of the bankruptcy of a lessee in a purchase and leaseback transaction, the trustee in bankruptcy may seek to recharacterize the transaction as either a financing or as a joint venture. To the extent the purchase and leaseback is treated as a financing, the lessee may be deemed the owner of the property and we would have the status of a creditor with respect to the property. We may not be able to reacquire the property and may not be adequately compensated for our loss of the property. Purchase and leaseback transactions also may be recharacterized as financings for tax purposes, in which case we would not be allowed depreciation and other deductions with respect to the property.

Our investments in unimproved real property will take longer to produce returns and will be riskier than investments in developed property.

      Our board of directors has the discretion to invest up to 10% of our total assets in other types of property, including land or other commercial property types. In addition to the risks of real estate investments in general, an investment in unimproved real property is subject to additional risks, including the expense and delay which may be associated with rezoning the land for a higher use and the development and environmental concerns of governmental entities and/or community groups.

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Effects of ERISA Regulations

Our common stock may not be a suitable investment for qualified pension and profit-sharing trusts.

      When considering an investment in our company with a portion of the assets of a qualified pension or profit-sharing trust, you should consider:

•  whether the investment satisfies the diversification requirements of the Employee Retirement Income Security Act of 1974, or ERISA,

•  or other applicable restrictions imposed by ERISA; and

•  whether the investment is prudent and suitable, since we anticipate that initially there will be no market in which you can sell or otherwise dispose of our shares.

      We have not evaluated, and will not evaluate, whether an investment in our company is suitable for any particular employee benefit plan, but, subject to restrictions described in “ERISA Considerations,” we will accept such entities as stockholders if an entity otherwise meets the suitability standards.

      If we are considered a “pension-held REIT,” an investment in our company may produce unrelated business taxable income for a qualified pension or profit sharing trust, which may cause a qualified pension or profit sharing trust holding 10% or more of our stock to pay federal income tax on a portion of the distributions it receives from us.

      In addition to considering their fiduciary responsibilities under ERISA and the prohibited transaction rules of ERISA and the federal tax laws, advisors to employee benefit plans also should consider the effect of the “plan asset” regulations issued by the Department of Labor. To avoid being subject to those regulations, our charter prohibits ERISA investors from owning 25% or more of our common stock prior to the time that the common stock qualifies as a class of “publicly-offered securities.” However, we cannot assure you that those provisions in our charter will be effective.

Forward-looking Statements

We make forward-looking statements in this prospectus which may prove to be inaccurate.

      This prospectus contains forward-looking statements within the meaning of the federal securities laws which are intended to be covered by the safe harbors created by those laws. Historical results and trends should not be taken as indicative of future operations. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of us, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “prospects,” or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; legislative/ regulatory changes, including changes to laws governing the taxation of REITs; availability of capital; interest rates; our ability to service our debt; competition; supply and demand for operating properties in our current and proposed market areas; the prospect of a continuing relationship with our advisor; generally accepted accounting principles; and policies and guidelines applicable to REITs; and litigation, including, without limitation, the investigation by the SEC of Triple Net Properties. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved.

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ESTIMATED USE OF PROCEEDS OF THIS OFFERING

      We will use the net proceeds from this offering to purchase suitable properties, to repay debt that we may assume when acquiring properties and to pay the amounts due to our advisor and the dealer manager.

      The following table sets forth information concerning the estimated use of the gross proceeds of this offering. Many of the figures set forth below represent our best estimate since they cannot be precisely calculated at this time. Please note that in this table, the Maximum Offering column does not include up to 5,000,000 shares that may be issued under our distribution reinvestment plan. The amounts shown for Gross Offering Proceeds do not reflect the possible discounts in commissions and other fees in connection with volume purchases. See “Plan of Distribution.”

		Minimum Offering					Maximum Offering
		Amount		Percent			Amount		Percent
Gross Offering Proceeds		$	2,000,000		100.0	%	$	1,000,000,000		100.0	%
Less Organizational and Public Offering
Expenses:
	Selling Commissions	$	140,000		7.0	%	$	70,000,000		7.0	%
	Marketing Allowance(1)	$	50,000		2.5	%	$	25,000,000		2.5	%
	Accountable Due Diligence Expense Reimbursement(2)	$	10,000		0.5	%	$	5,000,000		0.5	%
	Other Organizational and Offering Expenses(3)	$	30,000		1.5	%	$	15,000,000		1.5	%
	Total Organizational and Offering Expenses	$	230,000		11.5	%	$	115,000,000		11.5	%
Net Proceeds to Company Available for Investment in Properties(4)		$	1,770,000		88.5	%	$	885,000,000		88.5	%

(1)	We will pay the dealer manager an amount equal to 2.5% of the gross offering proceeds as a marketing allowance for expenses associated with non-accountable marketing fees, wholesaling fees, expense reimbursements, sales seminars and volume discounts. The dealer manager may reallow up to 0.5% of the gross offering proceeds for non-accountable marketing fees and expenses to broker dealers participating in the offering.
(2)	We will pay the dealer manager up to 0.5% of the gross offering proceeds for reimbursement of accountable due diligence expenses. The dealer manager may reallow up to 0.5% of the gross offering proceeds for accountable bona fide due diligence reimbursements to broker dealers participating in this offering.
(3)	This is an estimate of the costs and expenses expected to be incurred over the life of the offering, including fees for legal counsel, accountants and state registrations as well as reimbursements for costs to prepare sales materials, and our company’s conduct of educational conferences and retail seminars. The total amount is variable depending upon the length of the offering.
(4)	This does not include acquisition fees equal to (1) up to 3.0% of the purchase price of the properties we acquire or (2) up to 4.0% of the total development cost of any development property we acquire, as applicable, that may be paid by our company or the seller to independent third-party real estate brokers or to Realty, an affiliate of our advisor, who may serve as our real estate broker in some or all of our acquisitions, which, together with reimbursements for acquisition expenses, may equal up to 6.0% of the purchase price or total development cost, as applicable, of the property.

      The dealer manager may seek the assistance of other broker dealers in selling our common stock and may reallow the selling commissions it receives to such broker dealers.

      Our advisor is entitled to receive an annual asset management fee of either 0.75% or 1.0% of our average invested assets, calculated and payable monthly, depending upon the ratio of our FFO, as defined

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by NAREIT, to the gross offering proceeds. “Average invested assets” means, for any period, the average of the aggregate book value of our company invested, directly or indirectly, in equity interests in and loans secured by real estate, before deducting depreciation, bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period.

OUR COMPANY

      NNN Apartment REIT, Inc. is a recently formed Maryland corporation. We have not yet qualified as a REIT for federal income tax purposes, but intend to do so for our first full taxable year. As of the date of this prospectus, we do not own any properties but anticipate acquiring properties with the net proceeds of this offering. Our primary business strategy is to (1) purchase and hold a diverse portfolio of apartment communities with strong and stable cash flow and growth potential and (2) preserve our stockholders’ capital.

      NNN Apartment REIT Advisor, LLC, or our advisor, is a Virginia limited liability company formed in December 2005 to serve as advisor for our company. Our advisor is a subsidiary of Triple Net Properties, LLC, or Triple Net Properties, and is also partially owned by certain members of the management of Triple Net Properties through NNN Apartment Management, LLC, or NNN Apartment Management, and by ROC Realty Advisors, LLC, or ROC Realty Advisors. Key members of the management of Triple Net Properties and ROC Realty Advisors will provide over 75 years of real estate industry experience to our company through their roles with our advisor. Our day-to-day operations will be managed by our advisor under an advisory agreement. Our advisor may engage affiliated entities, including Triple Net Properties Realty, Inc., or Realty, a real estate brokerage and management company, to provide various services for the properties. Triple Net Properties and its affiliated property manager were formed in 1998 to serve as an asset and property manager for real estate investment trusts, syndicated real estate limited partnerships, limited liability companies and similar real estate entities. Realty was awarded the Accredited Management Organization accreditation in August 2003 from the Institute of Real Estate Management. This designation, which is awarded to approximately 526 out of the estimated 10,000 eligible real estate management firms in the United States, is based on criteria including ethical standards and industry experience. AMO firms must be reaccredited every three years.

      We will operate in an umbrella partnership REIT structure, in which our subsidiary operating partnership (or entities wholly-owned by our operating partnership) will own all of the properties that we acquire. Our operating partnership is NNN Apartment REIT Holdings, L.P., which was formed as a Virginia limited partnership in December 2005, and we are its sole general partner and a limited partner and have control over the affairs of our operating partnership. Our advisor is a limited partner and a special limited partner in our operating partnership entitling it to specified incentive distributions. Our advisor has also purchased 22,223 shares of our common stock at $9.00 per share, or $200,007, to satisfy the requirements of the North American Securities Administrators Association, or NASAA. In the future, our operating partnership may issue units of limited partnership interest in exchange for suitable properties. We will use the net proceeds of this offering to purchase suitable properties, to repay debt we may assume when acquiring properties and to pay the amounts due to our advisor and the dealer manager.

      The principal executive offices of our company and our advisor are located at 1551 N. Tustin Avenue, Suite 200, Santa Ana, California 92705. The principal property management offices of our company are located at 1606 Santa Rosa Road, Suite 109, Richmond, Virginia 23229. Our toll-free telephone number is (877) 888-7348. The address of our dealer manager is 4 Hutton Centre Drive, Suite 700, South Coast Metro, California 92707, and its telephone number is (714) 667-8252. References in this prospectus to “us,” “we” or “our company” refer to NNN Apartment REIT, Inc. and our operating partnership, NNN Apartment REIT Holdings, L.P., unless the context otherwise requires, and “our advisor” means NNN Apartment REIT Advisor, LLC.

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INVESTMENT OBJECTIVES AND POLICIES

Our Business and Objectives

      Our objective is to acquire quality apartment communities so we can provide our stockholders with:

•  stable cash flow available for distribution to our stockholders;

•  preservation and protection of capital; and

•  growth of income and principal without taking undue risk.

      Additionally, we intend to:

•  invest in income producing real property generally through equity investments in a manner which permits us to qualify as a REIT for federal income tax purposes; and

•  realize capital appreciation upon the ultimate sale of our properties.

      We cannot assure you that we will attain these objectives or that our invested capital will not decrease. Our investment objectives will not be altered if less than the maximum offering amount is raised; however, if only the minimum offering amount is raised, we will not be able to purchase a diverse portfolio of properties and may only be able to purchase one property.

      We believe the following will be key factors for our success in meeting our objectives.

Following Demographic Trends and Population Shifts to Find Attractive Tenants in Quality Apartment Community Markets

      According to the U.S. Census Bureau, nearly one half of total U.S. population growth between 2000 and 2030 will occur in three states: Florida, California and Texas, each gaining more than 12 million people total. Included in the top five growth states are Arizona and North Carolina, projected to add 5.6 million and 4.2 million people, respectively.

      We will emphasize property acquisitions in regions of the United States that seem likely to benefit from the ongoing population shift and/or are poised for strong economic growth. We further believe that these markets will likely attract quality tenants who have good income and strong credit profiles and choose to rent an apartment rather than buy a home because of their life circumstances. For example, they may be baby-boomers or retirees who desire freedom from home maintenance costs and property taxes or they may be service employees who have recently moved to the area and chosen not to make a long-term commitment to the area because of the itinerant nature of their employment. They may also be individuals in transition who need housing while awaiting selection or construction of a home. We believe that attracting and retaining quality tenants strongly correlates with the likelihood of providing stable cash flow to our investors as well as increasing the value of our properties.

      After visiting recent historical lows in 2003, interest rates have generally increased. From June 13, 2003 to December 30, 2005, the yield on the 10-year treasury bond rose overall from 3.10% to 4.39%. We believe that interest rates will continue to increase and that higher interest rates can benefit our business model by making it more difficult for many people to buy a home, especially a first home. We believe that as the pool of potential renters increases, the demand for apartments is also likely to increase. With this increased demand, we believe that it may be possible to raise rents and decrease rental concessions in the future at apartment communities we may acquire.

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Outsourcing of Property Management

      We believe that generally outsourcing our property management will be a significant factor in supporting our key management and portfolio objectives to the benefit of our stockholders by:

•  Focusing on Our Strengths

      We see our strengths in capitalizing on our management’s prior experience in purchasing similar properties and developing a diversified portfolio. We believe that outsourcing property management will free us to leverage these strengths to the benefit of our stockholders by allowing us to focus on purchasing quality, income-producing properties, rather than using our resources to build an extensive property management infrastructure.

      Our advisor’s management team has over 75 years of experience in the acquisition of comparable properties. It intends to use its contacts and relationships with apartment developers and owners to acquire high quality properties for our company on a timely basis and at a reasonable cost.

•  Focusing on Quality Properties

      Property management companies often aim to fund the cost of their business infrastructure by spreading these costs over multiple properties they manage. Outsourcing property management to a regionally focused and locally experienced firm may give us the flexibility to purchase fewer but higher quality apartment properties in an area or region by leveraging the property management firm’s greater economies of scales.

•  Focusing on Quality Tenant Attraction and Retention

      We believe that quality tenants seek well-managed properties that offer superior and dependable services, particularly in competitive markets. By seeking to retain the best property managers in a region or market, we intend to maximize the quality of services offered to attract and retain tenants who are prepared to potentially pay a premium in rent for those services.

•  Focusing on Networking and Business Synergies to Enhance Property Acquisitions

      A locally or regionally focused property management firm may learn of an owner’s desire to sell an apartment building before it is generally listed for sale. Property management may also gain important insights into the tenants’ general satisfaction, or their need for more and/or different space than they currently occupy. Therefore, building relationships with such locally attuned management firms may allow us to purchase “off market” properties at attractive terms and/or prices, aid in tenant retention, or execute pre-purchase leasing agreements that will help us meet occupancy objectives in a new property.

•  Focusing on Building Property Value

      We believe that selecting a “best of class” property manager can enhance a property’s resale value by offering a better maintained property with a more satisfied and stable tenant base to prospective purchasers.

      We believe that most of our properties will be managed by third-party property managers. However, our advisor or its affiliates may manage certain of our properties, when our advisor determines that it is in our best interests to do so.

Leveraging the Experience of Our Management

      We believe that a critical success factor in property acquisition lies in possessing the flexibility to move quickly when an opportunity presents itself to buy or sell a property. We believe that employing highly qualified industry professionals will allow us to better achieve this objective. By generally outsourcing our property management, we also intend to leverage the experience of our executives by allowing them to focus more on strategy and the actual business of acquiring, financing and selling properties and less time on managing human resources.

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      Each of our key executives has considerable experience building successful real estate companies. As an example, one of our principals, Mr. Olander, has been responsible for the acquisition and financing of approximately 40,000 apartment units, has been an executive in the real estate industry for more than 25 years, and previously served as president and chief financial officer and a member of the board of directors of Cornerstone Realty Income Trust, Inc. Likewise, Mr. Remppies and Mr. Carneal are the former chief investment officer and chief operating officer, respectively, of Cornerstone Realty Income Trust, where they oversaw the growth of that company. From year end 1997, when the company’s shares were listed on the New York Stock Exchange, Cornerstone Realty Income Trust grew from owning approximately 12,000 apartments mainly concentrated in four major markets to owning approximately 24,000 apartments across 18 major markets in 2004 when its merger with Colonial Properties Trust was announced. This growth represented a 100% increase in total assets over seven years and an average growth of over 14% per year.

      We intend to acquire fee ownership of our apartment communities, but may also enter into joint venture arrangements. We seek to maximize current and long-term net income and the value of our assets. Our policy is to acquire assets where we believe opportunities exist for acceptable investment returns.

      Decisions relating to the purchase or sale of properties will be made by our advisor subject to approval by our board of directors.

      Our board of directors has established written policies on investment objectives and borrowing. Our board is responsible for monitoring the administrative procedures, investment operations and performance of our company and our advisor to ensure such policies are carried out. Our board generally may change our policies or investment objectives at any time without a vote of our stockholders. The independent directors will review our investment policies at least annually to determine that our policies are in the best interests of our stockholders and will set forth their determinations in the minutes of the board meetings. You will have no voting rights with respect to implementing our investment objectives and policies, all of which are the responsibility of our board of directors and may be changed at any time.

      The sheltering from tax of income from other sources is not an objective of our company.

Types of Investments

      We intend to invest primarily in Class A apartment communities. To the extent it is in the best interests of our stockholders, we will strive to invest in a geographically diversified portfolio of apartment communities that will satisfy our primary investment objectives of providing our stockholders with stable cash flow, preservation of capital and growth of income and principal without taking undue risk. Because a significant factor in the valuation of income-producing real estate is their potential for future income, we anticipate that the majority of properties we acquire will have both the potential for growth in value and providing cash distributions to stockholders.

      We anticipate that 88.5% of the offering proceeds, excluding commissions, fees and acquisition expense reimbursements of up to 6% of the purchase price of the properties, will be used to acquire real estate and the balance will be used to pay various fees and expenses described in “Estimated Use of Proceeds of this Offering.”

      We may enter into purchase and leaseback transactions, under which we will purchase a property from an entity and lease the property back to such entity under a net lease.

      We do not intend to purchase interests in hedge funds.

      We intend to acquire properties with cash and mortgage or other debt, including a $75 million secured revolving line of credit with Wachovia Bank, N.A. we are currently negotiating and anticipate entering into, but we may acquire properties free and clear of permanent mortgage indebtedness by paying the entire purchase price for such property in cash or in units of limited partnership interest in our operating partnership. On properties purchased on an all-cash basis, we may later incur mortgage

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indebtedness by obtaining loans secured by selected properties, if favorable financing terms are available. The proceeds from such loans would be used to acquire additional properties and increase our cash flow.

      We do not intend to incur aggregate indebtedness in excess of 70% of the aggregate fair market value of all our properties, as determined at the end of each calendar year beginning with our first full year of operations. Fair market value will be determined each year by an internal or independent certified appraiser and in a similar manner as the fair market determination at the time of purchase.

      Our advisor and its affiliates may purchase properties in their own name, assume loans in connection with the purchase of properties and temporarily hold title to such properties for the purpose of facilitating the acquisition of such property, borrowing money or obtaining financing, completing construction of the property or for any other purpose related to our business. We may also acquire properties from our advisor, affiliates of our advisor, and entities advised or managed by our advisor or its affiliates. Such acquisitions must be approved by a majority of our directors, including a majority of our independent directors, and supported by an independent appraisal prepared by an appraiser who is a member in good standing of the American Institute of Real Estate Appraisers or similar national organization selected by the independent directors.

      Although we anticipate that our focus will be on apartment communities, our charter and bylaws do not preclude us from acquiring other types of properties. We may acquire other real estate assets, including, but not limited to, income producing commercial properties, such as retail shopping centers and office buildings. The purchase of any apartment community or other property type will be based upon the best interests of our stockholders as determined by our board of directors. Regardless of the mix of properties we may own, our primary business objectives are to maximize stockholder value by acquiring apartment communities that have strong and stable cash flow and growth potential and to preserve capital.

Our Acquisition Standards

      We generally intend to invest in metropolitan areas that are projected to have population growth rates in excess of the national average and that we believe will continue to perform well over time. While our acquisitions will not be limited to any state or geographic region, we will consider capitalizing on income opportunities that may result from shifts of population and assets. Areas and states we will especially focus on include, but are not limited to, Florida, Texas, Nevada, and other metropolitan areas in the mid-Atlantic, southeast and southwest regions of the United States that seem likely to benefit from the ongoing population shift and/or are poised for strong economic growth.

      Our primary investment focus will be existing Class A apartment communities that produce immediate income. However, we may acquire newly developed communities with some lease-up risk if we believe the investment will result in long-term benefits for our stockholders. We will generally purchase newer properties, less than five years old, with reduced capital expenditure requirements and high occupancy. However, we may purchase older properties, including properties that need capital improvements or lease-up to maximize their value and enhance stockholder returns. These properties may have short-term decreases in income during the lease-up or renovation phase, but will only be acquired when management believes in the long-term growth potential of the investment after completing necessary lease-up or renovations. We do not anticipate a significant focus on such properties.

      We generally intend to employ property management companies with expertise in our property markets who can help maximize property performance and the internal growth of our portfolio as discussed above.

      We will generally seek to acquire well located and well constructed properties where the average income of the tenants generally exceeds the average income for the metropolitan area in which the community is located. All of our anticipated apartment communities will lease to their tenants under similar lease terms, which range from month-to-month to 12 month leases. We believe that the relatively short lease terms that are customary in most markets may allow us to aggressively raise rental rates in appropriate circumstances.

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      We may also consider purchasing apartment communities that include land or development opportunities as part of the purchase package. Such acquisitions will be no more than 10% of the aggregate portfolio value, and our company’s intent is to transfer development risk to the developer. Acquisitions of this type, while permitted, are not anticipated and do not represent a primary objective of our acquisition strategy. In fact, such acquisitions would require special consideration by the board of directors because of their increased risk and their potential to represent purchasing conflicts for and between other of our affiliate entities for whom these purchases would be more appropriate given their portfolio allowances for the assumption of more risk.

      While real estate investing involves considerable risk, the owners and officers of our advisor possess considerable experience in the apartment housing sector, which we believe will help enable us to identify appropriate properties to meet our objectives and goals. Overall, we intend to focus on providing our stockholders with stable cash flow and income, a stable asset base, and a strategy for growth consistent with preservation of capital.

      We believe that our strategy for apartment community acquisitions will benefit our company and our stockholders for the following reasons:

•  We intend to preserve capital through selective acquisitions and professional management, whereby we intend to increase rental rates, maintain high economic occupancy rates, reduce tenant turnover, make value- enhancing and income producing capital improvements, where appropriate, and control operating costs and capital expenditures.

•  We will seek to acquire premier apartment properties in growth markets, at attractive prices relative to replacement cost, that provide the opportunity to improve operating performance through professional management, marketing and selective leasing and renovation programs.

•  We intend to purchase apartment communities at favorable prices and obtain immediate income from tenant rents, with the potential for appreciation in value over time.

      We believe, based on our advisor’s prior real estate experience, that we have the ability to identify quality properties capable of meeting our investment objectives. In evaluating potential acquisitions, the primary factor we will consider is the property’s current and projected cash flow. We will also consider a number of other factors, including a property’s:

•  geographic location and type;

•  construction quality and condition;

•  potential for capital appreciation;

•  the general credit quality of current and potential tenants;

•  the potential for rent increases;

•  the interest rate environment;

•  potential for economic growth in the tax and regulatory environment of the community in which the property is located;

•  potential for expanding the physical layout of the property;

•  occupancy and demand by tenants for properties of a similar type in the same geographic vicinity;

•  prospects for liquidity through sale, financing or refinancing of the property;

•  competition from existing properties and the potential for the construction of new properties in the area; and

•  treatment under applicable federal, state and local tax and other laws and regulations.

      Our advisor will have substantial discretion with respect to the selection of specific properties.

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      We will not close the purchase of any property unless and until we obtain an environmental assessment, a minimum of Phase I review, for each property purchased and are generally satisfied with the environmental status of the property, as determined by our advisor.

      We may also enter into arrangements with the seller or developer of a property whereby the seller or developer agrees that if, during a stated period, the property does not generate a specified cash flow, the seller or developer will pay in cash to our company a sum necessary to reach the specified cash flow level, subject in some cases to negotiated dollar limitations.

      In determining whether to purchase a particular property, we may, in accordance with customary practices, obtain an option on such property. The amount paid for an option, if any, is normally surrendered if the property is not purchased, and is normally credited against the purchase price if the property is purchased.

      In purchasing properties, we will be subject to risks generally incident to the ownership of real estate, including:

•  changes in general economic or local conditions;

•  changes in supply of or demand for similar competing properties in an area;

•  changes in interest rates and availability of permanent mortgage funds which may render the sale of a property difficult or unattractive;

•  changes in tax, real estate, environmental and zoning laws;

•  periods of high interest rates and tight money supply which may make the sale of properties more difficult;

•  tenant turnover; and

•  general overbuilding or excess supply in the market area.

      We anticipate that the purchase price of properties we acquire will vary widely depending on a number of factors, including size and location. In addition, the cost to our company will vary based on the amount of debt we incur in connection with financing the acquisition. If only the minimum offering amount is sold, we will not be able to purchase a diverse portfolio of properties and may only be able to purchase one property. If the maximum offering amount is sold, we will likely acquire a substantial number of properties; however, it is difficult to predict with precision the actual number of properties that we will actually acquire because the purchase prices of properties varies widely and our investment in each will vary based on the amount of leverage we use.

Property Acquisition

      We intend to primarily acquire real property through wholly-owned subsidiaries of our operating partnership. In addition to fee simple interests, we may acquire properties subject to long-term ground leases. Other methods of acquiring a property may be used when advantageous. For example, we may acquire properties through a joint venture or the acquisition of substantially all of the interests of an entity that in turn owns a real property.

      We are currently negotiating and anticipate entering into a $75 million secured revolving line of credit with Wachovia Bank, N.A., which we plan to use extensively to facilitate and expedite our acquisition opportunities for apartment communities, with the intention of placing permanent financing on the acquired property at a later date. We believe our line of credit will allow us to secure acquisition contracts faster after we identify a strategic property, and will be an attractive, compelling feature of our bids, especially to sellers seeking to complete a sale quickly.

      We may commit to purchase properties subject to completion of construction in accordance with terms and conditions specified by our advisor. In such cases, we will be obligated to purchase the property at the completion of construction, provided that (1) the construction conforms to definitive plans,

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specifications and costs approved by us in advance and embodied in the construction contract and (2) an agreed upon percentage of the property is leased. We will receive a certificate of an architect, engineer or other appropriate party, stating that the property complies with all plans and specifications. Our advisor or an affiliate may receive a fee from us for rendering services as a construction manager in connection with such development or construction. Our company’s intent is to transfer development risk to the developer. Acquisitions of this type, while permitted, are not anticipated and do not represent a primary objective of our acquisition strategy. In fact, such acquisitions would require special consideration by the board of directors because of their increased risk and their potential to represent purchasing conflicts for and between other of our affiliate entities for whom these purchases would be more appropriate given their portfolio allowances for the assumption of more risk.

      If remodeling is required prior to the purchase of a property, we will pay a negotiated maximum amount either upon completion or in installments commencing prior to completion. Such amount will be based on the estimated cost of such remodeling. In such instances, we will also have the right to review the lessee’s books during and following completion of the remodeling to verify actual costs. In the event of substantial disparity between estimated and actual costs, an adjustment in purchase price may be negotiated. If remodeling is required after the purchase of a property, our advisor or an affiliate may serve as construction manager for a fee as set forth in our advisory agreement.

      We are not specifically limited in the number or size of properties we may acquire or on the percentage of net proceeds of this offering which we may invest in a single property. The number and mix of properties we acquire will depend upon real estate and market conditions and other circumstances existing at the time we are acquiring our properties and the amount of proceeds we raise in this offering.

Joint Ventures

      We may invest in general partnership and joint venture arrangements with other real estate programs formed by, sponsored by or affiliated with our advisor or an affiliate of our advisor if a majority of our independent directors who are not otherwise interested in the transaction approve the transaction as being fair and reasonable to our company and our stockholders and on substantially the same terms and conditions as those received by the other joint venturers. We may also invest with nonaffiliated third parties by following the general procedures to obtain approval of an acquisition.

      We will invest in general partnerships or joint venture arrangements with our advisor and its affiliates only when:

•  there are no duplicate property management or other fees;

•  the investment of each entity is on substantially the same terms and conditions; and

•  we have a right of first refusal if our advisor or its affiliates wish to sell its interest in the property held in such arrangement.

      We may invest in general partnerships or joint venture arrangements with our advisor and its affiliates to allow us to increase our equity participation in such venture as additional proceeds of this offering are received, with the result that we will end up owning a larger equity percentage of the property. In addition, we will have the right to enter into joint venture arrangements with entities unaffiliated with our advisor and its affiliates.

      You should note that there is a potential risk that our company or its joint venture partner will be unable to agree on a matter material to the joint venture on joint venture decisions and we may not control the decision. Furthermore, we cannot assure you that we will have sufficient financial resources to exercise any right of first refusal.

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Description of Our Leases

      Consistent with the multi-family industry, we anticipate that our lease terms will be for one year or less. These terms provide maximum flexibility for the owner to implement rental increases when the market will bear such increases.

Our Operating Partnership

      We will conduct our business and own properties through our operating partnership, NNN Apartment REIT Holdings, L.P., and its wholly-owned subsidiaries. Our operating partnership will be governed by its Agreement of Limited Partnership, a copy of which may be obtained from us. As the sole general partner of our operating partnership, we will have control over the affairs of our operating partnership. We will delegate to our advisor the management of the day-to-day affairs of our operating partnership. Our advisor has no voting rights by virtue of its status as a special limited partner. Our operating partnership may issue additional units of limited partnership interest in the future in exchange for properties. The holders of these units have the right to redeem their units for cash or shares of common stock on terms set forth in the Agreement of Limited Partnership. Under specified circumstances, holders of these units may exercise their redemption rights by delivering a written notice of redemption to both the operating partnership and our company, as general partner of the operating partnership. Upon receipt of the redemption notice, our company may elect to purchase those units of limited partnership interest for either cash or shares in amounts determined in accordance with certain definitions and formulae set forth in the Agreement of Limited Partnership. If we decline to purchase those units, then the operating partnership must purchase the units of limited partnership, subject to certain limitations designed to protect our status as a REIT. Our operating partnership will use the net proceeds of this offering to purchase suitable properties and may use a portion of the net proceeds to repay debt secured by properties acquired by or contributed to our operating partnership.

Our Policies With Respect to Borrowing

      When we think it is appropriate, we will borrow funds to acquire or finance properties. We may later refinance or increase mortgage indebtedness by obtaining additional loans secured by selected properties, if favorable financing terms are available. We will use the proceeds from such loans to acquire additional properties for the purpose of increasing our cash flow and providing further diversification. We anticipate that aggregate borrowings, both secured and unsecured, will not exceed 70% of all of our properties’ combined fair market values, as determined at the end of each calendar year beginning with our first full year of operation. In addition, we anticipate that no property will be encumbered by secured indebtedness or financed by unsecured indebtedness in excess of 80% of its fair market value. Our board of directors will review our aggregate borrowings at least quarterly to ensure that such borrowings are reasonable in relation to our net assets. The maximum amount of such borrowings in relation to our net assets will not exceed 300%. We may also incur indebtedness to finance improvements to properties and, if necessary, for working capital needs or to meet the distribution requirements applicable to REITs under the federal income tax laws.

      When incurring secured debt, we generally intend to incur only nonrecourse indebtedness, which means that the lenders’ rights upon our default generally will be limited to foreclosure on the property that secured the obligation. If we incur mortgage indebtedness, we will endeavor to obtain level payment financing, meaning that the amount of debt service payable would be substantially the same each year, although some mortgages are likely to provide for one large payment and we may incur floating or adjustable rate financing when our board of directors determines it to be in our best interest.

      Our board of directors controls our policies with respect to borrowing and may change such policies at any time without stockholder approval.

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Sale or Disposition of Properties

      Our advisor and our board of directors will determine whether a particular property should be sold or otherwise disposed of after consideration of the relevant factors, including performance or projected performance of the property and market conditions, with a view toward achieving our principal investment objectives.

      In general, we intend to hold properties, prior to sale, for a minimum of four years. When appropriate to minimize our tax liabilities, we may structure the sale of a property as a “like-kind exchange” under the federal income tax laws so that we may acquire qualifying like-kind replacement property meeting our investment objectives without recognizing taxable gain on the sale. Furthermore, our general policy will be to reinvest in additional properties proceeds from the sale, financing, refinancing or other disposition of our properties that represent our initial investment in such property or, secondarily, to use such proceeds for the maintenance or repair of existing properties or to increase our reserves for such purposes. The objective of reinvesting such portion of the sale, financing and refinancing proceeds is to increase the total value of real estate assets that we own, and the cash flow derived from such assets to pay distributions to our stockholders.

      Despite this policy, our board of directors, in its discretion, may distribute to our stockholders all or a portion of the proceeds from the sale, financing, refinancing or other disposition of properties. In determining whether any of such proceeds should be distributed to our stockholders, our board of directors will consider, among other factors, the desirability of properties available for purchase, real estate market conditions and compliance with the REIT distribution requirements. Because we may reinvest such portion of the proceeds from the sale, financing or refinancing of our properties, we could hold our stockholders’ capital indefinitely. However, the affirmative vote of stockholders controlling a majority of our outstanding shares of common stock may force us to liquidate our assets and dissolve.

      In connection with a sale of a property, our general preference will be to obtain an all-cash sale price. However, we may take a purchase money obligation secured by a mortgage on the property as partial payment. There are no limitations or restrictions on our taking such purchase money obligations. The terms of payment upon sale will be affected by custom in the area in which the property being sold is located and the then prevailing economic conditions. To the extent we receive notes, securities or other property instead of cash from sales, such proceeds, other than any interest payable on such proceeds, will not be included in net sale proceeds available for distribution until and to the extent the notes or other property are actually paid, sold, refinanced or otherwise disposed of. Thus, the distribution of the proceeds of a sale to you as a stockholder, to the extent contemplated by our board of directors, may be delayed until such time. In such cases, we will receive payments in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years.

      We are not a mortgage bank or portfolio lender. We do not intend to engage in the business of originating, warehousing or servicing mortgages. If we engage in any such activities, it will be only as an ancillary result of our main business of investing in real estate properties. We may provide seller financing on certain properties if, in our judgment, it is prudent to do so. However, our main business is not investing in mortgages or mortgage-backed securities. If we do invest directly in mortgages, they will be mortgages secured by apartment communities or other commercial properties.

      While it is our intention to hold each property we acquire for a minimum of four years, circumstances might arise which could result in the early sale of some properties. A property may be sold before the end of the expected holding period if:

•  in the judgment of our advisor, the value of a property might decline substantially;

•  an opportunity has arisen to improve other properties;

•  we can increase cash flow through the disposition of the property; or

•  in our judgment, the sale of the property is in our best interests.

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      The determination of whether a particular property should be sold or otherwise disposed of will be made after consideration of the relevant factors, including prevailing economic conditions, with a view to achieving maximum capital appreciation. We cannot assure you that this objective will be realized. The selling price of a property will be determined in large part by the amount of rent payable under the lease. If a tenant has a repurchase option at a formula price or if operating expenses increase without a commensurate increase in rent under our gross leases, we may be limited in realizing any appreciation. In connection with our sales of properties, we may lend the purchaser all or a portion of the purchase price. In these instances, our taxable income may exceed the cash received in the sale. The terms of payment will be affected by custom in the area in which the property being sold is located and the then-prevailing economic conditions.

Our Long Term Investment Objectives

      Our long term investment objective is to provide stockholders with stable cash flow throughout the term of the investment, preservation of capital and growth of income and principal without taking undue risk. Our goal is to purchase interests in real estate that will provide immediate income to our stockholders from tenant rents but that will also appreciate in value such that we can sell them after several years at a profit.

      We anticipate that by 2013, our board of directors will determine when, and if, to apply to have our shares of common stock listed for trading on a national securities exchange or included for quotation on a national market system, if we meet the then applicable listing requirements. We believe that an exchange listing or inclusion of our shares in a national market system may allow us to increase our size, portfolio diversity, stockholder liquidity, access to capital and stability, and to decrease our operating costs. In this regard, our board of directors may consider an exchange listing or inclusion of our shares in a national market system in the future. However, we cannot assure that such listing or inclusion will ever occur. If it is not feasible or desirable to list our shares or include them on a national market system by 2013, our board of directors may decide to sell our assets individually, list our shares at a future date, or liquidate us within four years of such date.

Changes in Our Investment Objectives

      Subject to the limitations in our charter, our bylaws and the Maryland General Corporation Law, or MGCL, the powers of our company will be exercised by or under the authority of, and the business and affairs of our company will be controlled by, the board of directors. The board of directors also has the right and power to establish policies concerning investments and the right, power and obligation to monitor our procedures, investment operations and performance of our company.

      In general, the charter can be amended only if the proposed amendment is declared advisable by the board of directors and approved by the affirmative vote of a majority of the outstanding shares of our common stock, but the board of directors has the exclusive power to amend, alter or repeal the bylaws and to make new bylaws.

      Within the express restrictions and prohibitions of the bylaws, the charter and applicable law, the board of directors has significant discretion to modify our investment objectives and policies, as stated in this prospectus. We have no present intention to modify any of our investment objectives and policies, and it is anticipated that any modification would occur only if business and economic factors affecting us made our stated investment objectives and policies unworkable or imprudent. By way of

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illustration only, the board of directors could elect to acquire hotels or to acquire one or more commercial properties in addition to apartment communities.

      Thus, while this prospectus accurately and fully discloses our current investment objectives and policies, prospective stockholders must be aware that the board of directors, acting consistently with our organizational documents, applicable law and their fiduciary obligations, may elect to modify or expand our objectives and policies from time to time. Any action by the board of directors would be based upon the best interests of our stockholders.

Investment Limitations

      We do not intend to:

•  invest more than 10% of our total assets in unimproved real property or real estate investments not contemplated herein;

•  invest in commodities or commodity future contracts, except for interest rate futures contracts used solely for purposes of hedging against changes in interest rates; or

•  operate in such a manner as to be classified as an “investment company” for purposes of the Investment Company Act.

      As used above, “unimproved real property” means any investment with the following characteristics:

•  an equity interest in real property which was not acquired for the purpose of producing rental or other operating income;

•  has no development or construction in process on such land; and

•  no development or construction on such land is planned to commence within one year.

      In addition, we have adopted the following investment policies:

•  We will not issue redeemable equity securities.

•  We will not issue our shares on a deferred payment basis or other similar arrangement.

•  We will not issue debt securities unless the historical debt service coverage in the most recently completed fiscal year as adjusted for known charges is sufficient to properly service that higher level of debt.

•  We will not engage in trading, as opposed to investment, activities.

•  We will not engage in underwriting or the agency distribution of securities issued by others.

Making Loans and Investments in Mortgages

      We will not make loans to other entities or persons unless secured by mortgages, and we will not make any mortgage loans to our advisor or any of its affiliates. We will not make or invest in mortgage loans unless we obtain an appraisal concerning the underlying property from a certified independent appraiser. We will maintain such appraisal in our records for at least five years, and will make it available during normal business hours for inspection and duplication by any stockholder at such stockholder’s expense. In addition to the appraisal, we will seek to obtain a customary lender’s title insurance policy or commitment as to the priority of the mortgage or condition of the title.

      We will not make or invest in mortgage loans on any one property if the aggregate amount of all mortgage loans outstanding on the property, including the loans of our company, would exceed an amount equal to 85% of the appraised value of the property as determined by an appraisal from a certified independent appraiser, unless we find substantial justification due to the presence of other underwriting

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criteria. In no event will we invest in mortgage loans that exceed the appraised value of the property as of the date of the loans. All of our mortgage loans must provide for at least one of the following:

•  except for differences attributable to adjustable rate loans, equal periodic payments on a schedule that would be sufficient to fully amortize the loan over a 20 to 40 year period;

•  payments of interest only for a period of not greater than ten years with the remaining balance payable in equal periodic payments on a schedule that would fully amortize the loan over a 20 to 30 year period; or

•  payment of a portion of the stated interest currently and deferral of the remaining interest for a period not greater than five years, with the remaining principal and interest payable in equal periodic payments on a schedule that would fully amortize the loan over a 20 to 35 year period.

      We will not invest in real estate contracts of sale otherwise known as land sale contracts.

      We will not make or invest in any mortgage loans that are subordinate to any mortgage or equity interest of our advisor, any director, officer or any of their affiliates.

      We will not invest in subordinated secured indebtedness except where the amount of total indebtedness secured by that property does not exceed 85% of the appraised value of such property. In addition, the value of all such investments, as shown on our books in accordance with generally accepted accounting principles, after all reasonable reserves but before provision for depreciation, will not exceed 5% of our total assets.

Investment in Securities

      We will not invest in equity securities of another entity, other than our operating partnership or a wholly-owned subsidiary, unless a majority of the directors, including a majority of the independent directors not otherwise interested in such transaction, approves the investment as being fair, competitive and commercially reasonable. Investments in entities affiliated with our advisor, any officer, director or affiliates must be approved by a majority of the independent directors. We may purchase our own securities when traded on a secondary market or on a national securities exchange or national market system, if a majority of the directors determine such purchase to be in our best interests. We may in the future acquire some, all or substantially all of the securities or assets of other REITs or similar entities where that investment would be consistent with our investment policies and the REIT qualification requirements. There are no limitations on the amount or percentage of our total assets that may be invested in any one issuer, other than those imposed by the gross income and asset tests that we must satisfy to qualify as a REIT. However, we do not anticipate investing in the securities of other entities for the purpose of exercising control over that entity. In any event, we do not intend that our investments in securities will require us to register as an “investment company” under the Investment Company Act, and we intend to divest securities before any registration would be required.

      We do not intend to engage in trading, underwriting, agency distribution or sales of securities of other issuers.

Appraisals

      The purchase price for each property that we acquire must be approved by a majority of our independent directors and be based on the fair market value of the property. In cases in which a majority of the independent directors require, and in all cases in which we acquire property from our officers, directors, advisor or any affiliate of our officers, directors or advisor, we will obtain an appraisal from an independent appraiser who is a member-in-good-standing of the American Institute of Real Estate Appraisers or similar national or regional organization and who will be selected by the independent directors.

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Reserves

      A portion of the proceeds of this offering will be reserved to meet working capital needs and contingencies associated with our operations. We believe this reserve allocation will aid our objective of preserving capital for our investors by supporting the maintenance and viability of properties we acquire in the future. We will initially allocate to our working capital reserve not less than 0.5% of the proceeds of the offering. As long as we own any apartment communities, we will retain as working capital reserves an amount equal to at least 0.5% of the proceeds of the offering, subject to review and re-evaluation by the board of directors. If reserves and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our investment in one or more properties.

Other Policies

      In determining whether to purchase a particular property, we may first obtain an option to purchase such property. We may forfeit the amount paid for the option, if any, if the property is not purchased.

      Assuming the maximum offering is sold, we generally do not intend to invest more than 20% of the gross proceeds of this offering in any one property, although we may do so with the approval of a majority of our board of directors.

      We will hold all funds, other than funds raised in the offering that are held in the escrow account at CommerceWest Bank, pending investment in properties, in readily marketable, interest-bearing securities which will allow us to continue to qualify as a REIT. Such investments will be highly liquid and provide for appropriate safety of principal and may include, but will not be limited to, investments such as bank money market accounts, short-term CDs issued by a bank or other short-term securities issued or guaranteed by the U.S. government.

      We do not intend to make distributions-in-kind, except for:

•  distributions of beneficial interests in a liquidating trust established for the dissolution of our company and the liquidation of our assets in accordance with the terms of the MGCL; or

•  distributions of property which meet all of the following conditions:

•  our board of directors advises each stockholder of the risks associated with direct ownership of the property;

•  our board of directors offers each stockholder the election of receiving in-kind property distributions; and

•  our board of directors distributes in-kind property only to those stockholders who accept the directors’ offer.

Distribution Policy

      We cannot assure you that we will make distributions. In order to qualify as a REIT for federal income tax purposes, among other things, we must distribute each taxable year at least 90% of our taxable income, other than net capital gain. We do not intend to maintain cash reserves to fund distributions to stockholders.

      We will have a policy of avoiding, to the extent possible, the fluctuations in distributions that might result if distribution payments were based on actual cash received during the distribution period. To implement this policy, we may use cash received during prior periods or cash received subsequent to the distribution period and prior to the payment date for such distribution payment, to pay annualized distributions consistent with the distribution level established from time to time by our board of directors. Our ability to maintain this policy will depend upon the availability of cash flow and applicable requirements for qualification as a REIT under the federal income tax laws. Therefore, we cannot assure you that there will be cash flow available to pay distributions or that distributions will not fluctuate. If

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cash available for distribution is insufficient to pay distributions to you as a stockholder, we may obtain the necessary funds by borrowing, issuing new securities or selling assets. These methods of obtaining funds could affect future distributions by increasing operating costs.

      To the extent that distributions to our stockholders are made out of our current or accumulated earnings and profits, such distributions will be taxable as ordinary dividend income. To the extent that our distributions exceed our current and accumulated earnings and profits, such amounts will constitute a return of capital to our stockholders for federal income tax purposes, to the extent of their basis in their stock, and thereafter will constitute capital gain.

      Monthly distributions will be calculated with daily record and distribution declaration dates. However, our board of directors could, at any time, elect to pay distributions quarterly to reduce administrative costs. It will be our general policy, subject to applicable REIT rules, to reinvest proceeds from the sale, financing, refinancing or other disposition of our properties through the purchase of additional properties, although we cannot assure you that we will be able to do so.

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MANAGEMENT OF OUR COMPANY

General

      We operate under the direction of our board of directors, which is responsible for the overall management of our business and affairs. However, our board of directors has retained our advisor to manage our day-to-day affairs, subject to our board of directors’ supervision.

      Under the MGCL, each director is required to discharge his duties in good faith, in a manner reasonably believed to be in our best interests and with the care of an ordinarily prudent person in a like position under similar circumstances. As of the commencement of this offering, our board of directors will be comprised of six individuals, four of whom will be independent directors. We consider a director to be independent if in the last two years he or she is not associated, directly or indirectly, with our company or our advisor.

      The independent directors will determine, from time to time but at least annually, that the total fees and expenses of our company are reasonable in light of our investment performance, our net assets, our net income and the fees and expenses of other comparable unaffiliated REITs. This determination will be reflected in the minutes of the meetings of our board of directors. For purposes of this determination, net assets are our company’s total assets, other than intangibles, calculated at cost before deducting depreciation, bad debt or other non-cash reserves, less total liabilities and computed at least quarterly on a consistently-applied basis.

      In addition, the independent directors will determine from time to time, but at least annually, that the compensation that we contract to pay to our advisor is reasonable in relation to the nature and quality of the services performed and that such compensation is within the limits prescribed by any applicable state regulatory authorities. The independent directors will also supervise the performance of our advisor and the compensation paid to it to determine that the provisions of the advisory agreement are being carried out. The independent directors will base each determination on the factors set forth below and other factors that they deem relevant. This determination also will be reflected in the minutes of the meetings of the board of directors. Such factors include:

•  the size of the advisory fee in relation to the size, composition and profitability of our portfolio of properties;

•  the success of our advisor in generating opportunities that meet our investment objectives;

•  the fees charged to similar REITs and to investors other than REITs by advisors performing similar services;

•  additional revenues realized by our advisor and any affiliate through their relationship with us, including real estate commissions, servicing and other fees, whether paid by us or by others with whom we do business;

•  the quality and extent of the service and advice furnished by our advisor;

•  the performance of our portfolio of properties, including income, conservation or appreciation of capital, frequency of problem investments and competence in dealing with distress situations; and

•  the quality of our portfolio of properties in relationship to the investments generated by our advisor for its own account or for the account of other entities it advises.

The Directors and Executive Officers

      Our board of directors currently consists of six members, a majority of whom are independent. All of the directors will serve one-year terms or until their successors are elected and qualify, whichever occurs first.

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      The following table and biographical descriptions set forth certain information with respect to the individuals who are our officers and directors:

Name	Age		Position
Louis J. Rogers		48	President and Chairman of the Board of Directors
Stanley J. (“Jay”) Olander, Jr.		50	Chief Executive Officer and Director
David L. Carneal		41	Executive Vice President and Chief Operating Officer
Gus G. Remppies		45	Executive Vice President and Chief Investment Officer
Scott D. Peters		47	Executive Vice President and Chief Financial Officer
Andrea R. Biller		55	Secretary
Kevin E. Greene		48	Executive Vice President and Director of Marketing and Distribution
Glenn W. Bunting, Jr.		60	Independent Director
Robert A. Gary, IV		52	Independent Director
W. Brand Inlow		52	Independent Director
D. Fleet Wallace		38	Independent Director

Officers and Directors

      Louis J. Rogers has been the president and chairman of the board of our company since its formation. He has also served as president of our advisor since its formation and as president and a member of the board of managers of Triple Net Properties since September 2004. Mr. Rogers is also an owner of Triple Net Properties, the manager of our advisor; an owner and director of NNN Capital Corp., our dealer manager; and an owner and director of Triple Net Properties Realty, Inc., an affiliated real estate brokerage and management company that may provide certain real estate brokerage and management services to us. He is a founding member and director of the Tenants in Common Association. Mr. Rogers has been with the law firm of Hirschler Fleischer since 1988, was a shareholder from 1994 to December 31, 2004, and, since January 2005, has served as senior counsel. Mr. Rogers’ law practice focused on formation and operation of real estate investments, including REITs, and acquisition financings for real estate transactions, structuring like-kind (Section 1031) exchanges, private placements and syndications. Mr. Rogers earned a BS from Northeastern University (with highest honors), a BA (with honors) and an MA in Jurisprudence from Oxford University and a JD from the University of Virginia School of Law. Mr. Rogers is a member of the Virginia State Bar and is a registered securities principal and broker with the NASD.

      Stanley J. (“Jay”) Olander, Jr. has been the chief executive officer and a director of our company and the chief executive officer of our advisor since their formation. Mr. Olander has also been a managing member of ROC Realty Advisors since 2005. He served as president and chief financial officer and a member of the board of directors of Cornerstone Realty Income Trust, Inc. from 1996 until April 2005. Prior to the sale of Cornerstone in April 2005, the company’s shares were listed on the New York Stock Exchange, and it owned approximately 24,000 apartment units in five states and had a total market capitalization of approximately $1.5 billion. Mr. Olander has been responsible for the acquisition and financing of approximately 40,000 apartment units. He holds a bachelor’s degree in Business Administration from Radford University and a master’s degree in Real Estate and Urban Land Development from Virginia Commonwealth University.

      David L. Carneal has been the executive vice president and chief operating officer of our company and our advisor since their formation. Mr. Carneal has also been a managing member of ROC Realty Advisors since 2005. From 1998 to 2003, Mr. Carneal served as senior vice president of operations of

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Cornerstone Realty Income Trust, Inc., and from 2003 to 2005, served as executive vice president and chief operating officer. Mr. Carneal was responsible for overseeing the property management operations of approximately 24,000 apartment units. Prior to joining Cornerstone, Mr. Carneal held management and development positions with several other multifamily property management companies including Trammell Crow Residential. Mr. Carneal holds a bachelor’s degree from the University of Virginia.

      Gus G. Remppies has been the executive vice president and chief investment officer of our company and our advisor since their formation. Mr. Remppies has also been a managing member of ROC Realty Advisors since 2005. From 1995 to 2003, Mr. Remppies served as senior vice president of acquisition of Cornerstone Realty Income Trust, Inc., and from 2003 to 2005, served as executive vice president and chief investment officer. As such, he was responsible for all acquisitions, dispositions, financing and development for Cornerstone. During this tenure, Mr. Remppies oversaw the acquisition and development of approximately 30,000 apartment units. In addition, he oversaw the placement of over $500 million in debt, both secured and unsecured, with a variety of lenders. He is a graduate of the University of Richmond, where he received his degree in Business Administration.

      Scott D. Peters has been the executive vice president and chief financial officer of our company since its formation. Mr. Peters has also served as the executive vice president and chief financial officer of Triple Net Properties since September 2004 and of our advisor since its formation. He is also a member of the board of managers of Triple Net Properties. Mr. Peters is responsible for all areas of finance, including accounting and financial reporting, as well as a liaison for institutional investors, lenders and investment banks. Mr. Peters has also served as the president and chief executive officer of G REIT, Inc. since December 2005, having served as that company’s executive vice president and chief financial officer since September 2004. Mr. Peters has also served as executive vice president and chief financial officer of T REIT, Inc. since September 2004. Mr. Peters has also served as senior vice president/chief financial officer and director of Golf Trust America, Inc., a publicly traded real estate investment trust, since July 1996. Mr. Peters received a BBA in Accounting and Finance from Kent State University.

      Andrea R. Biller has been the secretary of our company since its formation. She has also been the general counsel of Triple Net Properties since March 2003, overseeing all legal functions for Triple Net Properties and coordinating with outside counsel, and the general counsel of our advisor since its formation. Ms. Biller has also served as the secretary and executive vice president of G REIT, Inc. since June 2004 and December 2005, respectively. She served as special counsel at the Securities and Exchange Commission from 1995 to 2000 and a private attorney specializing in securities and corporate law from 2000 to 2002. Ms. Biller earned a BA in Psychology from Washington University, an MA in Psychology from Glassboro State University and a JD from George Mason University School of Law in 1990, where she was first in her graduating class. Ms. Biller is licensed to practice law in California, Virginia and the District of Columbia.

      Kevin E. Greene has been the executive vice president and director of Marketing and Distribution of our company since its formation. He has also served as managing director — public programs of Triple Net Properties since June 2005, having previously served as senior vice president, director of national accounts for Triple Net Properties since 2004. From 2003 to 2004, he worked as an independent consultant in business planning for REITs; from 2002 to 2003, he was employed by Dividend Capital Trust, where he helped launch their marketing start-up to the retail broker dealer community; from 2001 to 2002, he worked as an independent consultant for separate accounts management and marketing; and from 1997 to 2001, he was employed as a regional vice president with Black Rock Funds. Mr. Greene holds a BA degree, cum laude from Boston College where he was enrolled in the Honors Program. He is a registered securities principal and broker with the NASD.

      Glenn W. Bunting, Jr. has been a director of our company since its formation. He has been president of American KB Properties, Inc., which develops and manages shopping centers, since 1985. He has been president of G. B. Realty Corporation, which brokers shopping centers and apartment communities, since 1980. Mr. Bunting is a current director of Apple Hospitality Two, Inc., Apple Hospitality Five, Inc., and Apple REIT Six, Inc., and a former director of Cornerstone Realty Income Trust, Inc., where he served

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on that company’s audit committee. Mr. Bunting holds a BS in Business Administration from Campbell University.

      Robert A. Gary, IV has been a director of our company since its formation. He is the chairperson and financial expert for our company’s audit committee. Mr. Gary co-founded Keiter, Stephens, Hurst, Gary and Shreaves, which is an independent certified public accounting firm based in Richmond, Virginia, in 1978, where he has worked since its formation. His accounting practice focuses on general business consulting, employee benefits and executive compensation, and estate planning and administration. Mr. Gary is a former director of Cornerstone Realty Income Trust, Inc., where he served as chairperson of the company’s audit committee. He holds a BS in Accounting from Wake Forest University and an MBA from the University of Virginia’s Darden School. He is a member of the American Institute of Certified Public Accountants and the Virginia Society of Certified Public Accountants.

      W. Brand Inlow has been a director of our company since its formation. He is a principal, co-founder, and serves as director of acquisitions for McCann Realty Partners, LLC, an apartment investment company focusing on garden apartment communities in the southeast formed in October 2004. Since November 2003, Mr. Inlow has provided professional consulting services to the multifamily industry on matters related to acquisitions, dispositions, asset management and property management operations, and through an affiliation with LAS Realty in Richmond, Virginia conducts commercial real estate brokerage. Mr. Inlow also is president of Jessie’s Wish, Inc., a Virginia non-profit corporation dedicated to awareness, education and financial assistance for patients and families dealing with eating disorders. Mr. Inlow served as president of Summit Realty Group, Inc. in Richmond, Virginia, from September 2001 through November 2003. Prior to joining Summit Realty, from December 1999 to August 2001, he was vice president of acquisitions for EEA Realty, LLC in Alexandria, Virginia, where he was responsible for acquisition, disposition, and financing of company assets, which were primarily garden apartment properties. Prior to joining EEA Realty, from December 1992 to November 1999, Mr. Inlow worked for United Dominion Realty Trust, Inc., a publicly traded REIT, as assistant vice president and senior acquisition analyst, where he was responsible for the acquisition of garden apartment communities. Mr. Inlow also serves as a director of G REIT, Inc. and T REIT, Inc., for which he has served as the chairperson of that company’s audit committee since 2003.

      D. Fleet Wallace has served a director of our company since its formation. He is a principal and co-founder of McCann Realty Partners, LLC, an apartment investment company focusing on garden apartment properties in the Southeast formed in October 2004. Mr. Wallace also serves as principal of Greystone Capital Management, LLC, formed in September 2001, and helps manage Greystone Fund, L.P. Greystone Fund, L.P. is a professionally managed opportunity fund invested primarily in promising venture capital opportunities and distressed assets in the form of real estate, notes and accounts receivable, inventory and other assets. From April 1998 to August 2001, Mr. Wallace served as corporate counsel and assistant secretary of United Dominion Realty Trust, Inc., a publicly-traded real estate investment trust. At United Dominion, he managed general corporate matters for over 150 affiliated entities, negotiated and executed numerous real estate acquisitions and dispositions, and provided legal support on over $1 billion in financing transactions. From September 1994 to April 1998, Mr. Wallace was in the private practice of law with the firm of McGuire Woods in Richmond, Virginia. Mr. Wallace also serves as a director of G REIT, Inc. and T REIT, Inc. Mr. Wallace received a BA in history and a JD from the University of Virginia.

Committees of Our Board of Directors

Acquisition Committee

      Each of our acquisitions must be approved by the acquisition committee or a majority of our board of directors, including a majority of the independent directors, as being fair and reasonable to our company and consistent with our investment objectives. Initially, the acquisition committee will be comprised of all members of our board of directors. Our advisor will recommend suitable properties for consideration by the acquisition committee. If the members of the acquisition committee approve a given acquisition, then our

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advisor will be directed to acquire the property on our behalf, if such acquisition can be completed on terms approved by the committee. Properties may be acquired from our advisor or its affiliates or our officers and directors, provided that a majority of our board of directors, including a majority of the independent directors, not otherwise interested in the transaction approve the transaction as being fair and reasonable to our company and at a price to our company no greater than the cost of the property to the affiliate, unless substantial justification exists for a price in excess of the cost to the affiliate and the excess is reasonable.

Audit Committee

      We will have an audit committee comprised of a minimum of three individuals, a majority of whom will be independent directors, including Mr. Gary, who we anticipate will be designated as the audit committee financial expert. The audit committee will:

•  make recommendations to our board of directors concerning the engagement of independent public accountants;

•  review the plans and results of the audit engagement with the independent public accountants;

•  approve professional services provided by, and the independence of, the independent public accountants;

•  consider the range of audit and non-audit fees; and

•  consult with the independent public accountants regarding the adequacy of our internal accounting controls.

Executive Compensation Committee

      We will have an executive compensation committee comprised of a minimum of three directors, including at least two independent directors, to establish compensation policies and programs for our directors and executive officers. At present, our executive compensation committee serves only to determine awards under our 2006 incentive award plan. However, at a later date, the executive compensation committee may exercise all powers of our board of directors in connection with establishing and implementing compensation matters. Stock-based compensation plans will be administered by the board of directors if the members of the executive compensation committee do not qualify as “non-employee directors” within the meaning of the Securities Exchange Act of 1934.

Director Compensation

      We intend to pay each of our non-officer directors an annual retainer of $15,000. In addition, we will pay non-officer directors for attending board and committee meetings as follows:

•  $1,000 per board meeting, in person or by telephone.

•  $500 per committee meeting, in person or by telephone, unless the committee meeting immediately follows a scheduled board meeting.

•  An additional $500 per committee meeting to a committee chair (other than the audit committee chair, who will receive an additional $2,000 per committee meeting) for each meeting attended in person or by telephone, unless the committee meeting immediately follows a scheduled board meeting.

•  1,000 shares of restricted stock at each annual meeting.

      Our non-officer directors also qualify for awards under the 2006 incentive award plan.

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Executive Officer Compensation

      We have no employees and our company’s executive officers are all employees of our advisor and/or its affiliates. Our executive officers and key employees of our advisor are compensated by our advisor and/or its affiliates and will not receive any compensation from us for their services. However, our officers and key employees of our advisor will be eligible for awards under our 2006 incentive award plan. As of the commencement of this offering, no awards have been granted to our executive officers or our advisor’s key employees under this plan.

Compensation Committee Interlocks and Insider Participation

      There are no Compensation Committee interlocks or insider participation as to compensation decisions.

2006 Incentive Award Plan

      The following is a summary of the principal features of the 2006 incentive award plan, or 2006 plan, as it is currently proposed. This summary highlights information from the 2006 plan. Because it is a summary, it may not contain all the information that is important to you. To fully understand the 2006 plan, you should carefully read the entire 2006 plan, which is included as an exhibit to the registration statement, of which this prospectus is a part.

Securities Subject to the 2006 Plan

      The shares of stock subject to the 2006 plan will be our common stock. Under the terms of the 2006 plan, the aggregate number of shares of our common stock subject to options, restricted stock awards, stock purchase rights, stock appreciation rights, or SARs, and other awards will be no more than 2,000,000 shares, subject to adjustment under specified circumstances.

Awards Under the 2006 Plan

      The board of directors, or a committee of the board, will be the administrator of the 2006 plan. The 2006 plan provides that the administrator may grant or issue stock options, SARs, restricted stock, deferred stock, dividend equivalents, performance awards and stock payments, or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.

      Our officers, employees, consultants and non-officer directors are eligible to receive awards under the 2006 plan. The administrator determines which of our officers, employees, consultants and non-officer directors will be granted awards.

      Nonqualified stock options, or NQSOs, will provide for the right to purchase our common stock at a specified price which, except with respect to NQSOs intended to qualify as performance-based compensation under Section 162(m) of the Code, may not be less than fair market value on the date of grant, and usually will become exercisable, in the discretion of the administrator, in one or more installments after the grant date. The exercisability of the installments of a NQSO may be subject to the satisfaction of individual or company performance criteria established by the administrator. NQSOs may be granted for any term specified by the administrator.

      Incentive stock options, or ISOs, will be designed to comply with the provisions of Section 422 of the Code and will be subject to certain restrictions contained in the Code. Among such restrictions, ISOs generally must have an exercise price of not less than the fair market value of a share of our common stock on the date of grant, may only be granted to officers and employees and must expire within ten years from the date of grant. In the case of an ISO granted to an individual who owns, or is deemed to own, at least 10% of the total combined voting power of all of our classes of stock, the 2006 plan provides that the exercise price must be at least 110% of the fair market value of a share of our common stock on the date of grant and the ISO must expire within five years from the date of grant.

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      Restricted stock may be sold to participants at various prices or granted with no purchase price, and may be made subject to such restrictions as may be determined by the administrator. Restricted stock, typically, may be repurchased by us at the original purchase price if the vesting conditions are not met. In general, restricted stock may not be sold or otherwise hypothecated or transferred and will be held in escrow until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and may receive distributions prior to the time the restrictions lapse. Also, distributions on restricted stock may be subject to vesting conditions and restrictions.

      Deferred stock may be awarded to participants, typically without payment of consideration, but subject to vesting conditions based on performance criteria established by the administrator. Like restricted stock, deferred stock may not be sold or otherwise hypothecated or transferred until vesting conditions are removed or expire. Unlike restricted stock, deferred stock will not be issued until the deferred stock award has vested, and recipients of deferred stock generally will have no voting or distribution rights prior to the time when the vesting conditions are satisfied.

      Stock appreciation rights may be granted in connection with stock options or separately. SARs granted by the administrator in connection with stock options typically will provide for payments to the holder based upon increases in the price of our common stock over the exercise price of the related option, but alternatively may be based upon an exercise price determined by the administrator. Except as required by Section 162(m) of the Code with respect to any SAR intended to qualify as performance-based compensation, there are no restrictions specified in the 2006 plan on the exercise prices of SARs, although restrictions may be imposed by the administrator in the SAR agreements. The administrator may elect to pay SARs in cash or our common stock or a combination of both.

      Distribution equivalents represent the value of the distributions per share paid by us, calculated with reference to the number of shares covered by the stock options, SARs or other awards held by the participant.

      Performance awards may be granted by the administrator to officers, employees or consultants based upon, among other things, the achievement of performance goals. Generally, these awards will be based upon specific performance criteria and may be paid in cash or our common stock or a combination of both. Performance awards to officers, employees and consultants may also include bonuses granted by the administrator, which may be payable in cash or our common stock or a combination of both.

      Stock payments may be authorized by the administrator in the form of shares of our common stock or an option or other right to purchase our common stock as part of a deferred compensation arrangement in lieu of all or any part of cash compensation, including bonuses, that would otherwise be payable to the officer, employee or consultant. Stock payments may be based on the achievement of performance goals.

      The administrator may designate officers and employees as Section 162(m) participants, whose compensation for a given fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code. The administrator may grant to Section 162(m) participants options, restricted stock, deferred stock, SARs, dividend equivalents, performance awards, cash bonuses and stock payments that are paid, vest or become exercisable upon the achievement of performance goals for our company, or any subsidiary, division or operating unit of our company related to one or more of the following performance criteria:

•  net income;

•  pre-tax income;

•  operating income;

•  cash flow;

•  earnings per share;

•  earnings before interest, taxes, depreciation and/or amortization;

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•  return on equity;

•  return on invested capital or assets;

•  FFO;

•  cost reductions or savings; or

•  appreciation in the fair market value of a share of our common stock.

      The maximum number of shares which may be subject to options, stock purchase rights, SARs and other awards granted under the 2006 plan to any individual in any calendar year may not exceed 250,000 shares. In addition, the maximum amount of cash that may be paid as a cash bonus to any individual in any calendar year is $1,000,000.

Automatic Grants of Restricted Stock to Non-Officer Directors

      Each of our current non-officer directors will receive an automatic grant of 1,000 shares of restricted stock on the effective date of this prospectus and an automatic grant of 1,000 shares of restricted stock at each annual meeting of our stockholders thereafter. Each person who thereafter is elected or appointed as a non-officer director will receive an automatic grant of 1,000 shares of restricted stock on the date such person is first elected as a non-officer director and an automatic grant of 1,000 shares of restricted stock at each annual meeting of our stockholders thereafter. To the extent allowed by applicable law, the non-officer directors will not be required to pay any purchase price for these grants of restricted stock. The restricted stock will vest 20% at the time of grant and 20% on each anniversary thereafter over four years from the date of grant. All restricted stock may receive distributions, whether vested or unvested.

      Pursuant to these arrangements, our current non-officer directors will collectively receive an aggregate of 4,000 shares of restricted stock in 2006. The value of the restricted stock to be granted is not determinable until the date of grant.

Amendment and Termination of the 2006 Plan

      The board of directors may not, without stockholder approval given within 12 months of the board’s action, amend the 2006 plan to increase the number of shares of our stock that may be issued under the 2006 plan.

      The board of directors may terminate the 2006 plan at any time. The 2006 plan will be in effect until terminated by the board of directors. However, in no event may any award be granted under the 2006 plan after ten years following the plan’s effective date. Except as indicated above, the board of directors may also modify the 2006 plan from time to time.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Our advisor is primarily responsible for managing our day-to-day business affairs and assets and carrying out the directives of our board of directors. Louis J. Rogers, our chairman and president, also serves as president of our advisor, as well as the president and a member of the board of managers of Triple Net Properties, the parent and manager of our advisor. Anthony W. Thompson serves as chairman and chief executive officer of Triple Net Properties. Messrs. Rogers and Thompson own 2% and 36%, respectively, of Triple Net Properties.

      Our advisor has purchased 22,223 shares of our common stock at a price of $9.00 per share, or $200,007, to satisfy the requirements of NASAA. Our advisor purchased those shares for cash and may not sell these shares for as long as it serves as the advisor to our company; however, our advisor may transfer all or a portion of these shares to its affiliates, although it has no current intention to do so.

      Messrs. Rogers and Thompson are both directors of NNN Capital Corp., the dealer manager in this offering, and own 10% and 85%, respectively, of the dealer manager. The fees payable to NNN Capital

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Corp. are set forth in “Compensation Table” and include selling commissions, marketing allowance and accountable due diligence expense reimbursements.

      Messrs. Rogers and Thompson are both officers and directors of Realty, an affiliate of our advisor that will provide real estate brokerage and other services for our properties, and own 16% and 84%, respectively, of Realty. The fees payable to Realty are set forth in “Compensation Table” and include real estate commissions, property management fees and disposition fees.

      Furthermore, pursuant to Mr. Rogers’ employment agreement with Triple Net Properties, Mr. Rogers has the right to acquire an additional 5% of the capital stock of NNN Capital Corp. and Realty per year, until his ownership in each of these entities equals 25% of the capital stock of each of these entities.

      Additionally, Realty expects to own a significant interest in a title insurance agency joint venture with unaffiliated third party title insurance professionals that will provide title and escrow services in connection with our acquisition, financing and sale of properties. Such services will be provided by appropriately licensed employees of the affiliated title insurance agency. It is anticipated that such services will be provided at market rates and on arms’-length terms. Our company expects that it will pay a material amount of title insurance premiums to this joint venture on an annual basis.

      Mr. Rogers has been with the law firm of Hirschler Fleischer since 1988, was a shareholder from 1994 to December 31, 2004, and, since January 2005, has served as senior counsel. As senior counsel of Hirschler Fleischer, Mr. Rogers shares in the firm’s revenues. Hirschler Fleischer has issued an opinion relating to the federal income tax consequences of the Company’s status as a REIT and will continue to represent our company in the future. Since 1998, Hirschler Fleischer has acted as primary outside counsel to Triple Net Properties, which is the manager of our advisor and, therefore, will be able to exert control over its operations and, consequently, our operations. Mr. Rogers’ ownership of Triple Net Properties and its affiliates is set forth above. See “Legal Matters.”

OUR ADVISOR

      Our advisor, NNN Apartment REIT Advisor, LLC, is primarily responsible for managing our day-to-day business affairs and assets and carrying out our board of directors’ directives. Our advisor is a newly-formed Virginia limited liability company that was formed in December 2005. Our advisor is affiliated with our company in that several of our officers, Messrs. Peters, Remppies and Carneal and Ms. Biller, and two of our officers and directors, Messrs. Olander and Rogers, also are owners and officers of our advisor. Messrs. Rogers and Peters and Ms. Biller also own interests in and serves as an officer, director, key employee or manager of Triple Net Properties, the parent and manager of our advisor, and certain of its affiliates. Since its formation, Triple Net Properties has acquired over 185 properties for its investors with a market value of over $3.7 billion and has disposed of 57 properties, which were sold for over $956 million. At December 31, 2005, Triple Net Properties and its affiliates managed over 27.8 million square feet of property in 23 states, acquired over nine apartment communities for investors, and had over 340 employees in Triple Net Properties’ corporate headquarters located in Santa Ana, California, and numerous satellite offices. Our advisor may engage Realty, its affiliated real estate brokerage and management company owned by Mr. Rogers and Mr. Thompson, to provide a number of services in connection with our properties.

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Management

      The following table sets forth information with respect to our advisor’s executive officers:

Name	Position
Louis J. Rogers	President
Stanley J. (“Jay”) Olander, Jr.	Chief Executive Officer
Scott D. Peters	Executive Vice President and Chief Financial Officer
Andrea R. Biller	General Counsel
David L. Carneal	Executive Vice President and Chief Operating Officer
Gus G. Remppies	Executive Vice President and Chief Investment Officer

      Louis J. Rogers. Mr. Roger’s background is described under “Management of Our Company — The Directors and Executive Officers.”

      Stanley J. (“Jay”) Olander, Jr. Mr. Olander’s background is described under “Management of Our Company — The Directors and Executive Officers.”

      Scott D. Peters. Mr. Peter’s background is described under “Management of Our Company — The Directors and Executive Officers.”

      Andrea R. Biller. Ms. Biller’s background is described under “Management of Our Company — The Directors and Executive Officers.”

      David L. Carneal. Mr. Carneal’s background is described under “Management of Our Company — The Directors and Executive Officers.”

      Gus G. Remppies. Mr. Remppies’ background is described under “Management of Our Company — The Directors and Executive Officers.”

The Advisory Agreement

      Under the terms of the advisory agreement, our advisor generally:

•  has responsibility for day-to-day operations of our company;

•  administers our bookkeeping and accounting functions;

•  serves as our consultant in connection with policy decisions to be made by our board of directors;

•  manages or causes to be managed our properties and other assets; and

•  may render other property-level services if our board of directors requests.

      Our advisor is subject to the supervision of our board of directors and, except as expressly provided in the advisory agreement, has only such additional functions as are delegated to it. In addition, our advisor will have a fiduciary duty to our company’s stockholders. A copy of the advisory agreement has been filed as an exhibit to the registration statement, of which this prospectus is a part, and you may obtain a copy from us.

      Expenses. Our advisor bears the expenses incurred by it in connection with performance of its duties under the advisory agreement, including administrative expenses incurred in supervising, monitoring and inspecting real property or other assets owned by us, excluding proposed acquisitions, or relating to its performance under the advisory agreement. We will reimburse our advisor for some expenses it incurs, including expenses related to proposed acquisitions and travel expenses. We will not reimburse our advisor at the end of any fiscal quarter for operating expenses that, in the four consecutive fiscal quarters then ended, exceed the greater of 2% of our average invested assets or 25% of our net income for such year. If our advisor receives an incentive distribution, net income, for purposes of calculating operating expenses, will exclude any gain from the sale of our assets. Any amount exceeding the greater of 2% of average

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invested assets or 25% of net income paid to our advisor during a fiscal quarter will be repaid to us within 60 days after the end of the fiscal year. We bear our own expenses for functions not required to be performed by our advisor under the advisory agreement, which generally include capital raising and financing activities, corporate governance matters and other activities not directly related to our properties and assets.

      Term. The advisory agreement, which was entered into by our company after our board of directors reviewed and evaluated the performance of our advisor and with the approval of a majority of independent directors, is for a one-year term subject to successive one-year renewals upon the mutual consent of the parties. In determining whether to renew the advisory agreement, our board of directors will re-evaluate the performance of our advisor. The criteria used in such evaluation will be reflected in the minutes of our board of director’s meetings.

      The advisory agreement may be terminated by our advisor or a majority of the independent directors upon 60 days’ prior written notice without cause.

      If the advisory agreement is terminated, the advisory agreement requires our advisor to cooperate with us and take all reasonable steps requested to assist the directors in making an orderly transition of all advisory functions. If the advisory agreement is terminated, our board of directors, including a majority of the independent directors, will determine that any successor advisor possess sufficient qualifications to:

•  perform the advisory function for our company; and

•  justify the compensation provided for in the contract with our company.

      If we liquidate all or a portion of our assets, our advisor may be entitled to compensation pursuant to the “incentive distribution upon sales” described under the heading “Compensation Table.” Additionally, if the advisory agreement is terminated in connection with the listing of our shares of common stock on a national exchange or a national market system, the advisory agreement provides that our advisor will receive compensation pursuant to such termination as agreed to by our independent directors and our advisor. Further, our company may choose to redeem our advisor as a special limited partner in our operating partnership, which would entitle it to receive cash, or if agreed by our company and our advisor, shares of common stock of our company or units of limited partnership interest in our operating partnership equal to the amount that would be payable to the advisor pursuant to the “incentive distribution upon sales” described under the heading “Compensation Table” if we liquidated all of our assets for their fair market value. Finally, upon the termination of our advisory agreement as a result of the advisor’s internalization into our company, the advisory agreement provides that our independent directors and our advisor will agree on the compensation payable to the advisor pursuant to such termination.

      Our Right of First Opportunity. The advisory agreement gives us the first opportunity to purchase any Class A income-producing apartment communities placed under contract by our advisor that satisfy our investment objectives, so long as our acquisition committee or board of directors votes to make the purchase within seven days of being offered such property by our advisor. If our board of directors does not vote to make such purchase within seven days of being offered such property, the advisor is free to offer such opportunity to any other affiliates or non-affiliates, as it so chooses.

      Possible Internalization. Many REITs that are listed on a national securities exchange or included for quotation on a national market system are considered “self-administered” because the employees of the REIT perform all significant management functions. In contrast, REITs that are not self-administered, like our company, typically engage a third-party to perform management functions on its behalf. Accordingly, if we apply to have our shares listed for trading on a national securities exchange or included for quotation on a national market system, it may be in our best interest to become self-administered. If the independent directors determine that we should become self-administered, the advisory agreement contemplates the internalization of our advisor into our company and the termination of the advisory agreement, with the consideration in such internalization and for such termination to be determined by our company and our advisor. In the event our advisor is internalized into our company, many of our advisor’s key employees will become employees of our company. While we would then be relieved of paying fees to

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our advisor under the advisory agreement, we would be required to pay the salaries of our advisor’s employees and related costs and expenses formerly absorbed by our advisor under the advisory agreement.

      Indemnification. We have agreed to indemnify our advisor, its managers, members and employees and pay or reimburse reasonable expenses in advance of final disposition of a proceeding with respect to acts or omissions of our advisor, provided that:

•  the indemnified person determined, in good faith, that the course of conduct that caused a loss or liability was in our best interests;

•  the indemnified person was acting on behalf of, or performing services for, our company;

•  such liability or loss was not the result of negligence or misconduct; and

•  such indemnification or agreement to hold harmless is recoverable only out of our net assets and not from our stockholders.

      Other Services. In addition to the services described above to be provided by our advisor and its affiliates, if we request, affiliates of our advisor may provide other property-level services to our company and may receive compensation for such services, including leasing, development, loan origination and servicing, property tax reduction and risk management fees. However, under no circumstances will such compensation exceed an amount that would be paid to non-affiliated third parties for similar services. A majority of the independent directors must approve all compensation for such other services paid to our advisor or any of its affiliates.

TRIPLE NET PROPERTIES, LLC

      Triple Net Properties, headquartered in Santa Ana, California, offers a diverse line of investment products as well as a full-range of services including asset and property management, brokerage, leasing, analysis and consultation. It manages a growing portfolio of over 27.8 million square feet of commercial properties, including 2.1 million square feet of apartment community properties representing over 2,400 apartment units, with a combined market value of over $3.7 billion. Triple Net Properties and its affiliates are currently buying and selling properties throughout the United States, though many recent acquisitions are located in California, Texas and Florida, which the U.S. Census Bureau forecasts to be the top three states for population growth over the next 25 years. Triple Net Properties also acquired commercial real estate properties in Colorado, Arizona, Wisconsin, Missouri, Illinois and Oregon in 2005. Triple Net Properties is also an active seller of real estate, bringing many of its investment programs full cycle. Since its formation, Triple Net Properties and affiliates have completed 57 sales transactions for approximately $956 million in aggregate sales price.

      Anthony “Tony” W. Thompson is the founder and an owner of Triple Net Properties, the parent and manager of our advisor. Mr. Thompson has been its chief executive officer and chairman of the board of managers since its inception in April 1998, and was its president from inception until September 2004. He is also chief executive officer and chairman of the board of directors and an owner of Realty, an affiliated real estate brokerage and management company that provides certain real estate brokerage and management services to us. Mr. Thompson served as chief executive officer and president of T REIT, Inc. from December 1999 through August 2004 and served as the chief executive officer and president of G REIT, Inc. from December 2001 through December 2005. Prior to April of 1998, Mr. Thompson was co-founder, co-owner, director and officer of a number of real estate investment entities trading under the name The TMP Companies, including the TMP Group, Inc., a full-service real estate investment firm founded in 1978. Mr. Thompson is the former president of our dealer manager, NNN Capital Corp., and is currently an owner and director. He is also a registered securities principal with the NASD. Mr. Thompson currently serves as the chairman of the board of directors of each of T REIT, Inc. and G REIT, Inc. He is a 1969 graduate of Sterling College with a BS degree in economics. He is a member of the Sterling College board of trustees and various other charitable and civic organizations.

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COMPENSATION TABLE

      The Compensation Table below outlines all the compensation that we will pay to our advisor, the dealer manager and their affiliates and the broker dealers participating in this offering during the stages in the life of our company and other payments that are subordinated to achieving the returns listed in the table. For ease of presentation and understanding, we have used defined terms in the table. Those terms have the following meanings:

      Average Invested Assets means, for any period, the average of the aggregate book value of our assets that are invested, directly or indirectly, in real estate assets or in equity interests and in loans secured by real estate, before deducting depreciation, bad debts or other similar non-cash reserves, computed by taking the average of the values at the end of each month during such period.

      Invested Capital means the gross proceeds from the sale of the shares of common stock in this offering. When a property is sold, Invested Capital will be reduced by the lesser of (1) the net sale proceeds available for distribution from such sale or (2) the sum of (A) the portion of Invested Capital that initially was allocated to that property and (B) any remaining shortfall in the recovery of our Invested Capital with respect to prior sales of properties.

      Competitive Real Estate Commission means the real estate or brokerage commission paid for the purchase or sale of a property which is reasonable, customary and competitive in light of the size, type and location of such property.

      Our advisor, the dealer manager and their affiliates will not be compensated for any services other than those which have been disclosed in this Compensation Table. In those instances in which there are maximum amounts or ceilings on the compensation which may be received by our advisor or the dealer manager for services rendered, our advisor and the dealer manager may not recover any amounts in excess of such ceilings or maximum amounts for those services by reclassifying such services under a different compensation or fee category. Except as expressly provided in the table, we will not pay, directly or indirectly, a commission or fee to our advisor or its affiliates in connection with the reinvestment of the proceeds of any resale, exchange, financing or refinancing of a company property.

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OFFERING STAGE

Type of Compensation	Method of Compensation	Estimated Amount
Selling Commissions	The dealer manager will receive 7.0% of the gross proceeds of this offering, or $0.70 for each share sold. The dealer manager may reallow a portion of the Selling Commissions to broker dealers for each share they sell. Shares purchased under the distribution reinvestment plan will be purchased without Selling Commissions.	Actual amount depends upon the number of shares sold. The dealer manager will receive a total of $140,000 if the minimum offering is sold and $70,000,000 if the maximum offering is sold.
Marketing Allowance and Accountable Due Diligence Expense Reimbursements	We will pay the dealer manager an amount up to 3.0% of the gross proceeds of this offering as follows: Up to 2.5% of the gross proceeds of this offering as an allowance to pay expenses associated with non- accountable marketing fees, wholesaling fees, expense reimbursements, sales seminars and volume discounts, and up to 0.5% of the gross offering proceeds for reimbursement of accountable bona fide due diligence expenses. The dealer manager may reallow up to 0.5% of the gross offering proceeds for non-accountable marketing fees and expenses and 0.5% of the gross offering proceeds for accountable bona fide due diligence expense reimbursement to broker dealers participating in this offering. We will not pay this fee with respect to shares purchased under the distribution reinvestment plan.	Actual amount depends upon the number of shares sold. A total of $60,000 will be paid if the minimum offering is sold and $30,000,000 will be paid if the maximum offering is sold.
Other Organizational and Offering Expenses	Our advisor may advance, and we will reimburse it for, organizational and offering expenses incurred on our behalf in connection with this offering, including legal and accounting fees, filing fees and printing costs as well as reimbursements for costs to prepare sales materials and our company’s conduct of educational conferences and retail seminars. We estimate such expenses will be approximately 1.5% of the gross proceeds of this offering.	Actual amounts will be based on actual funds advanced. We estimate that a total of $30,000 will be reimbursed if the minimum offering is sold and $15,000,000 will be reimbursed if the maximum offering is sold.

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ACQUISITION STAGE

Type of Compensation	Method of Compensation	Estimated Amount
Real Estate Commission	For its services in connection with the due diligence, selection and acquisition of a property, our advisor or one of its affiliates may receive a real estate commission from our company equal to up to 3.0% of the purchase price of the property acquired or up to 4.0% of the total development cost of any development property acquired, as applicable. A portion of the real estate commission may be paid at our advisor’s discretion to third-party developers for services rendered. Real estate commissions will be payable on the acquisition of a specific property, on the acquisition of a portfolio of properties through a purchase of assets, merger or similar transaction, or on the completion of development of a property or properties for our company.	Actual amounts depend upon the purchase price of properties acquired or the total development cost of properties acquired for development.
Reimbursement of Acquisition Expenses	We will reimburse our advisor for any and all expenses related to selecting, evaluating, acquiring and investing in properties, whether or not acquired or made, including, but not limited to, legal fees and expenses, travel and communications expenses, cost of appraisals and surveys, nonrefundable option payments on property not acquired, accounting fees and expenses, computer use related expenses, architectural, engineering and other property reports, environmental and asbestos audits, title insurance and escrow fees, loan fees or points or any fee of a similar nature paid to a third party, however designated, transfer taxes and personnel and miscellaneous expenses related to the selection, evaluation and acquisition of and investing in properties. The reimbursement of acquisition expenses and real estate commissions cannot exceed 6% of the purchase price or total development cost, as applicable, for a property unless fees in excess of such amount are approved by a majority of our directors not interested in the transaction and by a majority of our independent directors not interested in the transaction.	Actual amounts depend upon the actual expenses incurred.

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OPERATING STAGE

Type of Compensation	Method of Compensation	Estimated Amount
Asset Management Fee	We will pay our advisor an annual asset management fee for managing our day-to-day operations, which will be equal to either 0.75% or 1.0% of our average invested assets. The percentage used to calculate the asset management fee is based on the ratio of our Funds From Operations, or FFO (as defined below), to the gross offering proceeds. This ratio is referred to as the “return ratio.” FFO is defined by NAREIT as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.	Actual amounts depend upon the assets invested by our company and, therefore, cannot be determined at the present time.
	The percentage used to determine the asset management fee will be:
	• 0.75% if the return ratio for the preceding calendar quarter is 6.0% or less; or
	• 1.0% if the return ratio for the preceding calendar quarter is more than 6.0%.
	The asset management fee will be calculated and payable monthly in cash or shares, at the option of the advisor, based on the last preceding quarter end. The asset management fee calculation will be subject to quarterly and annual reconciliations. The asset management fee may be deferred at the option of the advisor, without interest.
Property Management Fee	We will pay Realty, our advisor’s affiliated property management company, a Property Management Fee equal to 4.0% of the monthly gross income from any properties it manages. This fee will be paid monthly.	Actual amounts to be paid depend upon the gross income of the properties and, therefore, cannot be determined at the present time.

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Type of Compensation	Method of Compensation	Estimated Amount
	Realty anticipates that it will subcontract property management services to third parties and will be responsible for paying all fees due such third party contractors.
Construction management fee	To the extent it provides a substantial amount of services in connection with the construction management of one or more of our properties, we will pay our advisor or one of its affiliates a construction management fee equal to 5.0% of any amount (including professional services) up to $25,000, 4.0% of any amount over $25,000 but less than $50,000 and 3.0% of any amount in excess of $50,000 which is expended in any calendar year for construction or repair at our properties.	Actual amounts depend upon amounts expended for construction or repair at our properties, and, therefore, cannot be determined at the present time.
Compensation for Additional Services	If we request our advisor or its affiliates to render services for our company other than those required to be rendered by our advisor under the advisory agreement, the additional services, if our advisor elects to perform them, will be compensated separately on terms to be agreed upon between our advisor or its affiliate and us. The rate of compensation for these services must be approved by a majority of our board of directors, including a majority of our independent directors, and cannot exceed an amount that would be paid to unaffiliated third parties for similar services. The advisor reserves the right to subcontract these services to third parties and will pay all fees due such third party contractors.	Actual amounts to be received depend upon the services provided and, therefore, cannot be determined at the present time.
Reimbursable Expenses	We will reimburse our advisor for: • our company’s organizational and offering expenses; provided, however, that within 60 days after the end of the month in which the offering terminates, our advisor will reimburse our company for any organizational and offering expenses reimbursement received by our	Actual amounts to be paid depend upon results of operations. We will not reimburse our advisor at the end of any fiscal quarter for operating expenses that, in the four consecutive fiscal quarters then ended, exceed the greater of 2% of average invested assets or 25% of net income for such year. Any amounts in excess of those

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Type of Compensation	Method of Compensation	Estimated Amount
	advisor, to the extent that such reimbursement exceeds the maximum amount permitted or, at the option of our company, such excess shall be subtracted from the next reimbursement of expenses to be made by us; • acquisition expenses incurred in connection with the selection, evaluation and acquisition of our properties; • the actual cost of goods and services used by us and obtained from entities not affiliated with our advisor, other than acquisition expenses; • interest and other costs for borrowed money, including discounts, points and other similar fees; • taxes and assessments on income of our company or its real estate assets; • costs associated with insurance required in connection with our business or by our directors; • expenses of managing and operating properties owned by our company, payable to the property manager, whether or not the property manager is an affiliate of our company. • all compensation and expenses payable to the independent directors and all expenses payable to the non-independent directors in connection with their services to the company and the stockholders and their attendance at meetings of the directors and stockholders; • expenses associated with a listing, if applicable, or with the issuance and distribution of our common stock, such as selling commissions and fees, marketing and advertising expenses, taxes, legal and	amounts will be repaid to us within 60 days after the end of the fiscal year.

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Type of Compensation	Method of Compensation	Estimated Amount
	accounting fees, listing and registration fees, and other organizational and offering expenses; • expenses connected with payments of distributions in cash or otherwise made or caused to be made by our company to our stockholders; • expenses of amending, converting liquidating or terminating our company or the charter; • expenses of maintaining communications with stockholders, including the cost of preparation, printing, and mailing annual and other stockholder reports, proxy statements and other reports required by governmental entities; • administrative services expenses (including personnel costs; provided, however, that no reimbursement shall be made for costs of personnel to the extent that such personnel perform services in transactions for which our advisor receives a separate fee); • transfer agent and registrar’s fees and charges paid to third parties; and • audit, accounting, legal and other professional fees.

DISPOSITION/ LIQUIDATION STAGE

Type of Compensation	Method of Compensation	Estimated Amount
Disposition Fee	We will pay our advisor, or Realty, one of its affiliates, a Disposition Fee out of net profits upon the sale of each of the properties, in an amount equal to the lesser of 3.0% of the property’s contract sales price or 50.0% of a customary Competitive Real Estate Commission given the	Actual amounts to be received depend upon the sale price of properties and, therefore, cannot be determined at the present time.

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Type of Compensation	Method of Compensation	Estimated Amount
	circumstances surrounding the sale. The amount paid, when added to the sums paid to unaffiliated parties, will not exceed the lesser of the customary Competitive Real Estate Commission or an amount equal to 6.0% of the contracted for sales price. Payment of such fees will be made only if our advisor or its affiliate provides a substantial amount of services in connection with the sale of the property. We will pay the Disposition Fee on all dispositions of properties, whether made in the ordinary course of business, upon liquidation or otherwise.
Incentive Distribution Upon Sales	Our operating partnership will pay to our advisor an incentive distribution upon the sale of a property equal to 10.0% of the net proceeds from the sale after our company has received, and paid to our stockholders, the sum of:	Actual amounts to be received depend upon the sale price of properties and, therefore, cannot be determined at the present time.
	• our Invested Capital that initially was allocated to that property,
	• any remaining shortfall in the recovery of our Invested Capital with respect to prior sales of properties, and
	• any remaining shortfall in the 8.0% return on Invested Capital. If we and, in turn, our stockholders have not received a return of our Invested Capital or if there is a shortfall in the 8.0% return after the sale of the last property and our advisor previously has received incentive distributions, other than those that have previously been repaid, our advisor will be required to repay to our operating partnership an amount of those distributions sufficient to cause us and, in turn, our stockholders to receive a full return of the Invested Capital and a full distribution of the 8.0% return. In no event will the cumulative

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Type of Compensation	Method of Compensation	Estimated Amount
	amount repaid by our advisor to our operating partnership exceed the cumulative amount of incentive distributions that our advisor previously has received. Until such time as stockholders receive such 8.0% return, our advisor will not receive any incentive distributions. There is no assurance we will be able to pay a 8.0% annual return to our stockholders. Thus, the 8.0% return is disclosed solely as a measure for our advisor’s incentive compensation.

      We do not intend to pay our affiliates in shares of our common stock or units of limited partnership interests in our operating partnership for the services they provide to us, but we reserve the right to do so if our board of directors, including a majority of our independent directors, determines that it is prudent to do so under the circumstances.

Additional Payments for Additional Services

      As specified in our advisory agreement, in extraordinary circumstances fully justified to the official or agency administering the state securities laws, our advisor and its affiliates may provide other goods and services to our company if all of the following criteria are met:

•  the goods or services must be necessary to our prudent operation; and

•  the compensation, price or fee must be equal to the lesser of 90% of the compensation, price or fee we would be required to pay to independent parties rendering comparable services or selling or leasing comparable goods on competitive terms in the same geographic location, or 90% of the compensation, price or fee charged by our advisor or its affiliates for rendering comparable services or selling or leasing comparable goods on competitive terms.

      Extraordinary circumstances will be presumed only when there is an emergency situation requiring immediate action by our advisor or its affiliates and the goods or services are not immediately available from unaffiliated parties. Services which may be performed in such extraordinary circumstances include emergency maintenance of our properties, janitorial and other related services due to strikes or lock-outs, emergency tenant evictions and repair services which require immediate action, as well as operating and re-leasing properties with respect to which the leases are in default or have been terminated.

Limitation on Reimbursements

      No reimbursement to our advisor or its affiliates is permitted for items such as rent, depreciation, utilities, capital equipment, salaries, fringe benefits and other administrative items of any controlling persons of our advisor, its affiliates or any other supervisory personnel except in those instances in which our board of directors believes it to be in our best interest that our advisor or its affiliates operate or otherwise deal with, for an interim period, a property with respect to which the lease is in default. Permitted reimbursements, except as set forth above, include salaries and related salary expenses for non-

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supervisory services which could be performed directly for our company by independent parties such as legal, accounting, transfer agent, data processing and duplication. Controlling persons include, but are not limited to, any person, irrespective of his or her title, who performs functions for our advisor similar to those of chairman or member of the board of directors, president or executive vice president, or those entities or individuals holding 5% or more of the stock of our advisor or a person having the power to direct or cause the direction of our advisor, whether through ownership of voting securities, by contract or otherwise. Despite the foregoing, and subject to the approval of our board of directors, including a majority of the independent directors, we may reimburse our advisor for expenses related to the activities of controlling persons undertaken in capacities other than those which cause them to be controlling persons. Our advisor has informed us that it believes that its employees and the employees of its affiliates and controlling persons who perform services for which reimbursement is allowed as described above, have the experience and educational background, in their respective fields of expertise, appropriate for the performance of such services.

Limitation on Acquisition-Related Compensation

      The total of all real estate commissions and acquisition expenses paid in connection with our purchase of a property may not exceed an amount equal to 6% of the contract purchase price for the property.

Limitation on Operating Expenses

      In the absence of a satisfactory showing to the contrary, our total operating expenses will be deemed to be excessive if, in any fiscal year, they exceed the greater of:

•  2% of our Average Invested Assets or

•  25% of our net income for such year.

      The independent directors have a fiduciary responsibility to limit such expenses to amounts that do not exceed these limitations.

      Within 60 days after the end of any fiscal quarter for which our total operating expenses for the 12 months then ended exceeded the greater of 2% of our Average Invested Assets or 25% of net income, we will send our stockholders a written disclosure of such fact.

      Our advisor will reimburse our company at the end of the calendar year the amount by which the aggregate annual expenses paid or incurred by our company exceed the limitations provided above.

      Total operating expenses include aggregate expenses of every character paid or incurred by us as determined under generally accepted accounting principles, including the fees we pay to our advisor. However, total operating expenses do not include:

•  the expenses we incur in raising capital such as organizational and offering expenses, legal, audit, accounting, registration and other fees, printing and other expenses, and taxes incurring in connection with the issuance, distribution, transfer and registration of our shares;

•  interest payments;

•  taxes;

•  non-cash expenditures, such as depreciation, amortization and bad debt reserves;

•  the incentive distribution paid to our advisor; and

•  acquisition expenses, real estate commissions on resale of properties and other expenses connected with the acquisition, disposition and ownership of real estate interests, mortgage loans or other property.

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Additional Important Information on Compensation to Our Affiliates

      Our advisor and its affiliates will be involved in determining the types and structure of the transactions in which we participate. Our advisor may benefit from our acquiring properties, retaining ownership of our properties or leveraging our properties, while it may be in your best interest as a stockholder for us to buy, sell or hold such property on an unleveraged basis. Furthermore, our advisor’s receipt and retention of many of the fees it receives and reimbursements depends upon our company making investments in properties. Therefore, the interest of our advisor in receiving such fees may conflict with the interest of our stockholders to earn income on their investment in our common stock and may result in our entering into transactions that do not solely reflect your interest as a stockholder. A majority of our independent directors must approve all transactions between our company and our advisor or its affiliates, including property acquisitions and dispositions.

PRIOR PERFORMANCE SUMMARY

      The information presented in the Prior Performance Summary, or Summary, represents the historical experience of real estate programs managed by Triple Net Properties through December 31, 2004. Investors in our company should not assume that they will experience returns, if any, comparable to those experienced by investors in these prior real estate programs.

      As of December 31, 2004, Triple Net Properties served as an advisor, sponsor or manager to 88 real estate investment programs formed for the purpose of acquiring and operating commercial real estate properties, primarily consisting of retail, office and industrial buildings. The programs are either (1) public programs that are required to file public reports with the SEC, or (2) private programs that have no public reporting requirements. As of December 31, 2004, there were 4 public programs and 84 private programs.

      Each of the private programs begins with the formation of an LLC to acquire the property. The LLC may sell investor, or membership, units; investors that purchase membership units thus acquire an indirect interest in the property through their equity interest in the LLC. Simultaneously with the acquisition of the property, the LLC may also sell undivided tenant in common interests, or TIC interests, directly in the property. A TIC interest is not an interest in any entity, but rather a direct real property interest. A TIC may be an individual or an entity such as a limited liability company. Typically, the TICs are involved in tax-deferred exchanges structured to comply with the requirements of Section 1031 of the Code, whereas the cash purchase of LLC membership units does not meet the requirements of Section 1031, although the LLC’s interest in the underlying real property interest will also be a TIC interest.

      Each private program bears the same name as the respective LLC formed to acquire the property and may include both the sale of interests in the LLC and the individual TIC interests. Thus the LLC is the de-facto identity of the private program and may acquire either an entire or a partial interest in a property. When a private program owns 100% of a property and all funds are raised from TICs and members of the LLC, the private program is referred to by Triple Net Properties as a “Simple Ownership Structure.” Conversely, if the program only owns a partial interest in the property or some portion of the funds are raised through one of the public programs which are advised or managed by Triple Net Properties, it is referred to by Triple Net Properties as a “Complex Ownership Structure.”

      The public programs include two corporations, G REIT, Inc. and T REIT, Inc., which have qualified as REITs, and two limited liability companies, NNN 2002 Value Fund, LLC and NNN 2003 Value Fund, LLC. Each of the public programs may acquire wholly-owned or partial interests in real estate properties. When a public program purchases a partial interest in a property that is also partially owned by a private program, the public program may invest either directly in the private program (by investing in the LLC or by purchasing a TIC interest) or outside of the private program by purchasing an interest in the property directly from the seller.

      In either the Complex or Simple Ownership Structure, the LLC may or may not retain an interest in the property after the program is closed, depending on whether the program sells the entire interest of the

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property to TIC investors. If the LLC retains an ownership interest in the program, it does so as one of the TICs and generally sells its ownership interest to a number of LLC members.

      Triple Net Properties maintains the day-to-day accounting for the LLC as well as the books and records for the property. In addition, Triple Net Properties is required to report financial data pertinent to the operation of each program and is responsible for the timely filing of the LLC’s income tax return as well as providing year-end tax basis income and expense information to the TICs.

      In some instances, the program owns an entire property, as in a Simple Ownership Structure, and the entire operation of the property is attributable to the program. In other instances, where the program owns a portion of a property or has affiliated ownership within the program, as in a Complex Ownership Structure, further allocations and disclosure are required to clarify the appropriate portions of the property’s performance attributable to the various ownership interests.

      Our Advisor presents the data in Prior Performance Table III for each program on either a “GAAP basis” or an “income tax basis” depending on the reporting requirements of the particular program. In compliance with the SEC reporting requirements, the Table III presentation of Revenues, Expenses and Net Income for the public programs has been prepared and presented by our Advisor in conformity with accounting principals generally accepted in the Unites States of America, or GAAP, which incorporate accrual basis accounting. Our Advisor presents Table III for all private programs on an income tax basis (which can in turn be presented on either a cash basis or accrual basis), as the only applicable reporting requirement is for the year-end tax information provided to each investor. Because it is a corporation, Western Real Estate Investment Trust, Inc., or WREIT, is the only private program for which our Advisor reports and presents Table III data in accordance with the accrual method of accounting for income tax purposes. The Table III data for all other private programs (which are generally formed using LLCs) are prepared and presented by our Advisor in accordance with the cash method of accounting for income tax purposes. This is because most, if not all, of the investors in these private programs are individuals required to report to the Internal Revenue Service using the cash method of accounting for income tax purposes, and the LLCs are required to report on this basis when more than 50% of their investors are taxpayers that report using the cash method of accounting for income tax purposes. When GAAP-basis affiliates invest in a private program, as in a Complex Ownership Structure, the ownership presentation in the tables is made in accordance with the cash method of accounting for income tax purposes. This presentation is made for consistency and to present results meaningful to the typical individual investor that invests in an LLC.

      While SEC rules and regulations allow our Advisor to record and report results for its private programs on an income tax basis, investors should understand that the results of these private programs may be different if they were reported on a GAAP basis. Some of the major differences between GAAP accounting and income tax accounting (and, where applicable, between cash basis and accrual basis income tax accounting) that impact the accounting for investments in real estate are described in the following paragraphs:

•  The primary difference between the cash methods of accounting and accrual methods (both GAAP and the accrual method of accounting for income tax purposes) is that the cash method of accounting generally reports income when received and expenses when paid while the accrual method generally requires income to be recorded when earned and expenses recognized when incurred.

•  GAAP requires that, when reporting lease revenue, the minimum annual rental revenue be recognized on a straight-line basis over the term of the related lease, whereas the cash method of accounting for income tax purposes requires recognition of income when cash payments are actually received from tenants, and the accrual method of accounting for income tax purposes requires recognition of income when the income is earned pursuant to the lease contract.

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•  GAAP requires that when an asset is considered held for sale, depreciation ceases to be recognized on that asset, whereas for income tax purposes, depreciation continues until the asset either is sold or is no longer in service.

•  GAAP requires that when a building is purchased certain intangible assets (such as above- and below-market leases, tenant relationships and in-place lease costs) are allocated separately from the building and are amortized over significantly shorter lives than the depreciation recognized on the building. These intangible assets are not recognized for income tax purposes and are not allocated separately from the building for purposes of tax depreciation.

•  GAAP requires that an asset is considered impaired when the carrying amount of the asset is greater than the sum of the future undiscounted cash flows expected to be generated by the asset, and an impairment loss must then be recognized to decrease the value of the asset to its fair value. For income tax purposes, losses are generally not recognized until the asset has been sold to an unrelated party or otherwise disposed of in an arm’s length transaction.

      When the private program owns 100% of the property and the entire fund is raised from TICs and LLC members investing directly in the private program, 100% of the private program’s operating results are presented for the relevant years.

      When a private program directly invests in and owns a partial interest in the property (as an example, 75%) and the remaining interest of the property (25%) is owned outside of the program by a public program, only the operating results relating to the private program ownership in the property (75%) are presented for the relevant years. The allocation is based on the private program’s effective ownership in the property.

      When a private program acquires 100% interest in the property but is jointly owned by a public entity investing directly in the private program, 100% of the private program’s operating results will be presented for the relevant years on a cash income tax basis. The affiliated ownership portion of the equity is eliminated in aggregation of all private programs reporting on a cash income tax basis. In such cases, Prior Performance Table III also presents the unaffiliated equity for informational purposes only.

References in the Summary

•  References in the Summary to unaffiliated members and to unaffiliated TICs refer to investors that hold membership units in a program LLC or a TIC interest in a program property, as applicable, but that are not otherwise affiliated with Triple Net Properties.

•  References in the Summary to Mr. Thompson refer to Anthony W. Thompson, who serves as the chairman of the board and chief executive officer of Triple Net Properties and owns approximately 36% of Triple Net Properties.

•  References in the Summary to Mr. Rogers refer to Louis J. Rogers, who serves as our president and chairman of the board, president of our advisor and president and a member of the board of managers of Triple Net Properties, and who owns approximately 2% of Triple Net Properties.

•  References in the Summary to loans from affiliates of Triple Net Properties refer to loans from Cunningham Lending Group, LLC, which is 100% owned by Mr. Thompson, NNN 2004 Notes Program or NNN 2005 Notes Program. Loans made by these entities are unsecured loans which were not negotiated at arms length with interest rates ranging from 8% to 12%.

•  References in the Summary to shareholders of Triple Net Properties refer to individuals or entities that have a membership interest in Triple Net Properties of less then 7%.

•  References in the Summary to Realty refer to Triple Net Properties Realty, Inc., of which Mr. Thompson serves as chairman and chief executive officer and owns 84% and of which Mr. Rogers serves as a director and owns 16%. Mr. Rogers also serves as president of our advisor. When Realty receives a real estate commission or disposition fee as part of the purchase or sale of

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	a property, 75% of that commission is passed through to Triple Net Properties pursuant to an agreement between Triple Net Properties and Realty.
•	References in the Summary table headings to GLA of a property indicate the gross leasable area of the property, which is expressed for the entire property even where the relevant program owns less than 100% interest in the property.

Public Programs

G REIT, Inc.

      G REIT, Inc. was formed as a Virginia corporation in December 2001, reincorporated as a Maryland corporation in September 2004 and is qualified as a REIT for federal income tax purposes. G REIT was formed to acquire interests in office, industrial and service properties anchored by government-oriented tenants such as Federal, state and local government offices, government contractors and/or government service providers. Triple Net Properties has served as the advisor of G REIT since January 2002. The initial public offering of G REIT’s common stock commenced on July 22, 2002 and terminated on February 9, 2004. G REIT’s second public offering commenced on January 23, 2004 and terminated on April 30, 2004. As of December 31, 2004, G REIT had raised gross offering proceeds of $437,315,000 in its two public offerings from the issuance of 43,865,000 shares of its common stock to 13,973 investors. As of December 31, 2004, G REIT had purchased interests in 25 real estate properties amounting to an investment of $861,192,000 (purchase price, including debt financing). Of the 25 properties, nine (36%) were in California, seven (28%) were in Texas and one each (4%) was in Delaware, Florida, Illinois, Maryland, Missouri, Nebraska, Nevada, Pennsylvania and Washington. The properties, which are described below, are all commercial office buildings. Weighted by purchase price, none of the property interests acquired by G REIT were apartment community assets, the primary focus of our company.

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      As of December 31, 2004, G REIT owned interests in the following properties:

	Ownership			Type of		Purchase		Share of		Share of Mortgage		GLA
Property Name	Interest			Property		Date		Purchase Price		Debt at Purchase		(Sq Ft)		Location
5508 Highway West 290		100.0	%		office		09/13/02	$	10,225,000	$	6,700,000		74,000		Austin, TX
Two Corporate Plaza		100.0	%		office		11/27/02		13,580,000		10,160,000		161,000		Clear Lake, TX
Congress Center — TIC		30.0	%		office		01/09/03		40,832,000		28,763,000		525,000		Chicago, IL
Atrium Building		100.0	%		office		01/31/03		4,532,000		2,200,000		167,000		Lincoln, NE
Park Sahara		4.75	%		office		03/18/03		580,000		399,000		124,000		Las Vegas, NV
Department of Children and Families Campus		100.0	%		office		04/25/03		11,580,000		7,605,000		124,000		Plantation, FL
Gemini Plaza		100.0	%		office		05/02/03		15,000,000		9,815,000		159,000		Houston, TX
Bay View Plaza		97.68	%		office		07/31/03		11,385,000		—		61,000		Alameda, CA
North Pointe Corporate Center		100.0	%		office		08/11/03		24,205,000		15,600,000		133,000		Sacramento, CA
824 Market Street		100.0	%		office		10/10/03		31,900,000		—		202,000		Wilmington, DE
Sutter Square Galleria		100.0	%		office		10/28/03		8,240,000		4,024,000		61,000		Sacramento, CA
One World Trade Center		100.0	%		office		12/05/03		113,648,000		77,000,000		573,000		Long Beach, CA
Centerpoint Corporate Park		100.0	%		office		12/30/03		54,220,000		25,029,000		436,000		Kent, WA
AmberOaks Corporate Center		100.0	%		office		01/20/04		35,525,000		14,250,000		282,000		Austin, TX
Public Ledger Building		100.0	%		office		02/13/04		33,950,000		25,000,000		472,000		Philadelphia, PA
Madrona Buildings		100.0	%		office		03/31/04		45,900,000		28,458,000		211,000		Torrance, CA
Brunswig Square		100.0	%		office		04/05/04		23,805,000		15,830,000		136,000		Los Angeles, CA
North Belt Corporate Center		100.0	%		office		04/08/04		12,675,000		—		156,000		Houston, TX
Hawthorne Plaza		100.0	%		office		04/20/04		97,000,000		62,750,000		419,000		San Francisco, CA
Pacific Place		100.0	%		office		05/26/04		29,900,000		—		324,000		Dallas, TX
525 B Street		100.0	%		office		06/14/04		96,310,000		69,943,000		424,000		San Diego, CA
600 B Street		100.0	%		office		06/14/04		77,190,000		56,057,000		339,000		San Diego, CA
Western Place I & II		78.5	%		office		07/23/04		26,298,000		18,840,000		429,000		Forth Worth, TX
One Financial Plaza		77.6	%		office		08/06/04		28,712,000		23,862,000		434,000		St. Louis, MO
Pax River Office		100.0	%		office		08/06/04		14,000,000		—		172,000		Lexington Park, MD

      Certain financial information for G REIT is summarized below:

	Year Ended December 31,
	2004			2003		2002
Gross Revenues	$	94,910,000		$	12,427,000	$	733,000
Net Income (Loss)	$	(1,876,000	)	$	78,000	$	26,000

      For the year ended December 31, 2002, G REIT had a return of capital from cash distributions of $170,000.

T REIT, Inc.

      T REIT was formed as a Virginia corporation in December 1998 and is qualified as a REIT for federal income tax purposes. T REIT was formed to acquire interests in office, industrial, service and retail properties located primarily in tax free states. Triple Net Properties has served as the advisor of T REIT since February 2000. The initial public offering of T REIT’s common stock commenced on February 22, 2000. As of May 31, 2002, when the offering was terminated, T REIT had issued 4,720,000 shares of common stock and raised $46,395,000 in aggregate gross proceeds. As of December 31, 2004, T REIT had 2,043 investors and had purchased interests in 20 real estate properties amounting to an investment of $134,119,000 (purchase price, including debt financing). As of December 31, 2004, nine of these properties had been sold. Of the 20 properties purchased by T REIT, four (20%) were in Nevada, four (20%) were in California, nine (45%) were in Texas, one was in Illinois (5%) and two in North Dakota

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(10%). The properties owned by T REIT as of December 31, 2004, which are described below, are all commercial properties consisting of eight office properties and three office/industrial properties, or 73% office and 27% office/industrial. Weighted by purchase price, none of the property interests acquired by T REIT were apartment community assets, the primary focus of our company.

      As of December 31, 2004, T REIT owned interests in the following 11 properties:

										Share of
								Share of		Mortgage
	Ownership					Purchase		Purchase		Debt at		GLA
Property Name	Interest			Type of Property		Date		Price		Purchase		(Sq Ft)		Location
Reno Trademark Building-TIC		40.0	%		office/industrial		09/04/01	$	2,918,000	$	1,080,000		72,000		Reno, NV
County Center Drive-TIC		16.0	%		office/industrial		09/28/01		1,014,000		514,000		78,000		Temecula, CA
City Center West “A” Building-TIC		89.1	%		office		03/15/02		19,308,000		11,583,000		106,000		Las Vegas, NV
Pacific Corporate Park-LLC		22.8	%		office		03/25/02		5,410,000		3,534,000		89,000		Lake Forest, CA
Titan Building & Plaza-TIC		48.5	%		office		04/17/02		4,446,000		2,910,000		131,000		San Antonio, TX
University Heights		100.0	%		office/industrial		08/22/02		6,750,000		—		68,000		San Antonio, TX
AmberOaks Corp. Center		75.0	%		office		01/20/04		17,021,000		13,125,000		207,000		Austin, TX
Congress Center-LLC		10.2	%		office		01/09/03		13,883,000		9,779,000		525,000		Chicago, IL
Oakey Building-LLC		9.8	%		office		04/02/04		797,000		392,000		98,000		Las Vegas, NV
Emerald Plaza-LLC		2.7	%		office		06/14/04		2,725,000		1,850,000		355,000		San Diego, CA
Enclave Parkway-LLC		3.26	%		office		12/22/03		1,125,000		769,000		207,000		Houston, TX

      As of December 31, 2004, T REIT had sold its interests in the following properties:

								Gain
	Date of		Date of		Ownership			(Loss) on
Property Name	Purchase		Sale		Interest			Sale
Christie Street Office Building		09/26/00		11/13/01		100.0	%	$	(178,000	)
Seguin Corners Shopping Center		11/22/00		08/12/02		26.0	%		104,000
Plaza del Rey Shopping Center		11/17/00		09/23/02		16.5	%		70,000
Northstar Crossing Shopping Center		10/26/00		01/11/03		100.0	%		(191,000	)
Thousand Oaks Center		12/06/00		08/11/03		100.0	%		2,100,000
Pahrump Valley Junction Shopping Center		05/11/01		09/25/03		100.0	%		874,000
Gateway Mall		01/29/03		03/18/04		100.0	%		769,000
Gateway Mall Land		02/27/04		09/09/04		100.0	%		854,000
Saddleback Financial Center		09/25/02		12/27/04		25.0	%		853,000

      Certain financial information for T REIT is summarized below:

	Year Ended December 31,
	2004		2003		2002		2001			2000
Gross Revenues	$	4,959,000	$	1,068,000	$	304,000	$	197,000		$	204,000
Net Income (Loss)	$	2,544,000	$	4,189,000	$	2,293,000	$	(464,000	)	$	(101,000	)

      For the years ended December 31, 2001, 2002, 2003 and 2004, T REIT had returns of capital from cash distributions of $863,000, $573,000, $896,000 and $358,000, respectively.

NNN 2002 Value Fund, LLC

      NNN 2002 Value Fund, LLC, or 2002 Value Fund, is a Virginia limited liability company formed on May 15, 2002 to purchase, own, operate and subsequently sell all or a portion of up to three properties. 5,960 units were sold to 545 investors in a private placement offering which began on May 15, 2002 and ended on July 14, 2003 and raised $29,799,000 of gross offering proceeds. Triple Net Properties has served as the manager of 2002 Value Fund since May 2002.

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      The Securities Exchange Act of 1934 requires that, within 120 days following the end of the fiscal year in which an entity exceeds 500 security holders and has more than $10,000,000 in assets, such entity file a registration statement pursuant to the requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. As of December 31, 2003, 2002 Value Fund had more than 500 investors and assets of more than $10,000,000 and had the obligation to file a registration statement with the SEC no later than April 29, 2004. The required Form 10 registration statement for 2002 Value Fund was not filed until December 30, 2004. Pursuant to Section 12(g)(1) of the Exchange Act, the Form 10 went effective by lapse of time on February 28, 2005. Subsequent to that date, 2002 Value Fund has filed all reports required to be filed by Sections 13 or 15(d) of the Exchange Act; however, 2002 Value Fund’s Form 10-K for the year ended December 31, 2004 was not timely filed.

      As of December 31, 2004, 2002 Value Fund had purchased interests in three real estate properties amounting to an investment of $57,141,000 (purchase price, including debt financing). Of the three properties, one (33%) was in Nevada, one (33%) was in Florida and one (33%) was in Illinois. The properties, which are described below, are all commercial office building properties. Weighted by purchase price, none of the property interests acquired by 2002 Value Fund are apartment community assets, the primary focus of our company.

      As of December 31, 2004, 2002 Value Fund owned interests in the following properties:

Share of

Share of

Mortgage

Ownership

Type of

Purchase

Purchase

Debt at

GLA

Property Name

Interest

Property

Date

Price

Purchase

(Sq Ft)

Location

Bank of America Plaza West

100.0

%

office

09/20/02

$

16,900,000

$

14,200,000

82,000

Las Vegas, NV

Congress Center-LLC

12.3

%

office

01/09/03

16,741,000

11,793,000

525,000

Chicago, IL

Netpark — TIC

50.0

%

office

06/11/03

23,500,000

15,750,000

911,000

Tampa, FL

      Certain financial information for 2002 Value Fund is summarized below:

							From May 15, 2002
							(Date of Inception)
	Year Ended December 31,						to December 31,
	2004			2003			2002
Gross Revenues	$	10,008,000		$	4,904,000		$	—
Net Income (Loss)	$	(184,000	)	$	(535,000	)	$	(172,000	)

      For the years ended December 31, 2003 and 2004, 2002 Value Fund had returns of capital from cash distributions of $100,000 and $410,000, respectively.

NNN 2003 Value Fund, LLC

      NNN 2003 Value Fund, LLC, or 2003 Value Fund, is a Delaware limited liability company formed on June 19, 2003 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified “value added” properties. 10,000 Units were sold to 785 investors in a private placement offering which began on July 11, 2003 and ended on October 14, 2004 and raised $50,000,000 of gross offering proceeds. Triple Net Properties has served as the manager of 2003 Value Fund since June 2003.

      The Exchange Act requires that, within 120 days following the end of the fiscal year in which an entity exceeds 500 security holders and has more than $10,000,000 in assets, such entity file a registration statement pursuant to the requirements of the Exchange Act. As of December 31, 2004, 2003 Value Fund had more than 500 investors and assets of more than $10,000,000 and had the obligation to file a registration statement with the SEC no later than May 2, 2005. The required Form 10 registration statement for 2002 Value Fund was filed on May 2, 2005. Pursuant to Section 12(g)(1) of the Exchange Act, the Form 10 went effective by lapse of time on July 1, 2005.

      As of December 31, 2004, 2003 Value Fund had purchased interests in nine real estate properties, amounting to an investment of $74,998,000 (purchase price, including debt financing). Of the nine

74

properties, three (33%) were in Texas, three (33%) were in California and one (11%) was in each of Nebraska, Nevada and Georgia. The properties, which are described below, are all commercial office building properties. Weighted by purchase price, none of the property interests acquired by 2003 Value Fund were apartment community assets, the primary focus of our company.

      As of December 31, 2004, 2003 Value Fund owned interests in the following properties:

								Share of		Share of
	Ownership			Type of		Purchase		Purchase		Mortgage Debt at		GLA
Property Name	Interest			Property		Date		Price		Purchase		(Sq Ft)		Location
Executive Center I		100.0	%		office		12/30/03	$	8,178,000	$	4,500,000		208,000		Dallas, TX
Financial Plaza		100.0	%		office		10/29/04		5,660,000		4,125,000		86,000		Omaha, NE
Oakey Building		75.4	%		office		04/02/04		6,135,000		3,016,000		98,000		Las Vegas, NV
Satellite Place		100.0	%		office		11/29/04		18,300,000		11,000,000		178,000		Atlanta, GA
Southwood Tower		100.0	%		office		10/27/04		5,461,000		—		79,000		Houston, TX
801 K Street		18.3	%		office		03/13/04		12,038,000		8,235,000		336,000		Sacramento, CA
Emerald Plaza		4.6	%		office		06/14/04		4,643,000		3,151,000		355,000		San Diego, CA
Enterprise Technology Center		8.5	%		office		05/07/04		5,211,000		3,102,000		370,000		Scotts Valley, CA
Executive Center II
& III		38.1	%		office		08/01/03		9,373,000		5,696,000		381,000		Dallas, TX

      Certain financial information for 2003 Value Fund is summarized below:

				From June 19, 2003
	Year Ended			(Date of Inception)
	December 31, 2004			to December 31, 2003
Gross Revenues	$	2,660,000		$	—
Net Income (Loss)	$	(2,302,000	)	$	(116,000	)

      For the year ended December 31, 2004 and for the period from June 19, 2003 (date of inception) through December 31, 2003, NNN 2003 Value Fund, LLC had no return of capital from cash distributions.

Private Programs

      Telluride Barstow, LLC: The offering period began June 1, 1998 and ended December 16, 1998. The offering raised $1,619,500, or 100% of the offering amount. The LLC retained a 32.25% ownership interest in the program with a membership of eight unaffiliated members, three members who are shareholders of Triple Net Properties and Triple Net Properties. The remaining 67.75% was owned by three unaffiliated TICs investing in the program. The program owned an 87% interest in the property. Mr. Thompson purchased a 13% interest in the property outside of the program.

Share of

Share of

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Barstow Road Shopping Center

87.0

%

shopping center

05/01/98

$

4,002,000

$

3,001,500

78,000

Barstow, CA

      For the years ended December 31, 1999 and 2000, the program had deficit cash flow after distributions of $74,000 and $12,000, respectively, which were covered by excess cash flow after distributions in 1998. For the year ended December 31, 2002, the program experienced deficit cash flow after distributions of $20,000 which was covered by the previous year’s excess cash flow after distributions. In 1999, Triple Net Properties loaned $8,000 to the program to fund operating shortfalls due to the timing of rent collections, which was repaid in full in 2001. In 2002, an affiliate of Triple Net Properties loaned $102,000 to the program to fund capital improvements. In February 2003, the property was sold for a loss

75

of $166,000. Triple Net Properties received no fees from the sale of the property and the affiliate of Triple Net Properties forgave the $102,000 loan previously made to the program.

      Western Real Estate Investment Trust, Inc.: Western Real Estate Investment Trust, Inc., or WREIT, was formed in July 1998 as a private real estate investment trust and is qualified as a REIT for federal income tax purposes. In April 2000, WREIT closed its best efforts private placement of its common stock in which it raised $14,051,000 from 345 investors. A total of nine affiliated parties, including shareholders of Triple Net Properties and entities controlled by Mr. Thompson, purchased 1.65% of the total offering. WREIT was formed to acquire office and industrial properties and retail shopping centers primarily in the western United States. Triple Net Properties manages the properties owned by WREIT. The 31.5% of the Brookings Mall that is not owned by the program is held by one unaffiliated TIC outside the program.

      As of December 31, 2004, WREIT owned interests in the following properties:

Share of

Share of

Mortgage

Ownership

Purchase

Purchase

Debt at

GLA

Property Name

Interest

Type of Property

Date

Price

Purchase

(Sq Ft)

Location

Kress Energy Center

100.0

%

office

07/07/98

$

1,850,000

$

925,000

54,000

Wichita, KS

Brookings Mall

68.5

%

shopping center

05/01/00

$

4,151,000

$

962,000

143,000

Brookings, SD

      As of December 31, 2004, WREIT had sold the following properties:

	Date of				Ownership			Gain on Sale
Property Name	Purchase		Date of Sale		Interest			of Real Estate
Century Plaza East Shopping Center		11/03/98		02/13/04		100	%	$	1,025,267
Phelan Village Shopping Center		10/16/98		12/20/02		100	%	$	155,446
Bryant Ranch Shopping Center		12/24/98		09/05/02		100	%	$	1,119,948
Huron Mall Shopping Center		03/31/99		04/14/00		100	%	$	1,335,007
Crossroads Shopping Center		07/29/99		08/29/00		100	%	$	730,851

      Certain financial information for WREIT is summarized below:

	Year Ended December 31,
	2004		2003			2002		2001		2000		1999			1998
Gross Revenues	$	890,555	$	2,144,916		$	3,535,350	$	4,323,400	$	5,248,209	$	4,210,027		$	542,089
Net Income (Loss)	$	1,652,952	$	(180,981	)	$	1,904,017	$	511,194	$	1,826,433	$	(293,176	)	$	47,973

      In 2000, WREIT had deficit cash flow after distributions of $344,000. The deficit cash flow was funded by prior years’ excess cash flow after distributions and cash proceeds from the sale of two properties. The sales generated a combined $2,066,000 gain and WREIT paid $4,740,000 in special distributions representing return of capital of $3,100,000 following the sales. In 2001, WREIT received a $480,000 loan from T REIT, an entity advised by Triple Net Properties, and a $404,000 loan from a private entity managed by Triple Net Properties. In 2002, WREIT sold two additional properties generating a combined $1,275,000 gain. Also in 2002, WREIT repaid the $480,000 loan from T REIT and $259,000 of the loan from a private entity managed by Triple Net Properties. WREIT also received a $21,000 loan from Triple Net Properties to supplement capital funds. In 2003, WREIT sold TIC interests to two entities advised by Triple Net Properties generating a $105,000 net loss for tax purposes and paid special distributions of $2,000,000 following the sale. In 2003, WREIT received a loan from Triple Net Properties in the amount of $8,000, which was used to repay a portion of a $58,000 loan from a private entity managed by Triple Net Properties. In 2004, WREIT had deficit cash flow after distributions of $97,000. The deficit cash flow was funded by prior years’ excess cash flow after distributions and cash proceeds from the sale of a property. In 2004, WREIT repaid in full Triple Net Properties’ loans of $29,000 from prior years.

76

      Truckee River Office Tower, LLC: The offering period began August 21, 1998 and ended July 15, 1999. The offering raised $5,550,000, or 100% of the offering amount. The LLC retained a 48% ownership interest in the property with a membership of 59 unaffiliated members, 4 members who are shareholders of Triple Net Properties and Triple Net Properties. The remaining 52% was owned by six unaffiliated TICs and a company controlled by one of Triple Net’s shareholders investing in the program.

Ownership

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Purchase Price

at Purchase

(Sq Ft)

Location

Truckee River Office Tower

100.0

%

office

12/01/98

$

16,030,000

$

12,000,000

139,000

Reno, NV

      For the year ended December 31, 2000, the program had distributions in excess of operating cash flows of $89,000, which was covered by excess cash flows after distributions from prior years.

      Yerington Shopping Center, LLC: The offering period began December 15, 1998 and ended August 3, 1999. The offering raised $1,625,000, or 100% of the offering amount. The LLC retained a 7.75% ownership interest with five unaffiliated members. The remaining 92.25% is owned by seven unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Yerington Plaza Shopping Center

100.0

%

shopping center

03/08/99

$

4,422,000

$

3,316,000

56,000

Yerington, NV

      For the years ended December 31, 1999 and 2000, the program experienced a cash flow deficit after distributions and return of capital of $16,000 and $26,000, respectively. In 2002, a cash flow deficit after distributions of $20,000 was covered by the prior year’s cash flow excess after distributions. For the years ended 2003, and 2004, the program had a cash flow deficit after distributions and return of capital of $6,000 and $11,000, respectively.

      In 1999, Triple Net Properties loaned $6,000 to the program to cover distributions, which was repaid in 2000. In 2001 and 2002, an affiliate of Triple Net Properties loaned $4,000 and $5,000, respectively, to cover distributions. In 2004, these loans were repaid in full.

      NNN Fund VIII, LLC: The offering period began February 22, 1999 and ended March 7, 2000. The offering raised $8,000,000, or 100% of the offering amount. The program acquired three properties with the LLC investing in all properties and various TIC interests investing in each of the properties. The LLC retained a 32.75% interest in Palm Court, a 32.24% interest in Belmont Plaza and a 47.25% interest in Village Fashion Center with a membership of 91 unaffiliated members, 3 members who are shareholders of Triple Net Properties and Triple Net Properties. The remaining 67.25% interest in Palm Court was owned by 11 unaffiliated TICs, Mr. Thompson and an entity owned by Triple Net Properties investing in the program. The remaining 67.76% interest in Belmont Plaza was owned by five unaffiliated TICs investing in the program. The remaining 52.75% interest in Village Fashion Center was owned by seven unaffiliated TICs investing in the program.

	Ownership					Purchase		Purchase		Mortgage Debt		GLA
Property Name	Interest			Type of Property		Date		Price		at Purchase		(Sq Ft)		Location
Belmont Plaza		100.0	%		shopping center		06/11/99	$	3,550,000	$	2,840,000		81,000		Pueblo, CO
Village Fashion Center		100.0	%		shopping center		06/18/99	$	8,800,000	$	6,600,000		130,000		Wichita, KS
Palm Court Shopping Center		100.0	%		shopping center		08/03/99	$	8,988,000	$	8,500,000		267,000		Fontana,  CA

      In March 2002, Village Fashion Center was sold resulting in a gain of $1,344,000. Realty received a real estate commission of $345,000 and Triple Net Properties received deferred management fees of $386,000 from the sale proceeds. From the sale proceeds, an affiliate of Triple Net Properties received repayment of a $400,000 loan made to the property in 2001 for capital improvements.

      In May 2003, Palm Court Shopping Center was sold resulting in a gain of $1,805,000. Realty received a real estate commission of $17,000 and Triple Net Properties received deferred management and

77

incentive fees of $794,000 from sale proceeds. Triple Net Properties received $356,000 and an affiliate of Triple Net Properties received $303,000 from sale proceeds as repayment for loans made in prior years for capital improvements and costs relating to a legal settlement in 2001 which allowed Triple Net Properties to expand non-retail leasing/ownership of its parcels from 5% to 25% of gross leaseable area within the center, subject to a redevelopment agreement with adjoining owners.

      In January 2004, Belmont Plaza was sold resulting in a gain of $208,000. Realty received a real estate commission of $130,000 from sale proceeds.

      For the years ended December 31, 2000 and 2001, the program had deficit cash flow after distributions of $690,000 and $142,000, respectively. The sources of distributions in excess of cash flows were the prior year’s excess cash flow after distributions and return of capital of $475,000 and $202,000, respectively. Cash flow deficits were caused primarily by the timing difference of incurred property tax expense and collection of the related reimbursement of these charges from the tenants at all three properties. In 2002, the program had deficit cash flow after distributions of $37,000 representing return of capital of $234,000. For the year ended December 31, 2003, the program had an overall positive cash flow after distributions, but return of capital relating to the Belmont property of $91,000. For the year ended December 31, 2004, the program experienced a deficit from operating cash flows due to post sale expenses with no offsetting operating income as all the properties had been sold. Excess cash flow after distributions from prior years covered the deficit.

      In 2000, Triple Net Properties loaned $239,000 to the program to cover the cost of a legal settlement relating to the Palm Court property. In 2001, Triple Net Properties loaned $114,000 for leasing and capital costs at all three properties. In 2002 and 2003, all loans from Triple Net Properties were repaid from the sale proceeds of Village Fashion Center and Palm Court. In 2001, affiliates of Triple Net Properties loaned $594,000 to the program to cover leasing and capital costs incurred at Palm Court and Village Fashion Center. In 2001, $365,000 was repaid from the sale of Village Fashion Center and additional loans of $229,000 were made for Palm Court leasing costs. In 2003, all loans from affiliates were paid in full from the sale proceeds of Palm Court.

      NNN Town & Country Shopping Center, LLC: The offering period began May 10, 1999 and ended March 29, 2000. The offering raised $7,200,000, or 100% of the offering amount. The LLC with 56 unaffiliated members retained a 30.25% ownership interest in the property. The remaining 69.75% of the property was owned by nine unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Town & Country Village Shopping Center

100.0

%

shopping center

07/01/99

$

23,800,000

$

21,339,000

235,000

Sacramento, CA

      The program reduced distributions to investors during 2000 from 8% to 5% due to reduced available operating cash flow. The property experienced reduced operating cash flow due to the costs of a major redevelopment project which included the relocation of certain tenants within the shopping center and a higher than projected interest rate on the variable rate mortgage loan. In 2002, Triple Net Properties refinanced the property with a $34,000,000 loan at a lower, fixed interest rate with a 10-year term. From refinance proceeds, Triple Net Properties and affiliates received $637,000 in deferred fees and repayment of loans of $1,875,000. With the refinance in place and redevelopment largely complete, cash flow improved and distributions were subsequently increased to 8% retroactively and 9% soon thereafter. On June 25, 2004, the property was sold at a price of $44,410,000. From sale proceeds, Realty received a selling commission of $444,000 and Realty and Triple Net Properties received deferred property and asset management fees of $1,175,000. The property sold for a gain of $1,797,000.

      For the year ended December 31, 2000, the program had a cash deficiency after distributions of $645,000 and return of capital of $513,000. The cash deficiency was caused primarily by debt service with increasing interest rates on a variable rate loan tied to LIBOR. For the year ended December 31, 2003,

78

the program had a cash deficiency after distributions of $363,000, which was covered by prior years’ excess cash flow after distributions.

      In 2000 and 2001, Triple Net Properties loaned $508,000 and $747,000, respectively, to cover tenant repositioning costs and tenant improvements related to the redevelopment of the property. In 2002, an affiliate of Triple Net Properties loaned $113,000 to cover additional tenant improvement costs. Triple Net Properties’ loans from prior years were repaid in full from refinance proceeds. In 2003, Triple Net Properties and an affiliate of Triple Net Properties loaned $75,000 and $12,000, respectively, for capital improvements and Triple Net Properties loaned $5,000 to the program for the LLC’s tax return cost. All 2003 loans from Triple Net Properties and its affiliate were paid in full in 2004.

      NNN “A” Credit TIC, LLC: The offering period began August 10, 1999 and ended February 12, 2001. The offering raised $2,500,000, or 100% of the offering amount. The LLC with 15 unaffiliated members retained a 20% ownership interest in the property. The remaining 80% is owned by 12 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Pueblo Shopping Center

100.0

%

shopping center

11/03/99

$

7,075,000

$

5,306,000

106,000

Pueblo, CO

      In 2003, the program had deficit cash flow after distributions of $65,000. Prior years’ excess cash flow after distributions covered the deficit. In 2004, the program had deficit cash flow after distributions of $99,000 representing return of capital of $51,000. During 2004, Triple Net Properties terminated distributions to investors in order to conserve cash flow for operations and future leasing.

      In 2001, Triple Net Properties loaned $13,000 and an affiliate of Triple Net Properties loaned $15,000 to cover a portion of leasing costs of $90,000. In 2002, affiliates of Triple Net Properties loaned $141,000 to cover a portion of distributions of $23,000 and capital expenditure and leasing costs of $118,000. In 2003, Triple Net Properties loaned $60,000 and an affiliate of Triple Net Properties loaned $84,000 to cover a portion of distributions of $33,000 and capital and leasing costs of $111,000. In 2003, an affiliate of Triple Net Properties forgave its unsecured loans to the program totaling $87,000 which was treated as income for tax purposes but was excluded in cash generated from operations in the Prior Performance Tables, resulting in the deficit cash flow for the year. In 2004, affiliates of Triple Net Properties loaned $75,000 to cover distributions and $15,000 of capital expenditures. Triple Net Properties forgave its unsecured loans of $48,000. For tax purposes, the forgiveness of indebtedness was treated as income but was excluded from cash generated from operations.

      NNN Redevelopment Fund VIII, LLC: The offering began August 27, 1999 and ended June 5, 2000. The offering raised $7,378,778, or 92.2% of the offering amount from 162 unaffiliated members and 6 shareholders of Triple Net Properties. The program owns 100% of the White Lakes property and 94.5% of the Bank One Building, with 5.5% of the Bank One Building owned outside the program by Mr. Thompson as a TIC.

Share of

Share of

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Bank One Building

94.5

%

office

11/22/99

$

8,250,000

$

7,645,000

129,000

Colorado Springs, CO

White Lakes Shopping Center

100.0

%

shopping center

03/15/00

$

14,688,000

$

12,200,000

437,000

Topeka, KS

      In 2000, a parcel at White Lakes Shopping Center was sold for $2,600,000. The sale generated net cash proceeds of $399,000 after payment of selling costs and a partial principal loan reduction. The proceeds were retained by the program to the fund reserves for subsequent capital expenditures. Realty received a $25,000 real estate commission from the sale.

79

      In 2001, the loan on the Bank One Building was refinanced. The refinance generated net proceeds to the fund of $462,000 which were distributed to investors during the year. An affiliate of Triple Net Properties loaned $162,000 to fund capital improvements for both projects. In 2002, Triple Net Properties and affiliates of Triple Net Properties loaned $23,000 and $414,000, respectively, for ongoing capital improvements and leasing costs. In 2003, Triple Net Properties loaned an additional $457,000 to the program and affiliates of Triple Net Properties loaned $103,000 to partially repay prior years’ loans, and Triple Net Properties forgave $399,000 of prior loans. In 2003, Triple Net Properties reduced the distribution rate from 8% to 5%.

      In 2004, two parcels of the White Lakes Shopping Center were sold for $1,250,000 and $225,000. The net proceeds after selling costs were used to reduce mortgage debt by $1,292,000. The remaining property was also refinanced with a loan amount less than the previously existing loan. In order to extend the loan on the Bank One Building, the program was required to pay additional loan fees of $300,000 and pay down the existing loan by $550,000. To fund the financing and continuing leasing requirements for both properties, Triple Net Properties loaned $507,000 to the program and an affiliate of Triple Net Properties loaned $1,649,000. The program has experienced reduced operating cash flow primarily as a consequence of reduced leasing rates resulting from the depressed local commercial leasing markets and economy in the Colorado Springs and Topeka markets.

      NNN Exchange Fund III, LLC: The offering began September 15, 1999 and ended May 31, 2000. The offering raised $6,300,000, or 100% of the offering amount. The LLC retained an 8.25% ownership interest with 10 unaffiliated members and the remaining 91.75% is owned by 18 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

County Fair Mall

100.0

%

shopping center

12/15/99

$

15,850,000

$

12,035,000

397,000

Woodland, CA

      In 2000, the program had deficit cash flow after distributions of $56,000 and return of capital of $31,000. In 2002, the program experienced deficit cash flow after distributions of $78,000 resulting in return of capital of $59,000. In 2004, deficit cash flow after distributions of $1,000 was covered entirely by excess cash flow from the previous year.

      In 2003, Triple Net Properties loaned $34,000 to cover capital improvements of $90,000. In 2004, Triple Net Properties loaned $149,000 and an affiliate of Triple Net Properties loaned $65,000 to the program to cover distributions and property management fees paid to a third party management company. In 2004, Triple Net Properties forgave $83,000 of the program’s indebtedness. In April 2004, Triple Net Properties terminated distributions to investors to conserve cash flow for operations and future capital and leasing requirements.

      NNN Tech Fund III, LLC: The offering period began February 21, 2000 and ended June 20, 2000. The offering raised $3,698,750, or 100% of the offering amount. The LLC with 13 unaffiliated members retained a 19.25% ownership interest in the property. The remaining 80.75% is owned by 15 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Moreno Corporate Center

100.0

%

retail, office and industrial

06/16/00

$

11,600,000

$

8,425,000

226,000

Moreno Valley, CA

      At acquisition in 2000, the lender funded $329,750 less than the amount planned for in the offering memorandum. The program received a loan from Triple Net Properties for $329,750 to close the acquisition. In 2001, the property was refinanced with a new loan of $9,750,000 and $289,067 of the loan from Triple Net Properties was repaid. Also in 2001, the 26,449 square foot retail component of the property was sold for $1,610,000. The sale produced net cash proceeds of $1,207,000 that were used to pay down the new loan on the property.

80

      In 2002, an affiliate of Triple Net Properties loaned $25,000, which was used to repay a part of Triple Net Properties’ loan.

      NNN Westway Shopping Center, LLC: The offering period began April 26, 2000 and ended February 7, 2001. The offering raised $3,278,250, or 99.3% of the offering amount. The LLC with 23 unaffiliated members retained a 31.75% ownership interest in the property. The remaining 68.25% is owned by 16 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Westway Shopping Center

100.0

%

shopping center

8/09/00

$

9,550,000

$

7,125,000

220,000

Wichita , KS

      In 2001, the program had deficit cash flow after distributions of $44,000. The deficit cash flow was funded from prior years’ excess cash flow after distributions.

      During the period from 2000 through 2004, the program received loans from Triple Net Properties and its affiliates to fund capital improvements and leasing costs. In 2001, the program received $84,000 from an affiliate of Triple Net Properties for capital improvements. In 2002, the program received a $61,000 loan from an affiliate of Triple Net Properties for capital improvements and leasing affiliated costs. In 2002, an affiliate of Triple Net Properties loaned an additional $28,000 for leasing costs. In 2003, the program received loans totaling $69,000 from affiliates of Triple Net Properties and an $8,000 loan from Triple Net Properties for tenant improvements. In 2004, the program received $271,000 in loans from Triple Net Properties and an affiliate to help fund $440,000 in capital and tenant improvements.

      Kiwi Associates, LLC: The offering began June 9, 2000 and ended February 4, 2001. The offering raised $2,681,352, or 95.8% of the offering amount. The LLC retained a 15.67% ownership with 13 unaffiliated members and the remaining 84.33% was owned by 11 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Orange Street Plaza

100.0

%

shopping center

07/14/00

$

8,200,000

$

6,500,000

74,000

Redlands, CA

      For the years ended December 31, 2000 and 2001, the program had deficit cash flow after distributions and return of capital of $36,000 and $36,000, respectively. In 2001, Triple Net Properties loaned $15,000 to the program, which was repaid in 2002. In 2002, the property was refinanced resulting in net proceeds of $477,000, which was held in reserve for future leasing and capital expenditures. In February 2003, the sale of the property resulted in a gain of $1,409,000. Triple Net Properties received no fees from the sale of the property.

      NNN 2000 Value Fund, LLC: The offering began July 15, 2000 and ended February 27, 2001. The offering raised $4,816,000, or 100% of the offering amount. The LLC acquired an 81% ownership of the Bowling Green Financial Park property with a membership of 123 unaffiliated members and 2 shareholders of Triple Net Properties. Two TICs, one unaffiliated and the other an entity controlled by Mr. Thompson, acquired a 19% interest in the property, investing outside of the program.

Share of

Share of

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Bowling Green Financial Park

81.0

%

7 office buildings

12/27/00

$

12,960,000

$

9,955,000

235,000

Sacramento, CA

      In October 2002, all seven buildings in the Bowling Green Financial Park were sold resulting in a cumulative gain of $1,120,000. As a result of the sales, Realty received a real estate commission of $122,000 and Triple Net Properties received an incentive fee of $250,000 from the program.

81

      NNN Rocky Mountain Exchange, LLC: The offering period began July 25, 2000 and ended February 15, 2001. The offering raised $2,670,000, or 100% of the offering amount. The property is 100% owned by 14 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Galena Street Building

100.0

%

office

11/30/00

$

7,225,000

$

5,275,000

71,000

Denver, CO

      In August, 2002, the program reduced its distribution to investors from 8.50% to 4.25% as a result of the loss of a major tenant. In 2003, the program had deficit cash flow after distributions of $25,000. The deficit cash flow was funded by prior years’ excess cash flow after distributions. In 2003 and 2004, weak local market conditions and tenant downsizing resulted in reduced occupancy. In 2004, the program had deficit cash flow after distributions of $172,000 resulting in return of capital of $66,000. The deficit cash flow was funded from prior years’ excess cash flow after distributions and an $83,000 loan from an affiliate of Triple Net Properties. The affiliate of Triple Net Properties forgave $40,000 of this loan in 2004. In 2002, 2003 and 2004, Triple Net Properties loaned $3,000, $1,000 and $55,000, respectively, to fund capital improvements and deficit cash flow. In 2004, Triple Net Properties forgave all of these loans and terminated distributions.

      NNN Market Centre, LLC: The offering period began September 1, 2000 and ended November 17, 2000. The offering raised $1,330,000, or 100% of the offering amount. 100% of the property is owned by seven unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase *

(Sq Ft)

Location

Market Centre

100.0

%

office — certified historic building

11/01/00

$

3,400,000

$

2,070,000

122,000

Wichita, KS

*  Includes $1,070,000 mortgage debt and $1,000,000 in Note Units assumed at close.

      In 1999, NNN Market Centre, LLC offered and sold $1,000,000 of 11% participating note units to supplement capital funds for capital improvements and to provide working capital. The note units were entitled to a 40% profit participation in profit generated from sale of the property or a prepayment fee. Investors in the program assumed these notes and $1,070,000 in mortgage debt. The program raised $1,330,000 for redevelopment of the property.

      In 2000, the program had deficit cash flow after distributions of $47,000, representing return of capital of $14,000. The deficit cash flow was funded from working capital. In 2001, the property was refinanced with a $2,300,000 loan from an affiliate of Triple Net Properties and the $1,000,000 in Note Units was repaid. The program also received a $91,000 loan from Triple Net Properties to supplement capital funds and provide working capital. In 2001, the program had deficit cash flow after distributions of $175,000 representing return of capital of $98,000. The deficit cash flow was funded from working capital and the loan from Triple Net Properties. In 2002, the program received loans of $112,000 from affiliates of Triple Net Properties and a $35,000 loan from Triple Net Properties to supplement capital funds and provide additional working capital. In August 2002, distributions were reduced from 8% to 0% due to unfavorable market conditions in the Wichita, Kansas central business district. In 2002, the program had deficit cash flow after distributions of $10,000 representing return of capital of the same amount. In 2003, the program received an $8,000 loan from an affiliate of Triple Net Properties. Also in 2003, an affiliate of Triple Net Properties forgave $124,000 in accrued interest owed by the program. In 2004, the program received a $6,000 loan from Triple Net Properties.

      NNN Sacramento Corporate Center, LLC: The offering period began November 8, 2000 and ended May 21, 2001. The offering raised $12,000,000, or 100% of the offering amount. The LLC with 55 unaffiliated members and 1 private program sponsored by Triple Net Properties retained a 17.5%

82

ownership interest in the property. The remaining 82.5% is owned by 16 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Sacramento Corporate Center

100.0

%

office

3/12/01

$

31,000,000

$

22,250,000

193,000

Sacramento, CA

      In 2003, the property received a $202,000 loan from Triple Net Properties and a $95,000 loan from TICs for capital improvements. In 2004, TICs loaned the property an additional $69,000 for additional capital improvements and $31,000 was repaid to Triple Net Properties.

      NNN Dry Creek Centre, LLC: The offering period began November 15, 2000 and ended January 31, 2001. The offering raised $3,500,000, or 100% of the offering amount. The LLC with one unaffiliated member retained a 2.0% ownership interest in the property. The remaining 98.0% is owned by 15 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Dry Creek Centre

100.0

%

office

1/31/01

$

11,100,000

$

8,350,000

86,000

Englewood, CO

      In 2001, the program had a cash flow deficiency due to the timing of property tax reimbursements. The deficiency was covered by existing reserves which were replenished in 2002 when the corresponding tax reimbursements were billed and collected. In 2004, the program had deficit cash flow after distributions of $47,000 covered by the prior years’ excess cash flow after distributions.

      NNN 2001 Value Fund, LLC: The offering began March 12, 2001 and ended June 30, 2002. The offering raised $10,992,321, or 99.9% of the offering amount, from 261 unaffiliated members and 5 shareholders of Triple Net Properties. The program acquired 100% of two properties, 1840 Aerojet Way and Western Plaza. The program also owns a 40% undivided interest in Pacific Corporate Park. The remaining 60% is owned by a private program sponsored by Triple Net Properties as a TIC interest.

								Share of		Share of
	Ownership					Purchase		Purchase		Mortgage Debt		GLA
Property Name	Interest			Type of Property		Date		Price		at Purchase		(Sq Ft)		Location
1840 Aerojet Way		100.0	%	office/industrial building			09/27/01	$	5,100,000	$	2,938,000		103,000		North Las Vegas, NV
Western Plaza		100.0	%		shopping center		07/31/01	$	5,000,000	$	4,250,000		412,000		Amarillo, TX
Pacific Corporate Park		40.0	%	6-building office park			03/25/02	$	9,491,000	$	6,200,000		167,000		Lake Forest, CA

      For the years ended December 31, 2001 and 2002, the program had deficit cash flow after distributions and return of capital of $18,000 and $130,000, respectively. For the year ended December 31, 2004, the program had deficit cash flow after distributions of $287,000 which was covered by excess cash flow from the previous year of $165,000 resulting in return of capital of $122,000.

      In 2003, Triple Net Properties loaned $675,000 to the program. The loan was used for a required $1,000,000 pay down of third party mortgage debt for Western Plaza. In 2004, Triple Net Properties loaned $375,000 to the program, and an affiliate of Triple Net Properties loaned $30,000 to the program and $80,000 to Pacific Corporate Park ($32,000 of which is allocable to the private program). The loans were used to fund a shortfall of refinance proceeds for Western Plaza along with capital and tenant improvements at Western Plaza.

83

      NNN Camelot Plaza Shopping Center, LLC: The offering period began March 30, 2001 and ended December 3, 2001. The offering raised $2,400,000, or 100% of the offering amount. The property is 100% owned by 13 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Camelot Plaza Shopping Center

100.0

%

shopping center

8/01/01

$

6,350,000

$

4,128,000

91,000

San Antonio, TX

      At acquisition, a major tenant left the property but agreed to pay rent through the end of its lease term. As a result, the lender required new loan terms including a lower funding than anticipated and accelerated principal repayment. The vacant space combined with weak local market conditions and the accelerated principal repayment has had a continuing adverse impact on the property’s cash flow. Loans from Triple Net Properties and affiliates have funded the initial loan proceeds shortfall and accelerated principal repayment during Triple Net Properties’ leasing and refinancing initiatives. At closing, Triple Net Properties and an affiliate of Triple Net Properties made $36,000 and $278,000 loans to the program, respectively. In 2002, an affiliate of Triple Net Properties loaned $126,000 to the program. In 2003, an affiliate of Triple Net Properties forgave $100,000 of its loan. In 2004, an affiliate of Triple Net Properties loaned $155,000 to the program.

      In 2001, the program had deficit cash flow after distributions of $82,000 representing return of capital of $65,000. The deficit cash flow and return of capital was funded from reserves and a loan from Triple Net Properties. In 2002, the program had deficit cash flow after distributions of $57,000 resulting return of capital of the same amount. The deficit cash flow and return of capital was funded by a loan from an affiliate of Triple Net Properties. In 2003, the program had deficit cash flow after distributions and return of capital of $71,000. In 2004, the program’s distribution rate was reduced from 8% to 4.25%.

      NNN Washington Square Center, LLC: The offering period began May 1, 2001 and ended November 21, 2001. The offering raised $3,000,000, or 100% of the offering amount. 100% of the property is owned by 18 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Washington Square Center

100.0

%

shopping center

10/16/01

$

7,263,000

$

4,890,000

72,000

Stephenville, TX

      In 2002, the program had deficit cash flow after distributions of $50,000 representing return of capital of $22,000. The deficit cash flow was funded from prior years’ excess cash flow after distributions, reserves and a $10,000 loan from an affiliate of Triple Net Properties.

      During the period from 2002 to 2004, the program received loans from Triple Net Properties and affiliates to fund return of capital as well as lender reserves and leasing costs. In 2002, the program received $10,000 to pay a portion of the return of capital distribution of $22,000. In 2003, the program received a loan of $98,000 from Triple Net Properties for leasing reserves and costs and repaid $10,000 to an affiliate of Triple Net Properties. In 2004, the program received a $40,000 loan from an affiliate of Triple Net Properties to fund tenant leasing costs and leasing reserves.

      NNN Reno Trademark, LLC: The offering period began May 30, 2001 and ended September 26, 2001. The offering raised $3,850,000, or 100% of the offering amount. The program owns 60% of the property, with nine unaffiliated TICs investing in the program. T REIT owns the remaining 40% of the property, which was purchased directly from the seller outside of the program.

Share of

Ownership

Purchase

Share of

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Purchase Price

at Purchase

(Sq Ft)

Location

Reno Trademark Building

60.0

%

office/industrial

9/04/01

$

4,378,000

$

1,620,000

75,000

Reno, NV

      In 2002, the property received a $49,000 loan from an affiliate of Triple Net Properties to provide the program with sufficient funds to meet the reserves required by the lender to refinance the property. Upon

84

refinancing, the original $1,620,000 million loan was replaced with a $4,600,000 million loan. After refinancing of the property, there was a special distribution of $1,092,000 to TICs investing in the program. In 2003, the property repaid the $49,000 loan from an affiliate of Triple Net Properties and received a loan of $19,000 from Triple Net Properties to assist with year-end reimbursement timing differences. In 2004, the property repaid the $19,000 loan from Triple Net Properties.

      NNN One Gateway Plaza, LLC: The offering period began June 8, 2001 and ended September 25, 2001. The offering raised $4,197,500, or 99.9% of the offering amount. The LLC with two unaffiliated members retained a 1.25% ownership interest in the property. The remaining 98.75% is owned by 10 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

One Gateway Plaza

100.0

%

office

7/30/01

$

12,550,000

$

9,375,000

113,000

Colorado Springs, CO

      NNN LV 1900 Aerojet Way, LLC: The offering period began July 26, 2001 and ended August 31, 2001. The offering raised $2,000,000, or 100% of the offering amount. 100% of the property is owned by 10 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

1900 Aerojet Way

100.0

%

office?industrial

8/31/01

$

5,067,000

$

3,625,000

107,000

Las Vegas, NV

      In 2001, the program received a $32,000 loan from Triple Net Properties to cover unanticipated lender holdbacks of $200,000 at acquisition. In 2002, the program received an $18,000 loan from an affiliate of Triple Net Properties to supplement capital funds due to the timing of certain repairs. In 2003, the program received a $31,000 loan from Triple Net Properties for the same purpose. In 2003, the program had deficit cash flow after distributions of $1,000. The deficit cash flow was funded from prior years’ excess cash flow after distributions. In 2004, the program received a $7,000 loan from Triple Net Properties and a $5,000 loan from an affiliate of Triple Net Properties pending lender reserve reimbursement.

      NNN Timberhills Shopping Center, LLC: The offering period began July 31, 2001 and ended November 27, 2001. The offering raised $3,695,375, or 99.9% of the offering amount. The LLC with one unaffiliated member retained a 1% ownership interest in the property. The remaining 99% is owned by 13 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Timberhills Shopping Center

100.0

%

shopping center

11/27/01

$

9,180,000

$

6,390,000

102,000

Sonora, CA

      In 2002, an affiliate of Triple Net Properties loaned $66,000 to the program for acquisition related costs.

      NNN Addison Com Center, LLC: The offering period began August 16, 2001 and ended April 2, 2002. The offering raised $3,650,000, or 100% of the offering amount. The LLC with six unaffiliated members retained a 5.125% ownership interest in the property. The remaining 94.875% is owned by 10 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Addison Com Center

100.0

%

office

10/31/01

$

10,500,000

$

7,750,000

96,000

Addison, TX

      In March 2003, the program reduced its distributions to investors from 8% to 0% as a result of the loss of a major tenant. In 2003, the program received a $40,000 loan from Triple Net Properties. In 2004, the program had deficit cash flow of $217,000. The deficit cash flow was funded from prior years’ excess cash flow after distributions and a $37,000 loan from an affiliate of Triple Net Properties in 2004. There were no distributions in 2004.

85

      NNN County Center Drive, LLC: The offering period began September 18, 2001 and ended February 6, 2002. The offering raised $3,125,000, or 100% of the offering amount. The LLC with Triple Net Properties as a single member retained a 1% ownership interest in the property. The remaining 99% is owned by 17 unaffiliated TICs, T REIT, an entity controlled by Mr. Thompson and a shareholder of Triple Net Properties investing as TICs in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

County Center Building

100.0

%

distribution/ warehouse/office

9/28/01

$

5,395,000

$

3,210,000

78,000

Temecula, CA

      In 2003, the program had deficit cash flow after distributions of $45,000. The deficit cash flow was funded from prior years’ excess cash flow.

      In 2003, an affiliate of Triple Net Properties loaned $14,000 and Triple Net Properties loaned $59,000 to the program primarily to fund lender required reserves. In 2004, Triple Net Properties loaned an additional $52,000 for the same purpose.

      NNN City Center West “B” LLC: The offering period began October 31, 2001 and ended June 15, 2002. The offering raised $8,200,000, or 100% of the offering amount. The LLC with two unaffiliated members retained a 0.915% ownership interest in the property. The remaining 99.085% is owned by 16 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

City Center West “B”

100.0

%

office

1/23/02

$

20,800,000

$

14,650,000

104,000

Las Vegas, NV

      The property is subject to a master lease guaranteed by an affiliate of Triple Net Properties.

      NNN Arapahoe Service Center II, LLC: The offering period began February 11, 2002 and ended June 20, 2002. The offering raised $4,000,000, or 100% of the offering amount. The LLC with two unaffiliated members retained a 5% ownership interest in the property. The remaining 95% is owned by 19 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Araphoe Service Center II

100.0

%

office/flex complex

4/19/02

$

8,038,000

$

5,000,000

79,000

Englewood, CO

      In 2004, the program had deficit cash flow after distributions of $33,000. The deficit cash flow resulted from a special distribution of $100,000 in addition to the program’s regular distribution which was funded from prior years’ excess cash flow after distributions.

      NNN City Center West “A”, LLC: The offering period began February 12, 2002 and ended March 15, 2002. The offering raised $1,237,803, or 35.4% of the offering amount. 10.875% of the property is owned by three unaffiliated TICs investing in the program and 89.125% of the property is owned by T REIT, which purchased its interest as a TIC in the property outside of the program.

Share of

Share of

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

City Center West “A”

10.9

%

office

3/15/02

$

2,362,000

$

1,417,000

106,000

Las Vegas, NV

      In 2003, the program had deficit cash flow after distributions of $4,000 representing return of capital of $2,000. In 2004, the program had deficit cash flow after distributions of $15,000 resulting in return of capital of the same amount.

      NNN Titan Building & Plaza, LLC: The offering began February 18, 2002 and ended May 28, 2002. The offering raised $2,219,808, or 88.8% of the original offering amount from five unaffiliated TICs. The

86

program acquired a 51.5% interest in the property. The remaining 48.5% was purchased outside of the program by T REIT as a TIC.

Share of

Share of

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Titan Building and Titan Plaza

51.5

%

office

04/17/02

$

4,721,000

$

3,090,000

131,000

San Antonio, TX

      NNN Pacific Corporate Park 1, LLC: The offering began March 11, 2002 and ended June 25, 2002. The offering raised $5,800,000, or 100% of the offering amount. The LLC retained an undivided 60% ownership interest in the property from 45 unaffiliated members and T REIT. The remaining 40% is owned by a private program sponsored by Triple Net Properties. Each program invested as an independent TIC outside of the other program.

Share of

Share of

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Pacific Corporate Park

60.0

%

6-building office park

03/25/02

$

14,237,000

$

9,300,000

167,000

Lake Forest, CA

      In 2004, the program had deficit cash flow after distributions of $55,000 which was funded by prior years’ excess cash flow after distributions. In 2004, an affiliate of Triple Net Properties loaned $80,000 ($48,000 of which is allocable to the program’s 60% ownership interest in the property) to cover incurred tenant improvements.

      NNN North Reno Plaza, LLC: The offering period began March 31, 2002 and ended June 19, 2002. The offering raised $2,750,000, or 100% of the offering amount. The LLC with three unaffiliated members retained a 1.75% ownership interest in the property. The remaining 98.25% is owned by 14 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

North Reno Plaza Shopping Center

100.0

%

shopping center

6/19/02

$

7,200,000

$

5,400,000

130,000

Reno, NV

      In 2003, the program received a loan of $44,000 from Triple Net Properties to supplement a short-term cash balance deficit. The loan was repaid in 2004.

      NNN Brookhollow Park, LLC: The offering period began April 12, 2002 and ended July 3, 2002. The offering raised $6,550,000, or 100% of the offering amount. The LLC with nine unaffiliated members and two affiliated members, consisting of separate investments by an entity controlled by Mr. Thompson, retained a 7.25% ownership interest in the property. The remaining 92.75% is owned by 19 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Brookhollow Park

100.0

%

office

7/03/02

$

15,360,000

$

10,250,000

102,000

San Antonio, TX

      NNN 1397 Galleria Drive, LLC: The offering period began May 24, 2002 and ended October 23, 2002. The offering raised $1,950,000, or 100% of the offering amount. The LLC with one unaffiliated member retained a 2% ownership interest in the property. The remaining 98% is owned by 14 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Galleria Office Building

100.0

%

office

9/11/02

$

3,420,000

$

1,962,000

14,000

Henderson, NV

      In August 2003, a major tenant vacated the property. As a result, in February, 2004, the program terminated distributions to investors. In 2003, the program had deficit cash flow after distributions of $97,000 representing return of capital of $69,000. The deficit cash flow was funded from prior years’ excess

87

cash flow after distributions, reserves and a $5,000 loan from an affiliate of Triple Net Properties. In 2004, the program had deficit cash flow after distributions of $18,000 representing return of capital of $13,000. In 2004, the $5,000 loan from an affiliate of Triple Net Properties was repaid.

      NNN Bryant Ranch, LLC: The offering period began June 10, 2002 and ended November 12, 2002. The offering raised $5,000,000, or 100% of the offering amount. The LLC with eight unaffiliated members retained a 2.875% ownership interest in the property. The remaining 97.125% was owned by 20 unaffiliated investors and one entity controlled by Mr. Thompson investing as TICs in the program. The property was acquired from WREIT, an entity managed by Triple Net Properties.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Bryant Ranch Shopping Center

100.0

%

shopping center

9/05/02

$

10,080,000

$

6,222,000

94,000

Yorba Linda, CA

      For the year ended December 31, 2003, the program had deficit cash flow after distributions of $58,000 which was funded by the previous year’s excess cash flow after distributions. On November 2, 2004, the property was sold at a price of $13,000,000. From sale proceeds, Realty received a disposition fee of $260,000. The gain was $1,424,000.

      NNN 4241 Bowling Green, LLC: The offering period began June 14, 2002 and ended December 27, 2002. The offering raised $2,850,000, or 100% of the offering amount. The LLC with one unaffiliated member retained a 2.63% ownership interest in the property. The remaining 97.37% is owned by 17 unaffiliated TICs investing in the program. The property was acquired from a private program managed by Triple Net Properties.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

4241 Bowling Drive

100.0

%

office

9/25/02

$

5,200,000

$

3,092,000

68,000

Sacramento, CA

      In 2002, Triple Net Properties loaned $9,000 to the program to cover costs to close the acquisition as all of the offering proceeds had not been raised as of the acquisition date of the property. The loan was repaid in 2003 upon the completion of the offering. In 2004, the program had deficit cash flow after distributions of $127,000 representing return of capital of $84,000.

      NNN Wolf Pen Plaza, LLC: The offering period began July 1, 2002 and ended October 23, 2002. The offering raised $5,500,000, or 100% of the offering amount. The LLC with one unaffiliated member retained a 1% ownership interest in the property. The remaining 99% is owned by 14 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Wolf Pen Plaza

100.0

%

shopping center

9/24/02

$

16,220,000

$

12,265,000

170,000

College Station, TX

      NNN Alamosa Plaza, LLC: The offering period began July 18, 2002 and ended October 25, 2002. The offering raised $6,650,000, or 100% of the offering amount. The LLC with one unaffiliated member retained a 1% ownership interest in the property. The remaining 99% is owned by 14 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Alamosa Plaza Shopping Center

100.0

%

shopping center

10/08/02

$

18,500,000

$

13,500,000

78,000

Las Vegas, NV

      In 2004, the program had deficit cash flow after distributions of $141,000. Prior years’ excess cash flow after distributions covered, in part, the 2004 deficit resulting in return of capital of $92,000.

      NNN Saddleback Financial, LLC: The offering period began August 30, 2002 and ended October 29, 2002. The offering raised $3,865,800, or 100% of the offering amount. 75% of the property was owned by investors investing in the program and 25% of the property was owned by T REIT, which

88

purchased its portion of the property outside of the program. The LLC with one unaffiliated member retained a 1.67% ownership interest in the program. The remaining 98.33% was owned by seven unaffiliated TICs investing in the program.

Share of

Ownership

Purchase

Share of Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Saddleback Financial Center

75.0

%

Office

9/25/02

$

8,304,000

$

5,738,000

72,000

Laguna Hills, CA

      In 2003, the program had deficit cash flow after distributions of $127,000 resulting in return of capital of $46,000. The deficit cash flow was funded in part from prior years’ excess cash flow after distributions. In December 2004, the property was sold at a price of $15,450,000. Realty was paid a disposition fee of $460,000 from the program’s portion of the sale. The program realized a gain of $1,941,000.

      NNN Kahana Gateway Center, LLC: The offering period began October 9, 2002 and ended March 6, 2003. The offering raised $8,140,000, or 100% of the offering amount. The LLC with nine unaffiliated members and one shareholder of Triple Net Properties retained a 5% ownership interest in the property. The remaining 95% is owned by 15 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Kahana Gateway Shopping Center and Professional Bldg

100.0

%

retail/office

12/20/02

$

19,400,000

$

13,041,000

80,000

Maui, HI

      NNN Springtown Mall, DST: The offering period began October 10, 2002 and ended March 21, 2003. The offering raised $2,550,000, or 100% of the offering amount. The LLC with three unaffiliated members owns a 3.375% beneficial interest in the trust that owns the property. Eleven unaffiliated investors own the remaining 96.625% of the beneficial interest in the trust that owns the property.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Springtown Mall Shopping Center

100.0

%

Shopping center

12/09/02

$

6,490,000

$

4,700,000

96,000

San Marcos, TX

      In 2002, affiliates of Triple Net Properties loaned $107,000 to the program to cover costs to close the acquisition as all of the offering proceeds had not been raised as of the acquisition date of the property. Upon completion of the offering in 2003, $65,000 of these loans were repaid. Also, in 2002, the program had deficit cash flow of $4,000 with no return of capital as no distributions were made in that year.

      NNN Congress Center, LLC: The offering began October 15, 2002 and ended July 14, 2003. The offering raised $36,073,120, or 100% of the offering amount. The LLC retained a 28.9% interest in the property and 44.8% interest in the program with 81 unaffiliated members, T REIT and 2002 Value Fund. The remaining 55.2% of the program (35.6% interest in the property) is owned by 15 unaffiliated TICs investing in the program. The program owns 64.5% of the property. The remaining 35.5%, which was purchased outside the program, is owned by one unaffiliated TIC (5.5% ownership in the property) and G REIT as a TIC (30% ownership of the property).

Share of

Ownership

Purchase

Share of

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Purchase Price

at Purchase

(Sq Ft)

Location

Congress Center

64.5

%

Office

01/09/03

$

87,790,000

$

61,839,000

525,000

Chicago, IL

      NNN Park Sahara, DST: The offering period began October 25, 2002 and ended March 17, 2003. The offering raised $4,953,000, or 100% of the offering amount. 95.25% of the property is owned by investors investing in the program and 4.75% of the property was purchased outside the program by G REIT as a TIC interest. The LLC with one unaffiliated member owns a 1.71% beneficial interest in the

89

trust that owns the property. Eleven unaffiliated investors own the remaining 98.29% of the beneficial interest in the trust that owns 95.25% of the property.

Share of

Ownership

Purchase

Share of

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Purchase Price

at Purchase

(Sq Ft)

Location

Park Sahara Office Park

95.25

%

5- building office park

3/18/03

$

11,627,000

$

8,005,000

124,000

Las Vegas, NV

      In 2002, Triple Net Properties loaned $225,000 to the program to cover costs to close the acquisition as all of the offering equity had not been raised as of the acquisition of the property. Upon completion of the offering in 2003, the loan was repaid. In 2004, Triple Net Properties loaned $44,000 to fund operations. In 2004, the program had deficit cash flow after distributions of $228,000 and return of capital of $174,000.

      NNN Parkwood Complex, LLC: The offering period began October 28, 2002 and ended April 23, 2003. The offering raised $7,472,000, or 100% of the offering amount. The LLC with 12 unaffiliated members and one shareholder of Triple Net Properties retained a 13.5% ownership interest in the property. The remaining 86.5% is owned by 10 TICs, 9 unaffiliated and an entity controlled by Mr. Thompson investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Parkwood I & II

100.0

%

office

12/31/02

$

20,436,000

$

13,922,000

196,000

Woodlands, TX

      In 2002, an affiliate of Triple Net Properties and Triple Net Properties loaned $257,000 and $87,000, respectively, to cover costs to close the acquisition as all of the offering equity had not been raised as of the acquisition of the property. Upon completion of the offering in 2003, these loans were repaid. In 2003, an affiliate of Triple Net Properties loaned $1,500,000 to take out short-term seller financing until a new mortgage could be put in place. This loan was repaid in 2003.

      NNN Beltline-Royal Ridge, LLC: The offering began November 8, 2002 and ended November 4, 2003. The offering raised $4,900,000, or 100% of the offering amount. The LLC retained a 10.5% ownership interest with 12 unaffiliated members. The remaining 89.5% is owned by 17 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Beltline — 114 and Royal Ridge Tech

100

%

2 office buildings

04/01/03

$

9,550,000

$

6,150,000

84,000

Irving, TX

      NNN Parkway Towers, DST: The offering period began November 18, 2002 and ended August 13, 2003. The offering raised $7,342,575, or 99.9% of the offering amount. The LLC with two unaffiliated members owns a 1.75% beneficial interest in the trust that owns the property. Twenty-four unaffiliated investors own the remaining 98.25% of the beneficial interest in the trust that owns the property.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Parkway Towers Office Park

100.0

%

office

5/09/03

$

12,450,000

$

6,000,000

190,000

Nashville, TN

      Upon the acquisition in 2003, the lender funded $1,200,000 less than the amount planned for in the offering memorandum, pending lease-up of vacant space. In 2003, the program received a $100,000 loan from an affiliate of Triple Net Properties and a $113,000 loan from Triple Net Properties to supplement capital funds for tenant improvements and lender-required capital improvements, which was repaid upon the full funding of the loan by the lender. The lender subsequently funded an additional $2,000,000, but required that the majority of this amount be reserved for capital improvements. In 2004, the $100,000 loan from an affiliate of Triple Net Properties was repaid and Triple Net Properties loaned $21,000 to supplement capital needs at the property.

90

      NNN Buschwood, LLC: The offering period began December 20, 2002 and ended March 25, 2003. The offering raised $3,200,000, or 100% of the offering amount. The LLC with one unaffiliated member retained a 1% ownership interest in the property. The remaining 99% is owned by 12 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Buschwood III Office Park

100.0

%

office

3/25/03

$

6,983,000

$

4,600,000

77,000

Tampa, FL

      In 2004, the program had deficit cash flow after distributions of $30,000 covered by prior years’ excess cash flow after distributions.

      NNN 1851 E. First Street, LLC: The offering period began February 14, 2003 and ended July 29, 2003. The offering raised $20,500,000, or 100% of the offering amount. The LLC with 54 unaffiliated members retained an 11.5% ownership interest in the property. The remaining 88.5% is owned by 17 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Xerox Centre

100.0

%

office

6/16/03

$

60,500,000

$

45,375,000

318,000

Santa Ana, CA

      NNN Netpark, LLC: The offering period began March 18, 2003 and ended September 18, 2003. The offering raised $23,700,000, or 100% of the offering amount. The LLC with 33 unaffiliated members retained a 4.75% ownership interest in the property. The remaining 95.25% is owned by 22 unaffiliated TICs, 2002 Value Fund and an entity controlled by Mr. Thompson investing as TICs in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Netpark Tampa Bay

100.0

%

office

6/11/03

$

47,000,000

$

31,500,000

911,000

Tampa, FL

      NNN 602 Sawyer, LLC: The offering period began March 28, 2003 and ended September 3, 2003. The offering raised $4,700,000, or 100% of the offering amount. The LLC with seven unaffiliated members retained a 10% ownership interest in the property. The remaining 90% is owned by 19 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

602 Sawyer

100.0

%

office

6/5/03

$

9,270,000

$

5,850,000

86,000

Houston, TX

      In 2004, the program had deficit cash flow after distributions of $89,000. The prior year’s excess cash flow after distributions covered the deficit in 2004. In December 2004, an affiliate of Triple Net Properties loaned $20,000 to the program for operations.

      NNN Jefferson Square, LLC: The offering period began May 1, 2003 and ended August 26, 2003. The offering raised $9,200,000, or 100% of the offering amount. The LLC with 22 unaffiliated members retained a 10% ownership interest in the property. The remaining 90% is owned by 15 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Jefferson Square

100.0

%

office/retail

7/28/03

$

20,125,000

$

13,070,000

146,000

Seattle, WA

      NNN Arapahoe Business Park, LLC: The offering period began June 13, 2003 and ended September 23, 2003. The offering raised $3,800,000, or 100% of the offering amount. The LLC with five

91

unaffiliated members retained a 5% ownership interest in the property. The remaining 95% is owned by 14 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Arapahoe Business Park

100.0

%

office

8/11/03

$

7,988,000

$

5,200,000

133,000

Centennial, CO

      In 2003, Triple Net Properties loaned $15,000 to the program relating to costs associated with the acquisition of the property. The loan was repaid in 2004.

      NNN 901 Corporate Center, LLC: The offering period began June 13, 2003 and ended October 3, 2003. The offering raised $6,292,125, or 99.9% of the offering amount. The LLC with 12 unaffiliated members retained a 5.125% ownership interest in the property. The remaining 94.875% is owned by 14 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

901 Corporate Center

100.0

%

office

8/15/03

$

16,150,000

$

11,310,000

101,000

Monterey Park, CA

      In 2004, the program had deficit cash flow after distributions of $211,000 representing return of capital of $68,000. The deficit cash flow was funded in part from the prior year’s excess cash flow after distributions.

      NNN Jamboree Promenade, LLC: The offering period began June 20, 2003 and ended December 10, 2003. The offering raised $6,800,000, or 100% of the offering amount. The LLC with 14 unaffiliated members retained a 7.625% ownership interest in the property. The remaining 92.375% is owned by 16 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Jamboree Promenade

100.0

%

retail

7/25/03

$

20,200,000

$

15,000,000

59,000

Irvine, CA

      NNN Executive Center, LLC: The offering period began July 11, 2003 and ended December 23, 2003. The offering raised $14,700,000, or 100% of the offering amount. The LLC with 30 unaffiliated members, a shareholder of Triple Net Properties and an entity controlled by Mr. Thompson retained a 49.625% ownership interest in the property. The remaining 50.375% is owned by 14 unaffiliated TICs and 2003 Value Fund and an entity controlled by Mr. Thompson investing as TICs in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Executive Center  II & III

100.0

%

office

8/1/03

$

24,600,000

$

14,950,000

381,000

Dallas, TX

      NNN Union Pines, LLC: The offering period began July 18, 2003 and ended May 20, 2004. The offering raised $7,900,000, or 100% of the offering amount. The LLC with 12 unaffiliated members retained a 5.25% ownership interest in the property. The remaining 94.75% is owned by 22 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Union Pines

100.0

%

office

10/08/03

$

15,000,000

$

9,060,000

134,000

Tulsa, OK

      NNN 1410 Renner, LLC: The offering period began July 25, 2003 and ended December 8, 2003. The offering raised $7,300,000, or 100% of the offering amount. The LLC with seven unaffiliated members

92

retained a 5% ownership interest in the property. The remaining 95% is owned by 19 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

1410 Renner Road

100.0

%

office

10/29/03

$

13,900,000

$

8,740,000

117,000

Richardson, TX

      NNN Westbay Office Park, LLC: The offering period began August 8, 2003 and ended June 9, 2004. The offering raised $11,000,000, or 100% of the offering amount. The LLC with 22 unaffiliated members retained a 11.375% ownership interest in the property. The remaining 88.625% is owned by 22 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Westbay Office Park

100.0

%

office

12/15/03

$

23,600,000

$

15,000,000

108,000

Las Vegas, NV

      In 2003, Triple Net Properties loaned $630,000 to the program at acquisition to fund an unanticipated lender imposed holdback related to tenant estoppel issues. Triple Net Properties was repaid $360,000 during 2004. In 2004, the program had deficit operating cash flow after distributions of $7,000, covered by the previous year’s excess cash flow after distributions.

      NNN Parkway Corporate Plaza, LLC: The offering period began August 15, 2003 and ended June 7, 2004. The offering raised $23,713,346, or 99.6% of the offering amount. The LLC with 50 unaffiliated members retained a 6.2% ownership interest in the property. The remaining 93.8% is owned by 24 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Parkway Corporate Plaza

100.0

%

office

11/10/03

$

63,650,000

$

45,000,000

287,000

Roseville, CA

      In 2004, a major tenant vacated the property. Pursuant to the loan agreement, the lender swept all operating cash flow for a reserve. Triple Net Properties procured a $2,500,000 letter of credit to temporarily secure funding of the reserve and the lender ended the cash flow sweep. The TICs funded their pro rata share of the reserve either directly or in credit of their distributions. In 2004, Triple Net Properties loaned $2,058,000 related to the letter of credit. In 2004, Triple Net Properties was repaid $1,145,000 of the loan.

      NNN Twain, LLC: The offering period began September 3, 2003 and ended May 20, 2004. The offering raised $2,925,000, or 100% of the offering amount. The LLC with seven unaffiliated members retained a 7.875% ownership interest in the property. The remaining 92.125% is owned by 18 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Business Bank of Nevada

100.0

%

office

12/08/03

$

5,700,000

$

3,750,000

27,000

Las Vegas, NV

      In 2003, due to an unanticipated loan holdback of $300,000, the program received a $100,000 loan from Triple Net Properties. In 2004, the program had deficit cash flow after distributions of $3,000 which was covered by the previous year’s excess cash flow after distributions.

      NNN Enclave Parkway, LLC: The offering began October 15, 2003 and ended May 27, 2004. The offering raised $15,350,000 or 100% of the offering amount. The LLC with eight unaffiliated members,

93

one shareholder of Triple Net Properties and T REIT retained a 7% ownership interest in the property. The remaining 93% of the property is owned by 22 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

1401 Enclave Parkway

100.0

%

office

12/22/03

$

34,500,000

$

23,600,000

207,000

Houston, TX

      NNN Arapahoe Service Center 1, LLC: The offering began November 21, 2003 and ended January 30, 2004. The offering raised $5,250,000 or 100% of the offering amount. The LLC with seven unaffiliated members retained a 5.625% ownership interest in the property. The remaining 94.375% of the property is owned by 13 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Arapahoe Service Center

100.0

%

office

1/29/04

$

10,100,000

$

6,500,000

144,000

Englewood, CO

      NNN Amber Oaks, LLC: The offering period began December 5, 2003 and ended January 20, 2004. The offering raised $10,070,000, or 100% of the offering amount. The property is owned by three unaffiliated TICs and T REIT investing as TICs in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

AmberOaks Corporate Center

100.0

%

three office buildings

1/20/04

$

22,965,000

$

15,000,000

207,000

Austin, TX

      NNN Lakeside Tech, LLC: The offering period began December 31, 2003 and ended June 24, 2004. The offering raised $8,000,000, or 100% of the offering amount. The LLC with 18 unaffiliated members retained a 8.5% ownership interest in the property. The remaining 91.5% is owned by 20 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Lakeside Tech Center

100.0

%

office

2/6/04

$

19,788,000

$

14,625,000

223,000

Tampa, FL

      NNN Corporate Court, LLC: The offering period began January 8, 2004 and ended May 19, 2004. The offering raised $3,230,000, or 100% of the offering amount. The LLC with seven unaffiliated members retained a 5% ownership interest in the property. The remaining 95% is owned by 11 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Corporate Court

100.0

%

office

3/25/04

$

7,570,000

$

5,000,000

67,000

Irving, TX

      Triple Net Properties loaned $15,000 to the program to cover costs to close the acquisition as all of the offering equity had not been raised as of the date of the acquisition of the property. Upon completion of the offering in 2004, the loan was repaid.

      NNN 801 K Street, LLC: The offering period began January 28, 2004 and ended March 31, 2004. The offering raised $29,600,000, or 100% of the offering amount. The LLC with 20 unaffiliated members, one shareholder of Triple Net Properties and 2003 Value Fund retained a 21.5% ownership interest in the property. The remaining 78.5% of the property is owned by 22 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

801 K Street

100.0

%

office

3/31/04

$

65,780,000

$

41,350,000

336,000

Sacramento, CA

      Triple Net Properties loaned $2,292,000 to the program to cover costs to close the acquisition as all the offering equity had not been raised as of the date of the acquisition of the property. Upon completion of the offering in 2004, the loan was repaid.

94

      NNN 100 Cyberonics Drive, LLC: The offering period began January 29, 2004 and ended May 28, 2004. The offering raised $6,500,000, or 100% of the offering amount. The LLC with nine unaffiliated members retained a 5% ownership interest in the property. The remaining 95% is owned by 14 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

100 Cyberonics Drive

100.0

%

office

3/19/04

$

15,580,000

$

10,500,000

144,000

Houston, TX

      Triple Net Properties loaned $70,000 to the program to cover costs to close the acquisition as all the offering equity had not been raised as of the date of the acquisition of the property. Upon completion of the offering in 2004, the loan was repaid.

      NNN Enterprise Way, LLC: The offering period began January 30, 2004 and ended May 7, 2004. The offering raised $32,060,000, or 100% of the offering amount. The LLC with 28 unaffiliated members and 2003 Value Fund retained an 11.6% ownership interest in the property. The remaining 88.4% is owned by 30 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Enterprise Technology Center

100.0

%

office

5/07/04

$

61,300,000

$

36,500,000

370,000

Scotts Valley, CA

      NNN Western Place, LLC: The offering period began March 12, 2004 and ended July 23, 2004. The offering raised $4,450,500, or 100% of the offering amount, from seven unaffiliated TICs. The program owns an undivided 21.5% interest in the property. The remaining 78.5% is owned by G REIT as a TIC outside of the program.

Share of

Share of

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Western Place I and II

21.5

%

office complex

07/23/04

$

7,203,000

$

5,160,000

429,000

Fort Worth, TX

      NNN Oakey Building 2003, LLC: The offering period began March 25, 2004 and ended May 19, 2004. The offering raised $8,270,000, or 100% of the offering amount. The LLC members with 12 unaffiliated members, 2003 Value Fund and T REIT retained 100% of the property.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Oakey Building

100.0

%

office

04/02/04

$

8,137,000

$

4,000,000

98,000

Las Vegas, NV

      NNN River Rock Business Center, LLC: The offering period began April 5, 2004 and ended July 1, 2004. The offering raised $7,130,000, or 100% of the offering amount. The property is owned by 29 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

River Rock Business Center

100.0

%

office

06/11/04

$

15,200,000

$

9,300,000

158,000

Murfreesboro, TN

      Triple Net Properties loaned $35,000 to the program at the close of escrow to cover an unanticipated lender required community development reserve of $82,000.

      NNN Great Oaks Center, LLC: The offering period began April 9, 2004 and ended October 22, 2004. The offering raised $11,000,000, or 100% of the offering amount. The LLC with two unaffiliated members retained a 1% ownership interest in the property. The remaining 99% is owned by 17 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Great Oaks Center

100.0

%

office complex

06/30/04

$

27,050,000

$

20,000,000

233,000

Atlanta, GA

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      NNN Sugar Creek Center, LLC: The offering began April 30, 2004 and closed September 29, 2004. The offering raised $8,650,000, or 100% of the offering amount. The LLC with four unaffiliated members retained a 1.125% ownership interest in the property. The remaining 98.875% is owned by 27 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Two Sugar Creek

100.0

%

office

07/12/04

$

21,850,000

$

16,000,000

143,000

Houston, TX

      NNN Emerald Plaza, LLC: The offering period began May 7, 2004 and ended January 5, 2005. The offering raised $42,799,712, or 100% of the offering amount. The LLC, with 71 unaffiliated members, T REIT, 2003 Value Fund and two shareholders of Triple Net Properties as affiliated members of the LLC, retained a 20.5% interest in the property. The remaining 79.5% is owned by 27 unaffiliated TICs and an entity controlled by Mr. Thompson investing as a TIC in the program.

Ownership

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Purchase Price

at Purchase

(Sq Ft)

Location

Emerald Plaza

100.0

%

office

06/14/04

$

100,940,000

$

68,500,000

355,000

San Diego, CA

      NNN Beltway 8 Corporate Centre, LLC: The offering period began June 2, 2004 and ended October 20, 2004. The offering raised $7,010,000, or 100% of the offering amount. The LLC with 14 unaffiliated members retained a 6.625% ownership interest in the property. The remaining 93.375% is owned by 18 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Beltway 8 Corporate Centre

100.0

%

office

7/22/04

$

16,200,000

$

10,530,000

101,000

Houston, TX

      NNN Reserve at Maitland, LLC: The offering period began June 10, 2004 and ended September 13, 2004. The offering raised $10,800,000, or 100% of the offering amount. The LLC with 23 unaffiliated members retained a 6.25% ownership interest in the property. The remaining 93.75% is owned by 23 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Reserve at Maitland

100.0

%

office

8/18/04

$

29,870,000

$

21,750,000

197,000

Maitland, FL

      NNN One Financial Plaza, LLC: The offering period began June 28, 2004 and ended August 30, 2004. The offering raised $3,624,750, or 100% of the offering amount, from three unaffiliated TICs. The program owns an undivided 22.4% interest in the property. The remaining 77.6% is owned by G REIT as a TIC outside the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

One Financial Plaza

22.4

%

office

08/06/04

$

8,288,000

$

6,888,000

434,000

St. Louis, MO

      NNN Las Cimas, LLC: The offering period began August 2, 2004 and ended December 9, 2004. The offering raised $32,250,000, or 100% of the offering amount. The LLC with 45 unaffiliated members retained a 9.375% ownership interest in the property. The remaining 90.625% is owned by 27 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Las Cimas II and III

100.0

%

office complex

9/27/04

$

73,100,000

$

46,800,000

313,000

Austin, TX

      NNN Embassy Plaza, LLC: The offering period began August 6, 2004 and ended January 20, 2005. The offering raised $8,655,000, or 100% of the offering amount. The LLC with six unaffiliated members

96

and a shareholder of Triple Net Properties retained a 3.75% ownership interest in the property. The remaining 96.25% is owned by 23 unaffiliated TICs investing in the program.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Embassy Plaza

100.0

%

office

10/29/04

$

17,000,000

$

9,900,000

132,000

Omaha, NE

      NNN 9800 Goethe Road, LLC: The offering period began August 10, 2004 and ended October 8, 2004. The offering raised $4,700,000, or 100% of the offering amount. The property is owned by seven unaffiliated TIC investors.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

9800 Goethe Road

100.0

%

office

10/07/04

$

17,850,000

$

14,800,000

111,000

Sacramento, CA

      NNN 2800 East Commerce, LLC: The offering period began August 16, 2004 and remained open as of December 31, 2004. As of December 31, 2004, the offering raised $7,980,000, or 99.75% of the offering amount of $8,000,000. The LLC with three unaffiliated members, Triple Net Properties and a shareholder of Triple Net Properties, retained a 2.25% ownership interest in the property. The remaining 97.75% is owned by 25 unaffiliated TICs investing in the program. The offering closed May 13, 2005, after raising an additional $20,000.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

2800 East Commerce Place

100.0

%

office

11/19/04

$

18,025,000

$

11,375,000

136,000

Tucson, AZ

      NNN Fountain Square, LLC: The offering began August 16, 2004 and remained open as of December 31, 2004. As of December 31, 2004, the offering had raised $18,595,500, or 94.9% of the offering amount of $19,600,000. The LLC with 13 unaffiliated members and Triple Net Properties retained a 3.25% ownership interest in the property. The remaining 96.75% is owned by 25 unaffiliated TICs investing in the program. The offering closed February 17, 2005, after raising an additional $1,004,500.

Ownership

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Type of Property

Date

Price

at Purchase

(Sq Ft)

Location

Fountain Square

100.0

%

office complex

10/28/04

$

51,500,000

$

36,250,000

242,000

Boca Raton, FL

      NNN Oak Park Office Center, LLC: The offering began September 27, 2004 and remained open as of December 31, 2004. As of December 31, 2004, the offering had raised $9,849,925 or approximately 100% of the offering amount of $9,850,000. The LLC with 10 unaffiliated members retained a 3.75% ownership interest in the property. The remaining 96.25% is owned by 19 unaffiliated TICs investing in the program. The offering was closed on May 31, 2005, without additional offering proceeds.

Ownership

Type of

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Property

Date

Price

at Purchase

(Sq Ft)

Location

Oak Park Office Center

100.0

%

office

11/12/04

$

29,149,000

$

21,800,000

173,000

Houston, TX

      NNN City Centre Place, LLC: The offering began October 7, 2004 and remained open as of December 31, 2004. As of December 31, 2004, the offering had raised $9,807,438, or 96.6% of the offering amount of $10,150,000. The LLC with 36 unaffiliated members retained an 18.125% ownership interest in the property. The remaining 81.875% of the property is owned by 16 unaffiliated TICs investing in the program. The offering closed on January 7, 2005, after raising the remaining $342,562 of the offering amount.

Ownership

Type of

Purchase

Purchase

Mortgage Debt

GLA

Property Name

Interest

Property

Date

Price

at Purchase

(Sq Ft)

Location

City Centre Place

100.0

%

office

11/05/04

$

29,480,000

$

21,500,000

103,000

Las Vegas, NV

97

CONFLICTS OF INTEREST

      Our management will be subject to various conflicts of interest arising out of our relationship with our advisor, the advisor’s affiliates and the dealer manager. All agreements and arrangements, including those relating to compensation, between us and our advisor, the dealer manager and their affiliates are not the result of arm’s-length negotiations. The limitations on our advisor described below have been adopted to control when we enter into transactions with our advisor, the dealer manager and their affiliates. With respect to the conflicts of interest described herein, our advisor, the dealer manager and their affiliates have informed us that they will endeavor to balance their interests with our interests.

      We believe that the compensation paid to our advisor and its affiliates under the advisory agreement is on terms no less favorable to our company than those customary for similar services performed by independent firms in the relevant geographic areas.

Competition for the Time and Service of Our Advisor and Its Affiliates

      Our company relies on our advisor and its affiliates to manage our assets and daily operations. Many of the same persons serve as directors, officers and employees of our company, our advisor and its affiliates. Key executives of our advisor have conflicts of interest in allocating management time, services and functions among our advisor and the various existing real estate programs and any future real estate programs or business ventures that they may organize or serve. Our advisor has informed us that it and its affiliates will employ sufficient staff to be fully capable of discharging their responsibilities in connection with our company and the various other real estate programs advised or managed by affiliates of our advisor.

Process for Resolution of Conflicting Opportunities

      Triple Net Properties, the parent and manager of our advisor, has sponsored publicly and privately offered real estate programs and may in the future sponsor privately and publicly offered real estate programs that may have investment objectives similar to ours. Therefore, our advisor and its affiliates could be subject to conflicts of interest between our company and other real estate programs. The advisory agreement gives us the first opportunity to buy Class A income-producing apartment properties placed under contract by our advisor or its affiliates that satisfy our investment objectives, so long as our board of directors or appropriate acquisition committee votes to make the purchase within seven days of being offered such property by our advisor. If our board of directors or appropriate acquisition committee does not vote to make such purchase within seven days of being offered such property, our advisor is free to offer such opportunity to any other affiliates or non-affiliates, as it so chooses.

      Other factors that may be considered in connection with the decisions as to the suitability of the property for investment include:

•  the effect of the acquisition on the diversification of our portfolio;

•  the amount of funds we have available for investment;

•  cash flow; and

•  the estimated income tax effects of the purchase and subsequent disposition.

      The independent directors must, by majority vote, approve all actions by our advisor or its affiliates that present potential conflicts with our company.

      We believe that the above factors, including the obligations of our advisor and its affiliates to present to us any Class A income-producing apartment property opportunities that satisfy our investment objectives, will help to lessen the competition or conflicts with respect to the acquisition of properties.

98

Acquisitions From Our Advisor and Its Affiliates

      We may acquire properties from our advisor, our directors or officers or their affiliates. The prices we pay for such properties will not be the subject of arm’s-length negotiations. However, we will not acquire a property from our advisor or any affiliate, including our officers and directors, unless a competent independent appraiser confirms that our purchase price is equal to or less than the property’s fair market value and a majority of our board of directors not otherwise interested in the transaction, including a majority of our independent directors, determines that the transaction and the purchase price are fair, reasonable and in our best interests. We cannot absolutely assure that the price we pay for any such property will not, in fact, exceed that which would be paid by an unaffiliated purchaser. In no event, however, will the cost of a property to our company exceed such property’s current appraised value.

We May Purchase Properties From Persons With Whom Affiliates of Our Advisor Have Prior Business Relationships

      We may purchase properties from sellers with whom our advisor or its affiliates have purchased properties in the past and may purchase properties in the future. If we purchase properties from such sellers, our advisor will experience a conflict between the current interests of our company and its interests in preserving any ongoing business relationship with such seller. Our board of directors will not, and our advisor has informed us that it will not, consummate such purchases in a manner that would effect a breach of any fiduciary obligations to our company.

Our Advisor May Have Conflicting Fiduciary Obligations in the Event Our Company Acquires Properties with Our Advisor’s Affiliates

      Our advisor may advise us to acquire an interest in a property through a joint venture arrangement with our advisor’s affiliates. In such instance, our advisor will have a fiduciary duty to our company, our stockholders and the affiliate participating in the joint venture arrangement. In addition, the advisory agreement provides that a majority of the independent directors not otherwise interested in the transaction must determine that the transaction is on terms and conditions no less favorable than from unaffiliated third parties and is fair and reasonable to our company.

Property Management Services may be Rendered by Our Advisor or its Affiliates

      Our advisor and its affiliates may provide property and asset management services to our company and do provide these services to other entities, some of whom may be in competition with our company. Our advisor and its affiliates will render these services to our company for the price and on the terms we would expect from an unaffiliated third party and in a manner consistent with customary business practices. Our advisor has informed us that it believes that it and its affiliates have sufficient personnel and other required resources to discharge all responsibilities for property management.

Receipt of Commissions, Fees and Other Compensation by Our Advisor and its Affiliates

      Our advisor and its affiliates have received and will continue to receive the compensation as described in “Compensation Table.” The real estate commission described under “Compensation Table” is based upon the purchase price of the properties we acquire and will be payable to our advisor despite the lack of cash available to make distributions to our stockholders. In addition, an affiliate of our advisor may receive the property management fee described under “Compensation Table” computed based upon the amount of gross income generated by our properties. To that extent, our advisor benefits from our retaining ownership of properties and leveraging our properties, while our stockholders may be better served by our disposing of a property or holding a property on an unleveraged basis. Furthermore, our advisor’s receipt and retention of many of the fees and reimbursements it receives from us are dependent upon our making investments in properties. Therefore, the interest of our advisor in receiving such fees may conflict with your interest in earning income on your investment in the shares of our common stock.

99

Non-Arm’s-Length Agreements; Conflicts; Competition

      The agreements and arrangements, including those relating to compensation, between our company, our advisor and its affiliates are not the result of arm’s-length negotiations, but are expected to approximate the terms of arm’s-length transactions. While we will not make loans to our advisor or its affiliates, we may borrow money from our advisor or its affiliates for various business purposes, including working capital requirements, but only if a majority of our board of directors, including a majority of the independent directors, approve the transaction as being fair, competitive, commercially reasonable and no less favorable to our company than loans between unaffiliated parties under the same circumstances. Our advisor and its affiliates are not prohibited from providing services to, and otherwise dealing or doing business with, persons who deal with us, although there are no present arrangements with respect to any such services. However, no rebates or “give-ups” may be received by our advisor or its affiliates, nor may our advisor or any such affiliates participate in any reciprocal business arrangements which would have the effect of circumventing any of the provisions of the advisory agreement.

Legal Counsel for Our Company, Our Advisor and Our Dealer Manager is the Same Law Firm

      Hirschler Fleischer, A Professional Corporation, acts as legal counsel to our advisor, our dealer manager and some of their affiliates and also is expected to represent us. Additionally, Louis J. Rogers, the president and chairman of the board of directors of our company, is also senior counsel with Hirschler Fleischer. In connection with the offering, Mr. Rogers will not serve as an attorney on behalf of Hirschler Fleischer or render any legal advice but will serve solely in his capacities with our company and our advisor. Hirschler Fleischer is not acting as counsel for the stockholders or any potential investor. There is a possibility in the future that the interests of the various parties may become adverse and, under the Code of Professional Responsibility of the legal profession, Hirschler Fleischer may be precluded from representing any one or all of such parties. If any situation arises in which our interests appear to be in conflict with those of our advisor, our dealer manager or their affiliates, additional counsel may be retained by one or more of the parties to assure that their interests are adequately protected. Moreover, should such a conflict not be readily apparent, Hirschler Fleischer may inadvertently act in derogation of the interest of parties which could adversely affect us, and our ability to meet our investment objectives and, therefore, our stockholders.

NNN Capital Corp. is Participating as Dealer Manager in the Sale of Our Common Stock

      NNN Capital Corp., a securities dealer affiliated with Louis J. Rogers, the president and chairman of the board of our company and the president of our advisor, and Anthony W. Thompson, the chairman and chief executive officer of Triple Net Properties, is participating as the dealer manager in this offering. The dealer manager is entitled to the selling commissions, marketing allowance and accountable due diligence expense reimbursements based upon the number of shares sold, which may be retained or reallowed to broker dealers participating in this offering. The dealer manager may be subject to a conflict of interest, which may arise out of its participation in this offering and its affiliation with Messrs. Thompson and Rogers, in performing independent “due diligence” with respect to our company. Any review of our structure, formation or operations performed by the dealer manager will be conducted as if it was an independent review; however, because the dealer manager is our affiliate, such review cannot be considered to represent an independent review, and such review may not be as meaningful as a review conducted by an unaffiliated broker dealer. Therefore, this offering will not necessarily have the independent review typically conducted by an underwriter or managing broker dealer.

SUMMARY OF DISTRIBUTION REINVESTMENT PLAN

      We have adopted a distribution reinvestment plan under which our stockholders may elect to have their cash distributions reinvested in additional shares of our common stock. The following discussion summarizes the principal terms of the distribution reinvestment plan, which is attached to this prospectus as Exhibit C.

100

General

      Stockholders who have received a copy of this prospectus and participate in this offering can elect to participate in and purchase shares through the distribution reinvestment plan, or DRIP, at any time and will not need to receive a separate prospectus relating solely to the DRIP.

      Shareholders are eligible to participate in the DRIP only with respect to 100% of their shares. Until the earlier to occur of the termination of this offering and the sale of all the shares reserved for issuance under the DRIP, the purchase price for shares purchased under the DRIP will be $9.50 per share.

Investment of Distributions

      Distributions will be used to purchase shares on behalf of the participants from our company. All such distributions will be invested in shares within 30 days after such payment date. Any distributions not so invested will be returned to the participants in the DRIP.

      As of the date of this prospectus, participants will not have the option to make voluntary contributions to the DRIP to purchase shares in excess of the amount of shares that can be purchased with their distributions. The board of directors reserves the right, however, to amend the DRIP in the future to permit voluntary contributions to the DRIP by participants, to the extent consistent with our objective of qualifying as a REIT.

Participant Accounts, Fee and Allocation of Shares

      For each participant in the DRIP, we will maintain a record which will reflect, for each distribution period, the distributions received by us on behalf of such participant. Any interest earned on such distributions will be retained by us to defray costs relating to the DRIP.

      We will use the aggregate amount of distributions to all participants for each distribution period to purchase shares for the participants. If the aggregate amount of distributions to participants exceeds the amount required to purchase all shares then available for purchase, our company will purchase all available shares and will return all remaining distributions to the participants within 30 days after the date such distributions are paid. We will allocate the purchased shares among the participants based on the portion of the aggregate distributions received on behalf of each participant, as reflected in our records. The ownership of the shares purchased under the DRIP will be reflected on our books.

      Shares acquired under the DRIP will entitle the participant to the same rights and to be treated in the same manner as those purchased by the participants in this offering.

      The allocation of shares among participants may result in the ownership of fractional shares, computed to four decimal places.

Administration

      As of the date of this prospectus, our DRIP will be administered by us or one of our affiliates, the DRIP Administrator, but a different entity may act as DRIP Administrator in the future. Any replacement entity which acts as the DRIP Administrator will be registered as a broker/ dealer with the NASD and in all states in which participants of our DRIP reside. The DRIP Administrator will keep all records of your account and send statements of your account to you. Shares purchased under our DRIP will be registered in the name of each participating stockholder.

Reports to Participants

      Within 90 days after the end of each fiscal year, we will mail to each participant a statement of account describing, as to such participant:

•  the distributions reinvested during the year;

•  the number of shares purchased during the year;

101

•  the per share purchase price for such shares;

•  the total administrative charge retained by us on behalf of each participant; and

•  the total number of shares purchased on behalf of the participant under the DRIP.

      Tax information with respect to income earned on shares under the DRIP for the calendar year will be sent to each participant.

Election to Participate or Terminate Participation

      Stockholders who purchase shares in this offering may become participants in the DRIP by making a written election to participate on their Subscription Agreements at the time they subscribe for shares. Any other stockholder who receives a copy of this prospectus or a separate prospectus relating solely to the DRIP and who has not previously elected to participate in the DRIP may so elect at any time by completing the enrollment form attached to such prospectus or by other appropriate written notice to us of such stockholder’s desire to participate in the DRIP. Shareholders are eligible to participate in the DRIP only with respect to 100% of their shares. Participation in the DRIP will commence with the next distribution made after receipt of the participant’s notice, provided it is received at least ten days prior to the record date for such distribution. Subject to the preceding sentence, the election to participate in the DRIP will apply to all distributions attributable to the distribution period in which the stockholder made such written election to participate in the DRIP and to all other distributions from that date. Participants will be able to terminate their participation in the DRIP at any time without penalty by delivering written notice to us no less than ten days prior to the next record date. We may also terminate the DRIP at our sole discretion, for any reason at any time, upon ten days’ prior written notice to all participants.

      A participant who chooses to terminate participation in the DRIP must terminate his or her entire participation in the DRIP and will not be allowed to terminate in part. If the DRIP is terminated or a participant terminates his participation in the DRIP, we will update our stock records to account for all whole shares purchased by the participant(s) in the DRIP, and if any fractional shares exist, we may either (a) send you a check in payment for any fractional shares in your account based on the then-current market price for the shares, or (b) credit your stock ownership account with any such fractional shares. There are no fees associated with a participant’s terminating his interest in the DRIP or our termination of the DRIP. A participant in the DRIP who terminates his interest in the DRIP will be allowed to participate in the DRIP again by notifying us and completing any required forms.

      We reserve the right to prohibit an employee benefit plan or other entity subject to ERISA from participating in the DRIP.

Federal Income Tax Considerations

      Stockholders subject to federal income taxation who elect to participate in the DRIP will incur tax liability for distributions reinvested under the DRIP even though they will receive no related cash. Specifically, stockholders will be treated as if they have received a cash distribution from our company and then applied such distribution to purchase shares in the DRIP. A stockholder who reinvests distributions will be taxed on such distribution at ordinary income tax rates to the extent such distributions are made out of our current or accumulated earnings and profits, unless we have designated all or a portion of the distribution as a capital gain dividend. In such case, such designated portion of the distribution will be taxed as capital gain.

Amendments and Termination

      We reserve the right to amend any aspect of the DRIP at our sole discretion and without the consent of stockholders, provided that notice of any material amendment is sent to participants at least ten days prior to the effective date of that amendment. We also reserve the right to terminate the DRIP for any reason at any time by ten days’ prior written notice of termination to all participants. We may terminate a

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participant’s participation in the DRIP immediately if in our judgment such participant’s participation jeopardizes in any way our status as a REIT.

PROPOSED SHARE REPURCHASE PLAN

      Our board of directors has approved (but delayed the effectiveness of) a share repurchase plan that would provide eligible stockholders with limited, interim liquidity by enabling them to sell their shares back to us in limited circumstances. The plan will not become effective until the earlier of (i) the completion or termination of this offering, which may last until                     , 2008, and receipt of formal or informal relief from the issuer tender offer rules or (ii) receipt by us of SEC exemptive relief from rules restricting issuer purchases during distributions and formal or informal relief from the issuer tender offer rules, which relief we may never obtain. Moreover, even when one of these conditions is met, our board of directors could choose not to implement the proposed repurchase plan or to amend its provisions without stockholder approval. Upon effectiveness, our proposed repurchase plan would permit you to sell your shares back to us after you have held them for at least one year, subject to the significant restrictions and conditions described below.

      The prices at which shares may be sold back to us would be as follows:

•  During the offering period at $9.00 per share;

•  During the 12 months following the end of the offering period at $9.25 per share;

•  During the next 12 months at $9.50 per share;

•  During the next 12 months at $9.75 per share; and

•  Thereafter, at the greater of: (a) $10.00 per share; or (b) a price equal to 10 times our “funds available for distribution” per weighted average share outstanding for the prior calendar year.

      If we implement the plan, we will make repurchases under our repurchase plan quarterly, at our sole discretion, on a pro rata basis. Subject to funds being available, we will limit the number of shares repurchased during any calendar year to five percent, 5%, of the weighted average number of shares outstanding during the prior calendar year. Funding for our repurchase program will come exclusively from proceeds we receive from the sale of shares under our distribution reinvestment plan.

      Our board of directors will have the discretion to redeem shares held for less than the one-year holding period upon the death or disability of a stockholder who is a natural person, including shares held by such stockholder through a revocable grantor trust, or an IRA or other retirement or profit-sharing plan. The waiver of the one-year holding period for death or disability does not apply if the stockholder is not a natural person, such as a trust other than a revocable grantor trust, partnership, corporation or other similar entity.

      Our board of directors, in its sole discretion, may choose to terminate, amend or suspend our repurchase plan at any time if it determines that the funds allocated to our repurchase plan are needed for other purposes, such as the acquisition, maintenance or repair of properties, or for use in making a declared distribution payment. A determination by the board of directors to terminate, amend or suspend our repurchase plan will require the affirmative vote of the majority of the board of directors, including a majority of the independent directors. A copy of our proposed share repurchase plan is attached as Exhibit C.

      We cannot guarantee that the funds set aside for our repurchase plan will be sufficient to accommodate all requests made each year. Pending requests will be honored on a pro rata basis if insufficient funds are available to honor all requests. If no funds are available for the plan when repurchase is requested, the stockholder may withdraw the request or ask that we honor the request when funds are available. In addition, you may withdraw a repurchase request upon written notice at any time prior to the date of repurchase.

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      Stockholders are not required to sell their shares to us. Our repurchase plan is intended only to provide limited, interim liquidity for stockholders until a liquidity event occurs, such as the listing of our common stock on a national securities exchange, inclusion of our common stock for quotation on a national market system, or our merger with a listed company. We cannot guarantee that a liquidity event will occur.

      Shares we purchase under our repurchase plan will be canceled and will have the status of authorized but unissued shares. Shares we acquire through our repurchase plan will not be reissued unless they are first registered with the Securities and Exchange Commission under the Securities Act of 1933 and under appropriate state securities laws or otherwise issued in compliance with such laws.

      We will notify you upon the effectiveness of the repurchase plan. Thereafter, if we terminate, amend or suspend our repurchase plan, we will send a letter to stockholders informing them of the change, and we will disclose the changes in reports filed with the Securities and Exchange Commission.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

      As of the date of this prospectus, we have not yet commenced active operations. Subscription proceeds may be released to us after the minimum offering is achieved and will be applied to investment in properties and the payment or reimbursement of selling commissions and other fees and expenses. We will experience a relative increase in liquidity as we receive additional subscriptions for shares and a relative decrease in liquidity as we spend net offering proceeds in connection with the acquisition, development and operation of properties.

      As of the date of this prospectus, we have not entered into any arrangements creating a reasonable probability that we will acquire a specific property. The number of properties that we will acquire will depend upon the number of shares sold and the resulting amount of the net proceeds available for investment in properties. Until required for the acquisition, development or operation of properties, we will keep the net proceeds of this offering in short-term, liquid investments.

      A portion of the proceeds of this offering will be reserved to meet working capital needs and contingencies associated with our operations. We believe this reserve allocation will aid our objective of preserving capital for our investors by supporting the maintenance and viability of properties we acquire in the future. We will initially allocate to our working capital reserve not less than 0.5% of the proceeds of the offering. As long as we own any apartment communities, we will retain as working capital reserves an amount equal to at least 0.5% of the proceeds of the offering, subject to review and re-evaluation by the board of directors. If reserves and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our investment in one or more properties. There is no assurance that such funds will be available or, if available, that the terms will be acceptable to us.

      We intend to make an election to be taxed as a REIT under Section 856(c) of the Internal Revenue Code. In order to qualify as a REIT, we must distribute to our stockholders each calendar year at least 90% of our taxable income, excluding net capital gains. If we qualify as a REIT for federal income tax purposes, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify as a REIT for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income and results of operations.

Results of Operations

      As of the date of this prospectus, we have not commenced business operations as we are in our organizational and development stage. We do not intend to begin our operations until we have sold at least the minimum offering amount of 200,000 shares of our common stock. As we have not acquired any properties, our management is not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting the apartment housing industry and real estate generally, which may be reasonably anticipated to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of our properties.

Liquidity and Capital Resources

      We are offering and selling to the public up to 100,000,000 shares of our common stock, $.01 par value per share, for $10.00 per share and up to 5,000,000 shares of our common stock to be issued pursuant to our distribution reinvestment plan under which our stockholders may elect to have distributions reinvested in additional shares at $9.50 per share.

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      Our principal demands for cash will be for property acquisitions and the payment of our operating and administrative expenses, continuing debt service obligations and distributions to our stockholders. Generally, we will fund our property acquisitions from the net proceeds of our public offering. We intend to acquire properties with cash and mortgage or other debt, but we may acquire properties free and clear of permanent mortgage indebtedness by paying the entire purchase price for properties in cash or in units of limited partnership interest in our operating partnership. Due to the delay between the sale of our shares and our acquisition of properties, there may be a delay in the benefits to our stockholders, if any, of returns generated from our investments. We also are currently negotiating and anticipate entering into a $75 million secured revolving line of credit agreement with a syndicate of lenders led by Wachovia Bank, N.A. We intend to use our line of credit to purchase properties, and then place permanent mortgage financing on the property at a later date.

      We anticipate that adequate cash will be generated from operations to fund our operating and administrative expenses, continuing debt service obligations and the payment of distributions. However, our ability to finance our operations is subject to several uncertainties. Our ability to generate working capital is dependent on our ability to attract and retain tenants and the economic and business environments of the various markets in which our properties are located. Our ability to sell real estate investments is partially dependent upon the state of real estate markets and the ability of purchasers to obtain financing at reasonable commercial rates.

      Potential future sources of capital include secured or unsecured financings from banks or other lenders, establishing additional lines of credit, proceeds from the sale of properties and undistributed cash flow. However, we currently have not identified any additional sources of financing and there is no assurance that such sources of financings will be available on favorable terms or at all.

Distributions

      We have not paid any distributions as of the date of this prospectus. Our board of directors will determine the amount of distributions to be distributed to our stockholders. The board’s determination will be based on a number of factors, including funds available from operations, our capital expenditure requirements and the annual distribution requirements necessary to maintain our REIT status under the Code.

Funds From Operations

      One of our objectives is to provide cash distributions to our stockholders from cash generated by our operations. Funds from operations is not equivalent to our net operating income or loss as determined under accounting principles generally accepted in the United States, or GAAP. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as Funds From Operations, or FFO, which it believes more accurately reflects the operating performance of a REIT such as our company.

      We define FFO, a non-GAAP measure, consistent with the NAREIT’s definition, as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joints ventures will be calculated to reflect FFO on the same basis.

      We consider FFO to be an appropriate supplemental measure of a REIT’s operating performance as it is based on a net income analysis of property portfolio performance that excludes non-cash items such as depreciation. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less

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informative. The use of FFO is recommended by the REIT industry as a supplemental performance measure.

      Presentation of this information is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO is not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income as an indication of our performance.

PRINCIPAL STOCKHOLDERS

      The following table shows, as of the date of this prospectus, the number and percentage of shares of our common stock owned by (1) any person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (2) each director and (3) all directors and executive officers as a group.

	Number of Shares
	Beneficially
	Owned as of		Percent if			Percent if
	Commencement of		Minimum			Maximum
Name	this Offering(1)		is Sold			is Sold
Glenn W. Bunting, Jr.		1,000		*	%		*
Robert A. Gary, IV		1,000		*	%		*
W. Brand Inlow		1,000		*	%		*
D. Fleet Wallace		1,000		*	%		*
Louis J. Rogers		—		0	%		0	%
Stanley J. Olander, Jr.		—		0	%		0	%
All Named Executive Officers and Directors as a Group		4,000		2.0	%		*

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

(1)  These amounts include shares of restricted stock granted to each individual under our 2006 incentive award plan.

      As of the date of this prospectus, we have one stockholder of record, our advisor. There is no established public trading market for our shares of common stock.

DESCRIPTION OF CAPITAL STOCK

General

      The following description of our capital stock highlights all material provisions of our charter and bylaws as in effect as of the date of this prospectus. Because it is a description of what is contained in our charter and bylaws, it may not contain all the information that is important to you.

Common Stock

      Under our charter, we will have 300,000,000 authorized shares of common stock, $.01 par value per share, available for issuance. We have authorized the issuance of up to 105,000,000 shares of common stock in connection with this offering. The common stock offered by this prospectus, when issued, will be duly authorized, fully paid and nonassessable. The common stock is not convertible or subject to redemption.

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      Holders of our common stock:

•  are entitled to receive distributions authorized by our board of directors after payment of, or provision for, full cumulative distributions on and any required redemptions of shares of preferred stock then outstanding;

•  are entitled to share ratably in the distributable assets of our company remaining after satisfaction of the prior preferential rights of the preferred stock and the satisfaction of all of our debts and liabilities in the event of any voluntary or involuntary liquidation or dissolution of our company; and

•  do not have preference, conversion, exchange, sinking fund, redemption or appraisal rights or preemptive rights to subscribe for any of our securities.

      We will generally not issue certificates for our shares. Shares will be held in “uncertificated” form, which will eliminate the physical handling and safekeeping responsibilities inherent in owning transferable stock certificates and eliminate the need to return a duly executed stock certificate to effect a transfer.                     acts as our registrar and as the transfer agent for our shares. Transfers can be effected simply by mailing to                     a transfer and assignment form, which we will provide to you at no charge upon written request.

Stockholder Voting

      Except as otherwise provided, all shares of common stock will have equal voting rights. Because stockholders do not have cumulative voting rights, holders of a majority of the outstanding shares of common stock can elect our entire board of directors. The voting rights per share of our equity securities issued in the future will be established by our board of directors.

      Our charter provides that we may not, without the affirmative vote of stockholders holding at least a majority of all the shares entitled to vote on the matter:

•  amend our charter, including, by way of illustration, amendments to provisions relating to director qualifications, fiduciary duty, liability and indemnification, conflicts of interest, investment policies or investment restrictions, except for amendments with respect to classifications and reclassifications of our capital stock and increases or decreases in the aggregate number of shares of our stock or the number of shares of stock of any class or series;

•  sell all or substantially all of our assets other than in the ordinary course of our business or as otherwise permitted by law;

•  cause a merger or reorganization of our company except as permitted by law; or

•  dissolve or liquidate our company.

      Our charter further provides that, without the necessity for concurrence by our board of directors, our stockholders may vote to elect or remove any or all of our directors.

      Each stockholder entitled to vote on a matter may do so at a meeting in person or by a proxy executed in writing or in any other manner permitted by law directing the manner in which he or she desires that his or her vote be cast. Any such proxy must be received by the board of directors prior to the date on which the vote is taken. Stockholders may take action without a meeting if a unanimous consent setting forth the action is given in writing or by electronic transmission by each stockholder entitled to vote on the matter.

Preferred Stock

      Our charter authorizes our board of directors without further stockholder action to provide for the issuance of up to 50,000,000 shares of preferred stock, in one or more series, with such voting powers and with such terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption, as our board of

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directors shall approve. As of the date of this prospectus, there are no preferred shares outstanding and we have no present plans to issue any preferred shares. There is no requirement that a majority of the independent directors approve the issuance of preferred stock.

Issuance of Additional Securities and Debt Instruments

      Our board of directors is authorized to issue additional securities, including common stock, preferred stock, convertible preferred stock and convertible debt, for cash, property or other consideration on such terms as they may deem advisable and to classify or reclassify any unissued shares of capital stock of our company without approval of the holders of the outstanding securities. We may issue debt obligations with conversion privileges on such terms and conditions as the directors may determine, whereby the holders of such debt obligations may acquire our common stock or preferred stock. We may also issue warrants, options and rights to buy shares on such terms as the directors deem advisable subject to certain restrictions in our charter, despite the possible dilution in the value of the outstanding shares which may result from the exercise of such warrants, options or rights to buy shares, as part of a ratable issue to stockholders, as part of a private or public offering or as part of other financial arrangements. Our board of directors, with the approval of a majority of the directors and without any action by stockholders, may also amend our charter from time to time to increase or decrease the aggregate number of shares of our stock or the number of shares of stock of any class or series that we have authority to issue.

Restrictions on Ownership and Transfer

      In order to qualify as a REIT under the federal tax laws, we must meet several requirements concerning the ownership of our outstanding capital stock. Specifically, no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals, as defined in the federal income tax laws to include specified private foundations, employee benefit plans and trusts, and charitable trusts, during the last half of a taxable year, other than our first REIT taxable year. Moreover, 100 or more persons must own our outstanding shares of capital stock during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year, other than our first REIT taxable year.

      Because our board of directors believes it is essential for our company to qualify and continue to qualify as a REIT and for other corporate purposes, our charter, subject to the exceptions described below, provides that no person may own, or be deemed to own by virtue of the attribution provisions of the federal income tax laws, more than 9.9% of:

•  the value of outstanding shares of our capital stock; or

•  the value or number (whichever is more restrictive) of outstanding shares of our common stock.

      Our charter provides that, subject to the exceptions described below, any transfer of capital stock that would:

•  result in any person owning, directly or indirectly, shares of our capital stock in excess of the foregoing ownership limitations;

•  result in our capital stock being owned by fewer than 100 persons, determined without reference to any rules of attribution;

•  result in our company being “closely held” under the federal income tax laws;

•  cause our company to own, actually or constructively, 9.9% or more of the ownership interests in a tenant of our real property, under the federal income tax laws; or

•  before our shares constitute a class of “publicly-offered securities,” result in 25% or more of our shares being owned by ERISA investors;

will be null and void, with the intended transferee acquiring no rights in such shares of stock, or result in such shares being designated as shares-in-trust and transferred automatically to a trust effective on the day

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before the purported transfer of such shares. The record holder of the shares that are designated as shares-in-trust, or the prohibited owner, will be required to submit such number of shares of capital stock to our company for registration in the name of the trust. We will designate the trustee, but he will not be affiliated with our company. The beneficiary of the trust will be one or more charitable organizations that are named by our company.

      Shares-in-trust will remain shares of issued and outstanding capital stock and will be entitled to the same rights and privileges as all other stock of the same class or series. The trust will receive all dividends and distributions on the shares-in-trust and will hold such dividends or distributions in trust for the benefit of the beneficiary. The trust will vote all shares-in-trust. The trust will designate a permitted transferee of the shares-in-trust, provided that the permitted transferee purchases such shares-in-trust for valuable consideration and acquires such shares-in-trust without such acquisition resulting in a transfer to another trust.

      Our charter requires that the prohibited owner of the shares-in-trust pay to the trust the amount of any dividends or distributions received by the prohibited owner that are attributable to any shares-in-trust and the record date of which was on or after the date that such shares of stock became shares-in-trust. The prohibited owner generally will receive from the trust the lesser of:

•  the price per share such prohibited owner paid for the shares of capital stock that were designated as shares-in-trust or, in the case of a gift or devise, the market price per share on the date of such transfer; or

•  the price per share received by the trust from the sale of such shares-in-trust.

The trust will distribute to the beneficiary any amounts received by the trust in excess of the amounts to be paid to the prohibited owner.

      The shares-in-trust will be deemed to have been offered for sale to our company, or our designee, at a price per share equal to the lesser of:

•  the price per share in the transaction that created such shares-in-trust or, in the case of a gift or devise, the market price per share on the date of such transfer; or

•  the market price per share on the date that our company, or our designee, accepts such offer.

      We will have the right to accept such offer for a period of 90 days after the later of the date of the purported transfer which resulted in such shares-in-trust or the date we determine in good faith that a transfer resulting in such shares-in-trust occurred.

      “Market price” on any date means the average of the closing prices for the five consecutive trading days ending on such date. The “closing price” refers to the last quoted price as reported by the primary securities exchange or market on which our stock is then listed or quoted for trading. If our stock is not so listed or quoted at the time of determination of the market price, our board of directors will determine the market price in good faith.

      If you acquire or attempt to acquire shares of our capital stock in violation of the foregoing restrictions, or if you owned common or preferred shares that were transferred to a trust, then we will require you immediately to give us written notice of such event and to provide us with such other information as we may request in order to determine the effect, if any, of such transfer on our status as a REIT.

      If you own, directly or indirectly, more than 5%, or such lower percentages as required under the federal income tax laws, of our outstanding shares of stock, then you must, within 30 days after January 1 of each year, provide to us a written statement or affidavit stating your name and address, the number of shares of capital stock owned directly or indirectly, and a description of how such shares are held. In addition, each direct or indirect stockholder shall provide to us such additional information as we may request in order to determine the effect, if any, of such ownership on our status as a REIT and to ensure compliance with the ownership limit.

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      The ownership limit generally will not apply to the acquisition of shares of capital stock by an underwriter that participates in a public offering of such shares or by our advisor. In addition, our board of directors, upon receipt of a ruling from the Internal Revenue Service or an opinion of counsel and upon such other conditions as our board of directors may direct, may exempt a person from the ownership limit. However, the ownership limit will continue to apply until our board of directors determines that it is no longer in the best interests of our company to attempt to qualify, or to continue to qualify, as a REIT.

      All certificates representing our common or preferred shares, if any, will bear a legend referring to the restrictions described above.

      The ownership limit in our charter may have the effect of delaying, deferring or preventing a takeover or other transaction or change in control of our company that might involve a premium price for your shares or otherwise be in your interest as a stockholder.

IMPORTANT PROVISIONS OF MARYLAND

CORPORATE LAW AND OUR CHARTER AND BYLAWS

      The following is a summary of some important provisions of Maryland law, our charter and our bylaws in effect as of the date of this prospectus, copies of which may be obtained from our company.

Our Charter and Bylaws

      Stockholder rights and related matters are governed by the Maryland General Corporation Law, or MGCL, and our charter and bylaws. Our board of directors, including our independent directors, unanimously approved our charter and bylaws. A majority of our independent directors must approve or ratify any subsequent amendment to our charter and bylaws. Provisions of our charter and bylaws, which are summarized below, may make it more difficult to change the composition of our board of directors and may discourage or make more difficult any attempt by a person or group to obtain control of our company.

Stockholders’ Meetings

      An annual meeting of our stockholders will be held upon reasonable notice for the purpose of electing directors and for the transaction of such other business as may come before the meeting. A special meeting of our stockholders may be called in the manner provided in the bylaws, including by the president or a majority of our board of directors or a majority of the independent directors, and will be called by the president upon written request of stockholders holding in the aggregate at least 10% of the outstanding shares. Upon receipt of a written request, either in person or by mail, stating the purpose(s) of the meeting, we will provide all stockholders, within 10 days after receipt of this request, written notice, either in person or by mail, of a meeting and the purpose of such meeting to be held on a date not less than 15 nor more than 60 days after the distribution of such notice, at a time and place specified in the request, or if none is specified, at a time and place convenient to our stockholders. At any meeting of the stockholders, each stockholder is entitled to one vote for each share owned of record on the applicable record date. In general, the presence in person or by proxy of a majority of the outstanding shares constitutes a quorum, and the majority vote of our stockholders will be binding on all of our stockholders.

Our Board of Directors

      Our charter provides that the number of directors of our company may not be fewer than three and that a majority of the directors will be independent directors. This provision may only be amended by a vote of a majority of our stockholders. A vacancy in our board of directors caused by the death, resignation or incapacity of a director or by an increase in the number of directors may be filled only by the vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred. With respect to a vacancy created by the death, resignation or incapacity of an independent director, the remaining independent directors will nominate a replacement. Any director may

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resign at any time and may be removed with or without cause by our stockholders owning at least a majority of the outstanding shares.

      Each director will serve a term beginning on the date of his or her election and ending on the next annual meeting of the stockholders and when his or her successor is duly elected and qualifies. Because holders of common stock have no right to cumulative voting for the election of directors, at each annual meeting of stockholders, the holders of the shares of common stock with a majority of the voting power of the common stock will be able to elect all of the directors.

Fiduciary Duties

      Our advisor and directors are deemed to be in a fiduciary relationship to us and our stockholders and our directors have a fiduciary duty to the stockholders to supervise our relationship with the advisor.

Limitation on Organizational and Offering Expenses

      The total organizational and offering expenses that we will pay in connection with our company’s formation and the offering and sale of shares of our common stock will be reasonable, and in any event, will not exceed an amount equal to 15% of the gross proceeds raised in this offering.

Limitation of Liability and Indemnification

      Maryland law permits us to include in our charter a provision limiting the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment and which is material to the cause of action.

      Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party by reason of their service in those or other capacities unless it is established that:

•  the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty,

•  the director or officer actually received an improper personal benefit in money, property or services, or

•  in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

      However, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses.

      Our charter provides that none of our directors or officers will be liable to our company or our stockholders for money damages and that we will indemnify and pay or reimburse reasonable expenses in advance of the final disposition of a proceeding to our directors, our officers, our advisor, our advisor’s affiliates and any individual who, while our director or officer at our request, served as a director, trustee, partner or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for losses they may incur by reason of their service in those capacities; provided, however, we will not indemnify or hold harmless our directors, our advisor or our advisor’s affiliates unless all of the following conditions are met:

•  the party was acting on behalf of or performing services on the part of our company;

•  our directors, our advisor or our advisor’s affiliates have determined, in good faith, that the course of conduct which caused the loss or liability was in the best interests of our company;

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•  such indemnification or agreement to be held harmless is recoverable only out of our net assets and not from our stockholders; and

•  such liability or loss was not the result of:

•  negligence or misconduct by our officers or directors (other than the independent directors) or our advisor or their affiliates; or

•  gross negligence or willful misconduct by the independent directors.

      The Securities and Exchange Commission takes the position that indemnification against liabilities arising under the Securities Act of 1933 is against public policy and unenforceable. Furthermore, our charter prohibits us from indemnifying our directors, our advisor or its affiliates or broker dealers for liabilities arising from or out of a violation of state or federal securities laws, unless one or more of the following conditions are met:

•  there has been a successful determination on the merits of each count involving alleged securities law violations as to the party seeking indemnification;

•  such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the party seeking indemnification; or

•  a court of competent jurisdiction approves a settlement of the claims against the party seeking indemnification and finds that indemnification of the settlement and related costs should be made and the court considering the request has been advised of the position of the Securities and Exchange Commission and of the published opinions of any state securities regulatory authority in which shares of our stock were offered and sold as to indemnification for securities law violations.

      We may advance amounts to persons entitled to indemnification for reasonable expenses and costs incurred as a result of any proceeding for which indemnification is being sought in advance of a final disposition of the proceeding only if all of the following conditions are satisfied:

•  the legal action relates to acts or omissions with respect to the performance of duties or services by the indemnified party for or on behalf of our company;

•  the legal action is initiated by a third party who is not a stockholder of our company or the legal action is initiated by a stockholder of our company acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement;

•  the party receiving such advances furnishes our company with a written statement of his or her good faith belief that he or she has met the standard of conduct described above; and

•  the indemnified party receiving such advances furnishes to our company a written undertaking, personally executed on his or her behalf, to repay the advanced funds to our company, together with the applicable legal rate of interest thereon, if it is ultimately determined that he or she did not meet the standard of conduct described above.

      Authorizations of payments will be made by a majority vote of a quorum of disinterested directors.

      Also, our board of directors may cause our company to indemnify or contract to indemnify any person not specified above who was, is, or may become a party to any proceeding, by reason of the fact that he or she is or was an employee or agent of our company, or is or was serving at the request of our company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person were specified as one whom indemnification is granted as described above. Any determination to indemnify or contract to indemnify will be made by a majority vote of a quorum consisting of disinterested directors.

      We may purchase and maintain insurance to indemnify such parties against the liability assumed by them in accordance with our charter.

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      The indemnification provided in our charter is not exclusive to any other right to which any person may be entitled, including any right under policies of insurance that may be purchased and maintained by our company or others, with respect to claims, issues or matters in relation to which our company would not have obligation or right to indemnify such person under the provisions of our charter.

Defenses Available

      There are defenses available to our directors and officers and our advisor under Maryland corporate law in the event of a stockholder action against them. A director or officer may contend that he or she performed the action giving rise to the stockholder’s action in good faith, in a manner he or she reasonably believed to be in the best interests of our company and with the care that an ordinarily prudent person in a like position under similar circumstances would have used. The directors and officers also are entitled to rely on information, opinions, reports or statements prepared by experts, including accountants, consultants and counsel, who were selected with reasonable care or a committee of the board of directors on which the director does not serve as to a matter within its authority so long as the director has a reasonable belief that the committee merits its confidence.

Inspection of Books and Records

      Our advisor will keep, or cause to be kept, on our behalf, full and true books of account on an accrual basis of accounting, in accordance with generally accepted accounting principles. We will maintain at all times at our principal office all of our books of account, together with all of our other records, including a copy of our charter.

      Any stockholder or his or her agent will be permitted access to all of our records at all reasonable times, and may inspect and copy any of them. We will permit the official or agency administering the securities laws of a jurisdiction including, without limitation, the Texas State Securities Board, to inspect our books and records upon reasonable notice and during normal business hours. As part of our books and records, we will maintain an alphabetical list of the names, addresses and telephone numbers of our stockholders along with the number of shares held by each of them. We will make the stockholder list available for inspection by any stockholder or his or her agent at our principal office upon the request of the stockholder.

      We will update, or cause to be updated, the stockholder list at least quarterly to reflect changes in the information contained therein.

      We will mail a copy of the stockholder list to any stockholder requesting the stockholder list within ten days of the request, subject to verification of the purpose for which the list is requested, as discussed below. The copy of the stockholder list will be printed in alphabetical order, on white paper, and in a readily readable type size. We may impose a reasonable charge for copy work incurred in reproducing the stockholder list.

      The purposes for which a stockholder may request a copy of the stockholder list include, without limitation, matters relating to stockholders’ voting rights and the exercise of stockholders’ rights under federal proxy laws.

      If our advisor or our board of directors neglects or refuses to exhibit, produce or mail a copy of the stockholder list as requested, our advisor and our board of directors will be liable to any stockholder requesting the list for the costs, including attorneys’ fees, incurred by that stockholder for compelling the production of the stockholder list, and for actual damages suffered by any stockholder by reason of such refusal or neglect. It will be a defense that the actual purpose and reason for the requests for inspection or for a copy of the stockholder list is to secure such list of stockholders or other information for the purpose of selling such list or copies thereof, or of using the same for a commercial purpose other than in the interest of the applicant as a stockholder relative to the affairs of our company. We may require that the stockholder requesting the stockholder list represent that he or she is not requesting the list for a commercial purpose unrelated to the stockholder’s interests in our company and that he or she will not

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make any commercial distribution of such list or the information disclosed through such inspection. These remedies are in addition to, and will not in any way limit, other remedies available to stockholders under federal law, or the laws of any state.

      The list may not be sold for commercial purposes.

Restrictions on Roll-Up Transactions

      In connection with a proposed “roll-up transaction,” which, in general terms, is any transaction involving the acquisition, merger, conversion or consolidation, directly or indirectly, of our company and the issuance of securities of an entity that would be created or would survive after the successful completion of the roll-up transaction, we will obtain an appraisal of all of our properties from an independent expert. In order to qualify as an independent expert for this purpose, the person or entity must have no material current or prior business or personal relationship with our advisor or directors and must be engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by our company. Our properties will be appraised on a consistent basis, and the appraisal will be based on the evaluation of all relevant information and will indicate the value of our properties as of a date immediately prior to the announcement of the proposed roll-up transaction. The appraisal will assume an orderly liquidation of properties over a 12-month period. The terms of the engagement of such independent expert will clearly state that the engagement is for the benefit of our company and our stockholders. We will include a summary of the independent appraisal, indicating all material assumptions underlying the appraisal, in a report to the stockholders in connection with a proposed roll-up transaction.

      In connection with a proposed roll-up transaction, the person sponsoring the roll-up transaction must offer to stockholders who vote against the proposal a choice of:

•  accepting the securities of the entity that would be created or would survive after the successful completion of the roll-up transaction offered in the proposed roll-up transaction; or

•  one of the following:

•  remaining stockholders of our company and preserving their interests in our company on the same terms and conditions as existed previously; or

•  receiving cash in an amount equal to the stockholder’s pro rata share of the appraised value of our net assets.

      Our company is prohibited from participating in any proposed roll-up transaction:

•  which would result in the stockholders having voting rights in the entity that would be created or would survive after the successful completion of the roll-up transaction that are less than those provided in our charter, including rights with respect to the election and removal of directors, annual reports, annual and special meetings, amendment of the charter, and dissolution of our company;

•  which includes provisions that would operate as a material impediment to, or frustration of, the accumulation of shares by any purchaser of the securities of the entity that would be created or would survive after the successful completion of the roll-up transaction, except to the minimum extent necessary to preserve the tax status of such entity, or which would limit the ability of an investor to exercise the voting rights of its securities of the entity that would be created or would survive after the successful completion of the roll-up transaction on the basis of the number of shares held by that investor;

•  in which our stockholder’s rights to access of records of the entity that would be created or would survive after the successful completion of the roll-up transaction will be less than those provided in our charter and described in “Inspection of Books and Records,” above; or

•  in which our company would bear any of the costs of the roll-up transaction if our stockholders do not approve the roll-up transaction.

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Anti-Takeover Provisions of the MGCL

      The following paragraphs summarize some provisions of Maryland law and our charter and bylaws which may delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for our stockholders.

Business Combinations

      Under the MGCL, certain “business combinations” (including a merger, consolidation, share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an interested stockholder (defined as any person who beneficially owns 10% or more of the voting power of the corporation’s shares or an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of the corporation) or an affiliate of such an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. However, in approving a transaction the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board. Thereafter, any such business combination must be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (a) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (b) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder, unless, among other conditions, the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a board of directors prior to the time that the interested stockholder becomes an interested stockholder.

      Pursuant to the statute, our board of directors has opted out of these provisions of the MGCL only with respect to affiliates of our company and, consequently, the five-year prohibition and the super-majority vote requirements will not apply to business combinations between us and any affiliate of our company. As a result, any affiliate who becomes an interested stockholder may be able to enter into business combinations with us that may not be in the best interest of our stockholders without compliance by our company with the super-majority vote requirements and the other provisions of the statute.

Control Share Acquisitions

      The MGCL provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved at a special meeting by the affirmative vote of two-thirds of the votes entitled to be cast on the matter, excluding shares of stock in a corporation in respect of which any of the following persons is entitled to exercise or direct the exercise of the voting power of shares of stock of the corporation in the election of directors:

      (1) a person who makes or proposes to make a control share acquisition,

      (2) an officer of the corporation, or

      (3) an employee of the corporation who is also a director of the corporation.

      “Control shares” are voting shares of stock which, if aggregated with all other such shares of stock previously acquired by the acquiror or in respect of which the acquiror is able to exercise or direct the

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exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power:

      (a) one-tenth or more but less than one-third,

      (b) one-third or more but less than a majority, or

      (c) a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions.

      A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses), may compel our board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

      If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or of any meeting of stockholders at which the voting rights of such shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition.

      The control share acquisition statute does not apply to (a) shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) acquisitions approved or exempted by the charter or bylaws of the corporation.

      Section 2.13 of our bylaws contains a provision exempting from the control share acquisition statute any and all acquisitions by any person of our stock. We cannot assure you that such provision will not be amended or eliminated at any time in the future.

Subtitle 8

      Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Securities Exchange Act of 1934 and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:

•  a classified board,

•  two-thirds vote requirements for removing a director,

•  a requirement that the number of directors be fixed only by vote of the directors,

•  a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred, and

•  a majority requirement for the calling of a special meeting of stockholders.

      We have elected, at such time as we are eligible to make the election provided for under Subtitle 8, to provide that vacancies on our board of directors may be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred. Through provisions in

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our charter and bylaws unrelated to Subtitle 8, we already vest in our board of directors the exclusive power to fix the number of directorships.

Dissolution or Termination of Our Company

      We are an infinite-life corporation which may be dissolved under the MGCL at any time by the affirmative vote of a majority of our entire board and a majority of our stockholders. If, before 2013, our common stock is not listed on a national securities exchange or quoted on a national market system or we have not merged with an entity whose shares are so listed or quoted, we intend to submit for a vote of the stockholders at the next annual meeting a proposal to extend or eliminate this deadline or to liquidate all of our properties in an orderly fashion and distribute the net proceeds to our stockholders.

Transactions with Affiliates

      We have established restrictions on dealings between our company, our advisor and any of their officers, directors or affiliates in our charter and elsewhere. Under the MGCL, each director is required to discharge his duties in good faith, in a manner reasonably believed to be in the best interests of our company and with the care of an ordinarily prudent person in a like position under similar circumstances. In addition, Maryland law provides that a transaction between our company and any of our directors or between our company and any other corporation, firm or other entity in which any of our directors is a director or has a material financial interest is not voidable solely because of the common directorship or interest if:

•  the fact of the common directorship or interest is disclosed to or known by the directors and the transaction is authorized, approved or ratified by the disinterested directors; or

•  the fact of the common directorship or interest is disclosed to or known by our stockholders and the transaction is authorized approved or ratified by the disinterested stockholders; or

•  the transaction is fair and reasonable to our company.

Advance Notice of Director Nominations and New Business

      Our bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to the board of directors and the proposal of business to be considered by stockholders may be made only (1) pursuant to our notice of the meeting, (2) by the board of directors or (3) by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice procedures of the bylaws. With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of individuals for election to the board of directors at a special meeting may be made only (A) pursuant to our notice of the meeting, (B) by the board of directors, or (C) provided that the board of directors has determined that directors will be elected at the meeting, by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice provisions of the bylaws.

SHARES AVAILABLE FOR FUTURE SALE

      All of the shares of common stock offered and sold by this prospectus to the public or pursuant to our distribution reinvestment plan will be freely tradable under the federal securities laws, except shares held by affiliates of our company, such as officers and directors. We may issue up to 100,000,000 shares to the public and up to 5,000,000 shares in connection with our distribution reinvestment plan.

AGREEMENT OF LIMITED PARTNERSHIP

      The following description of the Agreement of Limited Partnership is a summary of the provisions included in the Agreement of Limited Partnership. Currently, our company and our advisor are the only partners of our operating partnership. Our operating partnership may issue units of limited partnership

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interest in exchange for interests in properties, thus creating additional limited partners in our operating partnership.

Management

      Our operating partnership has been organized as a Virginia limited partnership under the terms of the Agreement of Limited Partnership. As the sole general partner of our operating partnership, we have full, exclusive and complete responsibility and discretion in the management and control of it. When and if additional limited partners are admitted, they will have no authority in their capacity as limited partners to transact business for, or participate in the management activities or decisions of, our operating partnership. However, any amendment to the Agreement of Limited Partnership that would affect the limited partners’ redemption rights described below would require the consent of limited partners holding more than 50% of the units of limited partnership interest held by such partners.

Transferability of Interests

      Our company may not voluntarily withdraw from our operating partnership or transfer or assign our interest in our operating partnership unless the transaction in which such withdrawal or transfer occurs results in the limited partners receiving property in an amount equal to the amount they would have received had they exercised their redemption rights immediately prior to such transaction, or unless the successor to our company contributes substantially all of its assets to our operating partnership in return for an interest in our operating partnership. Except in the limited situations described in the Agreement of Limited Partnership, it is anticipated that the limited partners may not transfer their interests in our operating partnership, in whole or in part, without our written consent, which consent we may withhold in our sole discretion.

Capital Contribution

      We are currently the sole general partner of our operating partnership and own substantially all of the limited partnership interests. We will contribute to our operating partnership all the net proceeds of the offering as a capital contribution in exchange for additional limited partnership interests. Our advisor owns a 0.01% limited partnership interest in our operating partnership. Our advisor has no voting rights by virtue of its status as a special limited partner.

      The Agreement of Limited Partnership provides that if our operating partnership requires additional funds at any time or from time to time in excess of funds available to our operating partnership from borrowing or capital contributions, we may borrow such funds from a financial institution or other lender and lend such funds to our operating partnership on the same terms and conditions as are applicable to our borrowing of such funds. Under the Agreement of Limited Partnership, we generally will be obligated to contribute the proceeds of a securities offering as additional capital to our operating partnership.

      Moreover, we are authorized to cause our operating partnership to issue partnership interests for less than fair market value if our company has concluded in good faith that such issuance is in the best interests of our company and our operating partnership. If we contribute additional capital to our operating partnership, we will receive additional units of limited partnership interest of our operating partnership and our percentage interest in our operating partnership will be increased on a proportionate basis based upon the amount of such additional capital contributions and the value of our operating partnership at the time of such contributions. Conversely, the percentage interests of any limited partners will be decreased on a proportionate basis in the event of additional capital contributions by our company. In addition, if we contribute additional capital to our operating partnership, we will revalue the property of our operating partnership to its fair market value, as determined by us, and the capital accounts of the partners will be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property that has not been reflected in the capital accounts previously would be allocated among the partners under the terms of the Agreement of Limited Partnership if there were a taxable disposition of such property for such fair market value on the date of the revaluation.

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Redemption Rights

      Under the Agreement of Limited Partnership, limited partners have redemption rights, which enable them to cause our operating partnership to redeem their units of limited partnership interests in our operating partnership in exchange for cash or, at our option, shares of our common stock on a one-for-one basis. The redemption price will be paid in cash, at our discretion, or if the issuance of common stock to the redeeming limited partner would:

•  result in any person owning, directly or indirectly, stock in excess of the ownership limit;

•  result in our shares of capital stock being owned by fewer than 100 persons, determined without reference to any rules of attribution;

•  result in our company being “closely held” under the federal income tax laws;

•  cause us to own, actually or constructively, 10% or more of the ownership interests in a tenant of our real property; or

•  cause the acquisition of common stock by such redeeming limited partner to be “integrated” with any other distribution of common stock for purposes of complying with the Securities Act.

      A limited partner may exercise the redemption rights at any time after one year following the date on which he received such units of limited partnership interest in our operating partnership, provided that a limited partner may not exercise the redemption right for fewer than 1,000 units or, if such limited partner holds fewer than 1,000 units, all of the units held by such limited partner. In addition, a limited partner may not exercise the redemption right more than two times annually.

      The number of shares of common stock issuable upon exercise of the redemption rights will be adjusted upon the occurrence of stock splits, mergers, consolidations or similar pro rata share transactions, which otherwise would have the effect of diluting or increasing the ownership interests of the limited partners or our stockholders.

Special Limited Partner

      Our advisor is a special limited partner in our operating partnership. Special limited partners have no voting rights.

      As a special limited partner, our advisor is entitled to receive an incentive distribution equal to 10% of the net proceeds of the sale of a property after our company has received, and paid to the stockholders, the sum of:

•  our Invested Capital, as defined below, that initially was allocated to the property sold;

•  any remaining shortfall in the recovery of our Invested Capital with respect to prior sales of properties;

•  and any remaining shortfall in the 8% return.

Invested Capital will equal the total proceeds from the sale of our common stock. When a property is sold, Invested Capital will be reduced by the lesser of: (A) the net sale proceeds available for distributions; or (B) the sum of (1) the portion of Invested Capital that initially was allocated to that property and (2) any remaining shortfall in the recovery of our Invested Capital with respect to prior sales of properties.

      If we and, in turn, our stockholders have not received a return of our Invested Capital or if there is a shortfall in the 8% return after the sale of the operating partnership’s last property and our advisor previously has received incentive distributions, other than those that have previously been repaid, our advisor will be required to repay to our operating partnership an amount of those distributions sufficient to cause us and, in turn, our stockholders to receive a full return of our Invested Capital and a full distribution of the 8% return. In no event will the cumulative amount repaid by our advisor to our

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operating partnership exceed the cumulative amount of incentive distributions that our advisor has previously received.

      Until such time as stockholders receive such 8% return, our advisor will not receive any incentive distributions. In addition, there is no assurance that we will be able to pay an annual 8% return to our stockholders. Thus, the 8% return is disclosed solely as a measure for our advisor’s incentive compensation.

      If the advisory agreement is terminated in connection with the listing of our common stock on a national securities exchange or national market system, the advisory agreement provides that our advisor will receive compensation pursuant to such termination as agreed to by our independent directors and our advisor. Further, we may choose to redeem our advisor’s interest as a special limited partner in our operating partnership, which would entitle it to receive cash or, if agreed by our company and our advisor, shares of common stock of our company or units of limited partnership interests in our operating partnership equal to the amount that would be payable to the advisor pursuant to the “incentive distribution upon sales” described under the heading “Compensation Table” if we liquidated all of our assets for their fair market value.

Operations

      The Agreement of Limited Partnership requires that our operating partnership be operated in a manner that will enable our company to satisfy the requirements for being classified as a REIT, to avoid any federal income or excise tax liability imposed by the federal income tax laws, other than any federal income tax liability associated with our retained capital gains, and to ensure that our operating partnership will not be classified as a “publicly traded partnership” for purposes of the federal income tax laws.

      In addition to the administrative and operating costs and expenses incurred by our operating partnership, our operating partnership will pay all administrative costs and expenses of our company, including:

•  all expenses relating to our formation and continuity of existence;

•  all expenses relating to our public offering, including our company’s organizational expenses;

•  all expenses associated with the preparation and filing of any periodic reports under federal, state or local laws or regulations;

•  all expenses associated with compliance with laws, rules and regulations promulgated by any regulatory body;

•  acquisition expenses incurred in connection with the selection, evaluation and acquisition of our properties;

•  the actual cost of goods and services used by us and obtained from entities not affiliated with our advisor, other than acquisition expenses;

•  interest and other costs for borrowed money, including discounts, points and other similar fees;

•  taxes and assessments on income of our company or its real estate assets;

•  costs associated with insurance required in connection with our business or by our directors;

•  expenses of managing and operating properties owned by our company, payable to the property manager, whether or not the property manager is an affiliate of our company.

•  all compensation and expenses payable to the independent directors and all expenses payable to the non-independent directors in connection with their services to the company and the stockholders and their attendance at meetings of the directors and stockholders;

•  expenses associated with a listing, if applicable, or with the issuance and distribution of our common stock, such as selling commissions and fees, marketing and advertising expenses, taxes,

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	legal and accounting fees, listing and registration fees, and other organizational and offering expenses;
•	expenses connected with payments of distributions in cash or otherwise made or caused to be made by our company to our stockholders;
•	expenses of amending, converting liquidating or terminating our company or the charter;
•	expenses of maintaining communications with stockholders, including the cost of preparation, printing, and mailing annual and other stockholder reports, proxy statements and other reports required by governmental entities;
•	administrative services expenses (including personnel costs; provided, however, that no reimbursement shall be made for costs of personnel to the extent that such personnel perform services in transactions for which our advisor receives a separate fee);
•	transfer agent and registrar’s fees and charges paid to third parties; and
•	audit, accounting, legal and other professional fees; and
•	all other operating or administrative costs incurred by our company in the ordinary course of business on behalf of our operating partnership.

Distributions

      The Agreement of Limited Partnership provides that our operating partnership will distribute to the partners cash from operations, excluding net sale or refinancing proceeds, and net proceeds from the sale of our operating partnership’s property in connection with the liquidation of our operating partnership, on a monthly basis in accordance with the percentage interests of the partners. In our sole discretion, we will determine the amounts of such distributions. Our operating partnership does not intend to maintain cash reserves to fund distributions. The net sale proceeds from the sale of one of our operating partnership’s properties will be distributed 100% to us until we have received an amount equal to the sum of (1) our Invested Capital that initially was allocated to that property, (2) any remaining shortfall in the recovery of our Invested Capital with respect to prior sales of properties, and (3) any remaining shortfall in our 8% return. Any remaining net sale proceeds will be distributed 90% to us and 10% to our advisor. Until such time as stockholders receive such 8% return, our advisor will not receive any incentive distributions. In addition, there is no assurance that our operating partnership will be able to pay an annual 8% return to its partners, including our company. Thus, the 8% return is disclosed solely as a measure for our advisor’s incentive compensation.

      Notwithstanding the foregoing, if there is a shortfall in the distribution of the 8% return to us at the end of any calendar year and the advisor previously has received incentive distributions, other than distributions that have previously been repaid, the advisor will be required to repay to the operating partnership whatever portion of those prior distributions is necessary to cause our 8% return to be met.

      Upon liquidation of our operating partnership, after payment of, or adequate provision for, debts and obligations of our operating partnership, including any partner loans, any remaining assets of our operating partnership will be distributed to all partners with positive capital accounts in accordance with their respective positive capital account balances. Notwithstanding the foregoing, if we have not received a full return of our Invested Capital or there is a shortfall in our 8% return when the operating partnership’s last property has been sold and the advisor previously has received distributions, other than distributions that have previously been repaid, the advisor will be required to repay to the operating partnership whatever portion of those prior distributions is necessary to cause a full return of our Invested Capital and a full distribution of our 8% return.

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Allocations

      Operating Income. Operating income of our operating partnership will be allocated as follows:

      (1) First, 100% to our company to the extent operating losses previously allocated 100% to us pursuant to clause (3) under Operating Losses below and losses from property sales previously allocated 100% to us pursuant to clause (2) under Losses from Capital Transactions below;

      (2) Second, 90% to our company and 10% to our advisor to the extent of operating losses and losses from property sales previously allocated to us and our advisor in that same proportion pursuant to clause (2) under operating losses below and clause (1) under Losses from Capital Transactions below;

      (3) Third, 100% to our company until we have been allocated operating income and gain from property sales in an amount equal to the distributions to us of our 8% return on Invested Capital;

      (4) Fourth, 90% to our company and 10% to our advisor until our advisor has been allocated operating income and gain from property sales in an amount equal to the net sales proceeds distributed to our advisor; and

      (5) Thereafter, any remaining operating income will be allocated 100% to our company.

      Operating Losses. Operating losses of our operating partnership will be allocated as follows:

      (1) First, 100% to our company to the extent of operating income previously allocated 100% to us pursuant to clause (5) under Operating Income above;

      (2) Second, 90% to our company and 10% to our advisor to the extent of operating income and gain from property sales previously allocated to us and the advisor in that same proportion pursuant to clause (4) under Operating Income above and clause (4) under Gains from Capital Transactions below; and

      (3) Thereafter, any remaining operating losses will be allocated 100% to our company.

All depreciation and amortization deductions of our operating partnership will be allocated 100% to our company.

      Gains from Capital Transactions. Gains from the sale of property other than the disposition of all or substantially all of the assets of the operating partnership will be allocated as follows:

      (1) First, 100% to our company to the extent of operating losses and losses from property sales previously allocated 100% to us pursuant to clause (3) under Operating Losses above and clause (2) under Losses from Capital Transactions below;

      (2) Second, 90% to our company and 10% to our advisor to the extent of operating losses and losses from property sales previously allocated to us and the advisor in that same proportion pursuant to clause (2) under Operating Losses above clause (2) under Losses from Capital Transactions below;

      (3) Third, 100% to our company until we have been allocated an aggregate amount equal to the sum of (A) any depreciation or amortization recapture associated with the operating partnership’s investment in the property, (B) the amount by which our Invested Capital allocable to the property sold exceeds the operating partnership’s investment in the property, (C) any remaining shortfall in the recovery of our Invested Capital with respect to prior sales of properties that is distributed to us in connection with the sale of the property, and (D) any remaining shortfall in our 8% return that is distributed to us in connection with the sale of the property; and

      (4) Thereafter, any remaining gain will be allocated 90% to our company and 10% to our advisor.

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      Losses from Capital Transactions. Losses from the sale of property other than the disposition of all or substantially all of the assets of the operating partnership will be allocated as follows:

      (1) First, 90% to our company and 10% to our advisor to the extent of operating income and gain from property sales previously allocated to us and the advisor in that same proportion pursuant to clause (4) under Operating Income above and clause (4) under Gains from Capital Transactions above; and

      (2) Thereafter, any remaining loss will be allocated 100% to our company.

      Gains from Terminating Capital Transactions. Gains from the sale of all or substantially all of the assets of the operating partnership will be allocated as follows:

      (1) First, to our company until our aggregate capital account balance equals the sum of (A) the Invested Capital and (B) the cumulative 8% return that has not previously been distributed; and

      (2) Thereafter, any remaining gain will be allocated 90% to our company and 10% to our advisor.

      Losses from Terminating Capital Transactions. Losses from the sale of all or substantially all of the assets of the operating partnership will be allocated as follows:

      (1) First, 90% to our company and 10% to our advisor to the extent of operating income and gain from property sales previously allocated to us and the advisor in that same proportion pursuant to clauses (2) and (4) under Operating Income above and clause (4) under Gains from Capital Transactions above; and

      (2) Thereafter, any remaining loss will be allocated 100% to our company.

      Notwithstanding the foregoing, to the extent that our advisor is required to repay distributions to the operating partnership, the allocations will be adjusted to reflect such repayment.

      All allocations are subject to compliance with the provisions of the federal income tax laws.

Term

      Our operating partnership will continue until December 31, 2055 or until dissolved upon the bankruptcy, dissolution or withdrawal of our company, unless the limited partners elect to continue our operating partnership; the sale or other disposition of all or substantially all the assets of our operating partnership; or the election by the general partner.

Tax Matters

      Under the Agreement of Limited Partnership, we will be the tax matters partner of our operating partnership and, as such, will have authority to handle tax audits and to make tax elections under the federal income tax laws on behalf of our operating partnership.

FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS A REIT

      This section summarizes the federal income tax issues that you, as a prospective stockholder, may consider relevant. Because this section is a summary, it does not address all of the tax issues that may be important to you. In addition, this section does not address the tax issues that may be important to stockholders that are subject to special treatment under the federal income tax laws, such as insurance companies, tax-exempt organizations, except to the extent discussed in “— Taxation of Tax-Exempt Stockholders” below, financial institutions or broker dealers, and non-U.S. individuals and foreign corporations, except to the extent discussed in “— Taxation of Non-U.S. Stockholders” below, among others.

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      The statements in this section are based on the current federal income tax laws governing qualification as a REIT. We cannot assure you that new laws, interpretations thereof, or court decisions, any of which may take effect retroactively, will not cause any statement in this section to be inaccurate.

      We urge you to consult your own tax advisor regarding the specific tax consequences to you of investing in our common stock and of our election to be taxed as a REIT. Specifically, you should consult your own tax advisor regarding the federal, state, local, foreign, and other tax consequences of such investment and election, and regarding potential changes in applicable tax laws.

Taxation of Our Company

      We plan to elect to be taxed as a REIT under the federal income tax laws for our first full taxable year. We believe that, commencing with such taxable year, we will be organized and will operate in a manner so as to qualify as a REIT under the federal income tax laws. We cannot assure you, however, that we will qualify or remain qualified as a REIT. This section discusses the laws governing the federal income tax treatment of a REIT and its stockholders, which laws are highly technical and complex.

      Hirschler Fleischer has acted as tax counsel to us in connection with this offering. Hirschler Fleischer is of the opinion that based on our proposed method of operation, we are in a position to qualify for taxation as a REIT for the taxable year that will end December 31, 2006. Hirschler Fleischer’s opinion is based solely on our representations with respect to factual matters concerning our business operations and our properties. Hirschler Fleischer has not independently verified these facts. In addition, our qualification as a REIT depends, among other things, upon our meeting the requirements of Sections 856 through 860 of the Code throughout each year. Accordingly, because our satisfaction of such requirements will depend upon future events, including the final determination of financial and operational results, no assurance can be given that we will satisfy the REIT requirements during the taxable year that will end December 31, 2006, or in any future year.

      Our REIT qualification depends on our ability to meet on a continuing basis several qualification tests set forth in the federal tax laws. Those qualification tests involve the percentage of income that we earn from specified sources, the percentage of our assets that fall within specified categories, the diversity of our share ownership, and the percentage of our earnings that we distribute. We describe the REIT qualification tests, and the consequences of our failure to meet those tests, in more detail below. Hirschler Fleischer will not review our compliance with those tests on a continuing basis. Accordingly, neither we nor Hirschler Fleischer can assure you that we will satisfy those tests.

      If we qualify as a REIT, we generally will not be subject to federal income tax on the taxable income that we distribute to our stockholders. The benefit of that tax treatment is that it avoids the “double taxation,” which means taxation at both the corporate and stockholder levels, that generally results from owning stock in a corporation.

      However, we will be subject to federal tax in the following circumstances:

•  we will pay federal income tax on taxable income, including net capital gain, that we do not distribute to our stockholders during, or within a specified time period after, the calendar year in which the income is earned;

•  we may be subject to the “alternative minimum tax” on any items of tax preference that we do not distribute or allocate to our stockholders;

•  we will pay income tax at the highest corporate rate on (1) net income from the sale or other disposition of property acquired through foreclosure that we hold primarily for sale to customers in the ordinary course of business and (2) other non-qualifying income from foreclosure property;

•  we will pay a 100% tax on our net income from sales or other dispositions of property, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business;

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•  if we fail to satisfy either the 75% gross income test or the 95% gross income test, as described below under “— Requirements for Qualification — Income Tests,” and nonetheless continue to qualify as a REIT because we meet other requirements, we will pay a 100% tax on (1) the gross income attributable to the greater of the amounts by which we fail the 75% and 95% gross income tests, multiplied by (2) a fraction intended to reflect our profitability;

•  if we fail to distribute during a calendar year at least the sum of (1) 90% of our REIT ordinary net income for such year, (2) 90% of our REIT capital gain net income for such year (unless an election is made as provided below), and (3) any undistributed taxable income from prior periods, we will pay a 4% excise tax on the excess of such required distribution over the amount we actually distributed;

•  we may elect to retain and pay income tax on our net long-term capital gain; and

•  if we acquire any asset from a C corporation, or a corporation generally subject to full corporate-level tax, in a merger or other transaction in which we acquire a tax basis determined by reference to the C corporation’s basis in the asset, we will pay tax at the highest regular corporate rate if we recognize gain on the sale or disposition of such asset during the 10-year period after we acquire such asset. The amount of gain on which we will pay tax is the lesser of (1) the amount of gain that we recognize at the time of the sale or disposition and (2) the amount of gain that we would have recognized if we had sold the asset at the time we acquired the asset.

Requirements for Qualification

      NNN Apartment REIT, Inc. is a corporation that, it is anticipated, will meet the following requirements:

      (1) it is managed by one or more trustees or directors;

      (2) its beneficial ownership is evidenced by transferable shares, or by transferable certificates of beneficial interest;

      (3) it would be taxable as a domestic corporation, but for the REIT provisions of the federal income tax laws;

      (4) it is neither a financial institution nor an insurance company subject to specified provisions of the federal income tax laws;

      (5) at least 100 persons are beneficial owners of its shares or ownership certificates;

      (6) not more than 50% in value of its outstanding shares or ownership certificates is owned, directly or indirectly, by five or fewer individuals, including specified entities, during the last half of any taxable year;

      (7) it elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements established by the Internal Revenue Service that must be met to elect and maintain REIT status;

      (8) it uses a calendar year for federal income tax purposes and complies with the record keeping requirements of the federal income tax laws; and

      (9) it meets other qualification tests, described below, regarding the nature of its income and assets.

      We must meet requirements 1 through 4 during our entire taxable year and must meet requirement 5 during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. Requirements 5 and 6 will not apply to us until our second taxable year.

      If we comply with all the requirements for ascertaining the ownership of our outstanding shares in a taxable year and have no reason to know that requirement 6 above was violated, we will be deemed to

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have satisfied that requirement for such taxable year. For purposes of determining share ownership under requirement 6, a supplemental unemployment compensation benefits plan, a private foundation, and a portion of a trust permanently set aside or used exclusively for charitable purposes are each considered one individual owner. However, a trust that is a qualified employee pension or profit sharing trust under the federal income tax laws is not considered one owner but rather all of the beneficiaries of such a trust will be treated as holding our shares in proportion to their actuarial interests in the trust for purposes of requirement 6.

      We plan to issue sufficient common stock with sufficient diversity of ownership to satisfy requirements 5 and 6 set forth above. In addition, our charter restricts the ownership and transfer of our stock so that we should continue to satisfy requirements 5 and 6. The provisions of our charter restricting the ownership and transfer of our stock are described in “Description of Capital Stock — Restrictions on Ownership and Transfer.”

      A corporation that is a “qualified REIT subsidiary” is not treated as a corporation separate from its parent REIT. All assets, liabilities and items of income, deduction and credit of a “qualified REIT subsidiary” are considered to be assets, liabilities and items of income, deduction and credit of the REIT. A “qualified REIT subsidiary” is a corporation, all of the capital stock of which is owned by the REIT. Thus, in applying the requirements described herein, any of our “qualified REIT subsidiaries” will be ignored, and all assets, liabilities and items of income, deduction and credit of such subsidiaries will be considered to be assets, liabilities and items of income, deduction and credit of our company. We currently do not have any corporate subsidiaries, but we may have corporate subsidiaries in the future.

      In the case of a REIT that is a partner in a partnership, the REIT is treated as owning its proportionate share of the assets of the partnership and as earning its allocable share of the gross income of the partnership for purposes of the applicable REIT qualification tests. Thus, our proportionate share of the assets, liabilities and items of income of our operating partnership will be treated as assets and gross income of our company for purposes of applying the requirements described in this prospectus.

Income Tests

      We must satisfy two gross income tests annually to qualify and maintain our qualification as a REIT. First, at least 75% of our gross income, excluding gross income from prohibited transactions, for each taxable year must consist of defined types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or temporary investment income. Qualifying income for purposes of the 75% gross income test includes:

•  “rents from real property;”

•  interest on debt or obligations secured by mortgages on real property or on interests in real property; and

•  dividends or other distributions on and gain from the sale of shares in other REITs.

      Second, at least 95% of our gross income, excluding gross income from prohibited transactions, for each taxable year must consist of income that is qualifying income for purposes of the 75% gross income test described above, dividends, other types of interest, gain from the sale or disposition of stock or securities, or any combination of the foregoing. The following paragraphs discuss the specific application of those tests to our company.

Rents and Interest

      Rent that we receive from our tenants will qualify as “rents from real property” in satisfying the gross income requirements for a REIT described above only if the following conditions are met:

•  The amount of rent must not be based, in whole or in part, on the income or profits of any person, but may be based on a fixed percentage or percentages of gross receipts or sales.

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•  Neither we nor a direct or indirect owner of 10% or more of our stock may own, actually or constructively, 10% or more of a tenant from whom we receive rent, known as a “related party tenant.”

•  If the rent attributable to the personal property leased in connection with a lease of our real property exceeds 15% of the total rent received under the lease, the rent that is attributable to personal property will not qualify as “rents from real property.”

      We generally must not operate or manage our real property or furnish or render services to our tenants, other than through a taxable subsidiary or an “independent contractor” who is adequately compensated and from whom we do not derive revenue. However, we need not provide services through an independent contractor, but instead may provide services directly, if the services are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not otherwise considered “rendered to the occupant.” In addition, we may render a de minimis amount of “non-customary” services to the tenants of a property, other than through a taxable subsidiary or an independent contractor, as long as our income from the services does not exceed 1% of our gross income from the property.

      We do not expect to charge rent for any of our properties that is based, in whole or in part, on the income or profits of any person, except by reason of being based on a fixed percentage of gross revenues, as described above. Furthermore, we have represented that, to the extent that the receipt of such rent would jeopardize our REIT status, we will not charge rent for any of our properties that is based, in whole or in part, on the income or profits of any person. In addition, we do not anticipate receiving rent from a related party tenant, and we have represented that, to the extent that the receipt of such rent would jeopardize our REIT status, we will not lease any of our properties to a related party tenant. We also do not anticipate that we will receive rent attributable to the personal property leased in connection with a lease of our real property that exceeds 15% of the total rent received under the lease. Furthermore, we have represented that, to the extent that the receipt of such rent would jeopardize our REIT status, we will not allow the rent attributable to personal property leased in connection with a lease of our real property to exceed 15% of the total rent received under the lease. Finally, we do not expect to furnish or render, other than under the 1% de minimis rule described above, “non-customary” services to our tenants other than through an independent contractor, and we have represented that, to the extent that the provision of such services would jeopardize our REIT status, we will not provide such services to our tenants other than through an independent contractor.

      If our rent attributable to the personal property leased in connection with a lease of our real property exceeds 15% of the total rent we receive under the lease for a taxable year, the portion of the rent that is attributable to personal property will not be qualifying income for purposes of either the 75% or 95% gross income test. Thus, if such rent attributable to personal property, plus any other income that we receive during the taxable year that is not qualifying income for purposes of the 95% gross income test, exceeds 5% of our gross income during the year, we would lose our REIT status. Furthermore, if either (1) the rent we receive under a lease of our property is considered based, in whole or in part, on the income or profits of any person or (2) the tenant under such lease is a related party tenant, none of the rent we receive under such lease would qualify as “rents from real property.” In that case, if the rent we receive under such lease, plus any other income that we receive during the taxable year that is not qualifying income for purposes of the 95% gross income test, exceeds 5% of our gross income during the year, we would lose our REIT status. Finally, if the rent we receive under a lease of our property does not qualify as “rents from real property” because we furnish non-customary services to the tenant under such lease, other than through a qualifying independent contractor or under the 1% de minimis exception described above, none of the rent we receive from the related party would qualify as “rents from real property.” In that case, if the rent we receive from such property, plus any other income that we receive during the taxable year that is not qualifying income for purposes of the 95% gross income test, exceeds 5% of our gross income during the year, we would lose our REIT status.

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      To the extent that we receive from our tenants reimbursements of amounts that the tenants are obligated to pay to third parties or penalties for the nonpayment or late payment of such amounts, those amounts should qualify as “rents from real property.” However, to the extent that we receive interest accrued on the late payment of the rent or other charges, that interest will not qualify as “rents from real property,” but instead will be qualifying income for purposes of the 95% gross income test. We may receive income not described above that is not qualifying income for purposes of the gross income tests. We will monitor the amount of non-qualifying income that our assets produce and we will manage our portfolio to comply at all times with the gross income tests.

      For purposes of the 75% and 95% gross income tests, the term “interest” generally excludes any amount that is based in whole or in part on the income or profits of any person. However, the term “interest” generally does not exclude an amount solely because it is based on a fixed percentage or percentages of gross receipts or sales. Furthermore, if a loan contains a provision that entitles a REIT to a percentage of the borrower’s gain upon the sale of the secured property or a percentage of the appreciation in the property’s value as of a specific date, income attributable to such provision will be treated as gain from the sale of the secured property, which generally is qualifying income for purposes of the 75% and 95% gross income tests. In addition, interest received on debt obligations that are not secured by a mortgage on real property may not be qualified income, and would be excluded from income for purposes of the 75% and 95% gross income tests.

Failure to Satisfy Income Tests

      If we fail to satisfy one or both of the 75% and 95% gross income tests for any taxable year, we nevertheless may qualify as a REIT for such year if we qualify for relief under the relief provisions of the federal income tax laws. Those relief provisions generally will be available if:

•  our failure to meet such tests is due to reasonable cause and not due to willful neglect;

•  we attach a schedule of the sources of our income to our tax return; and

•  any incorrect information on the schedule was not due to fraud with intent to evade tax.

      We cannot predict, however, whether in all circumstances we would qualify for the relief provisions. In addition, as discussed above in “— Taxation of Our Company,” even if the relief provisions apply, we would incur a 100% tax on the gross income attributable to the greater of the amounts by which we fail the 75% and 95% gross income tests, multiplied by a fraction intended to reflect our profitability.

Prohibited Transaction Rules

      A REIT will incur a 100% tax on the net income derived from any sale or other disposition of property, other than foreclosure property, that the REIT holds primarily for sale to customers in the ordinary course of a trade or business. We anticipate that none of our assets will be held for sale to customers and that a sale of any such asset would not be in the ordinary course of our business. Whether a REIT holds an asset “primarily for sale to customers in the ordinary course of a trade or business” depends, however, on the facts and circumstances in effect from time to time, including those related to a particular asset. Nevertheless, we will attempt to comply with the terms of safe-harbor provisions in the federal income tax laws prescribing when an asset sale will not be characterized as a prohibited transaction, and will otherwise attempt to avoid any sale of assets that will be treated as being held “primarily for sale to customers in the ordinary course of a trade or business.” We cannot provide assurance, however, that we can comply with such safe-harbor provisions or that we will avoid owning property that may be characterized as property that we hold “primarily for sale to customers in the ordinary course of a trade or business.”

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Asset Tests

      To qualify as a REIT, we also must satisfy two asset tests at the close of each quarter of each taxable year. First, at least 75% of the value of our total assets must consist of:

•  cash or cash items, including receivables specified in the federal tax laws;

•  government securities;

•  interests in mortgages on real property;

•  stock of other REITs;

•  investments in stock or debt instruments but only during the one-year period following our receipt of new capital that we raise through equity offerings or offerings of debt with a term of at least five years; or

•  interests in real property, including leaseholds and options to acquire real property and leaseholds.

      The second asset test has two components. First, of our investments not included in the 75% asset class, the value of our interest in any one issuer’s securities may not exceed 5% of the value of our total assets. Second, we may not own more than 10% of any one issuer’s outstanding securities as measured by vote or value. For purposes of both components of the second asset test, “securities” does not include our stock in other REITs or any qualified REIT subsidiary or our interest in any partnership, including our operating partnership.

      We anticipate that, at all relevant times, (1) at least 75% of the value of our total assets will be represented by real estate assets, cash and cash items, including receivables, and government securities and (2) we will not own any securities in violation of the 5% or 10% asset tests. In addition, we will monitor the status of our assets for purposes of the various asset tests and we will manage our portfolio to comply at all times with such tests.

      Our company is allowed to own up to 100% of the stock of taxable REIT subsidiaries (“TRSs”) which can perform activities unrelated to our tenants, such as third-party management, development, and other independent business activities, as well as provide services to our tenants. We and our subsidiary must elect for the subsidiary to be treated as a TRS. We may not own more than 10% of the voting power or value of the stock of a taxable subsidiary that is not treated as a TRS. Overall, no more than 20% of our assets can consist of securities of TRSs, determined on a quarterly basis.

      If we should fail to satisfy the asset tests at the end of a calendar quarter, we would not lose our REIT status if (1) we satisfied the asset tests at the close of the preceding calendar quarter and (2) the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was not wholly or partly caused by an acquisition of one or more non-qualifying assets. If we did not satisfy the condition described in clause (2) of the preceding sentence, we still could avoid disqualification as a REIT by eliminating any discrepancy within 30 days after the close of the calendar quarter in which the discrepancy arose.

Distribution Requirements

      To qualify as a REIT, each taxable year we must make distributions, other than capital gain dividends and deemed distributions of retained capital gain, to our stockholders in an aggregate amount at least equal to:

•  the sum of (1) 90% of our “REIT taxable income,” computed without regard to the dividends paid deduction and excluding our net capital gain or loss, and (2) 90% of our after-tax net income, if any, from foreclosure property; minus

•  the sum of specified items of non-cash income.

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      We must pay such distributions in the taxable year to which they relate, or in the following taxable year if we declare the distribution before we timely file our federal income tax return for such year and pay the distribution on or before the first regular dividend payment date after such declaration and no later than the close of the subsequent tax year.

      We will pay federal income tax on any taxable income, including net capital gain, that we do not distribute to our stockholders. Furthermore, if we fail to distribute during a calendar year or, in the case of distributions with declaration and record dates falling in the last three months of the calendar year, by the end of January following such calendar year, at least the sum of:

•  85% of our REIT ordinary income for such year;

•  95% of our REIT capital gain income for such year; and

•  any undistributed taxable income from prior periods;

we will incur a 4% nondeductible excise tax on the excess of such required distribution over the amounts we actually distributed. We may elect to retain and pay income tax on the net long-term capital gain we receive in a taxable year. If we so elect, we will be treated as having distributed any such retained amount for purposes of the 4% excise tax described above. We intend to make timely distributions sufficient to satisfy the annual distribution requirements.

      From time to time, we may experience timing differences between (1) our actual receipt of income and actual payment of deductible expenses and (2) the inclusion of that income and deduction of such expenses in arriving at our REIT taxable income. In that case, we still would be required to recognize such excess as income in the taxable year in which the difference arose even though we do have the corresponding cash on hand. Further, it is possible that, from time to time, we may be allocated a share of net capital gain attributable to the sale of depreciated property which exceeds our allocable share of cash attributable to that sale. Therefore, we may have less cash available for distribution than is necessary to meet the applicable distribution requirement or to avoid corporate income tax or the excise tax imposed on undistributed income. In such a situation, we might be required to borrow money or raise funds by issuing additional stock.

      We may be able to correct a failure to meet the distribution requirements for a year by paying “deficiency dividends” to our stockholders in a later year. We may include such deficiency dividends in our deduction for dividends paid for the earlier year. Although we may be able to avoid income tax on amounts we distribute as deficiency dividends, we will be required to pay interest to the Internal Revenue Service based on the amount of any deduction we take for deficiency dividends.

Record Keeping Requirements

      We must maintain specified records in order to qualify as a REIT. In addition, to avoid a monetary penalty, we must request on an annual basis information from our stockholders designed to disclose the actual ownership of our outstanding stock. We intend to comply with such requirements.

Failure to Qualify

      If we fail to qualify as a REIT in any taxable year, and no relief provision applies, we will be subject to federal income tax and any applicable alternative minimum tax on our taxable income at regular corporate rates. In such a year, we would not be able to deduct amounts paid out to stockholders in calculating our taxable income. In fact, we would not be required to distribute any amounts to our stockholders in such year. In such event, to the extent of our current and accumulated earnings and profits, all distributions to our stockholders would be taxable as ordinary income. Subject to limitations in the federal income tax laws, corporate stockholders might be eligible for the dividends received deduction. Unless we qualified for relief under specific statutory provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. We cannot predict whether in all circumstances we would qualify for such statutory relief.

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Taxation of Taxable U.S. Stockholders

      As long as we qualify as a REIT, a taxable “U.S. stockholder” must take into account, as ordinary income, distributions out of our current or accumulated earnings and profits and that we do not designate as capital gain dividends or that we retain as long-term capital gain. The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the tax rate for qualified dividend income to 15%. However, dividends from REITs generally are not subject to this lower rate. REIT dividends paid to a U.S. stockholder that is a corporation will not qualify for the dividends received deduction generally available to corporations. As used herein, the term “U.S. stockholder” means a holder of our common stock that for U.S. federal income tax purposes is:

•  a citizen or resident of the United States;

•  a corporation, partnership, or other entity created or organized in or under the laws of the United States or of an political subdivision thereof;

•  an estate whose income from sources without the United States is includable in gross income for U.S. federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States; or

•  any trust with respect to which (A) a U.S. court is able to exercise primary supervision over the administration of such trust and (B) one or more U.S. persons have the authority to control all substantial decisions of the trust.

      A U.S. stockholder generally will recognize distributions that we designate as capital gain dividends as long-term capital gain without regard to the period for which the U.S. stockholder has held its common stock. We generally will designate our capital gain dividends as either 15% or 25% rate distributions. A corporate U.S. stockholder, however, may be required to treat up to 20% of capital gain dividends as ordinary income.

      We may elect to retain and pay income tax on the net long-term capital gain that is received in a taxable year. In that case, a U.S. stockholder would be taxed on its proportionate share of our undistributed long-term capital gain. The U.S. stockholder would receive a credit or refund for its proportionate share of the tax we paid. The U.S. stockholder would increase the basis in its stock by the amount of its proportionate share of our undistributed long-term capital gain, minus its share of the tax we paid.

      If a distribution exceeds our current and accumulated earnings and profits but does not exceed the adjusted basis of a U.S. stockholder’s common stock, the U.S. stockholder will not incur tax on the distribution. Instead, such distribution will reduce the stockholder’s adjusted basis of the common stock. A U.S. stockholder will recognize a distribution that exceeds both our current and accumulated earnings and profits and the U.S. stockholder’s adjusted basis in its common stock as long-term capital gain, or short-term capital gain if the common stock has been held for one year or less, assuming the common stock is a capital asset in the hands of the U.S. stockholder. In addition, if we declare a distribution in October, November or December of any year that is payable to a U.S. stockholder of record on a specified date in any such month, to the extent of the REIT’s earnings and profits not already distributed, such distribution shall be treated as both paid by us and received by the U.S. stockholder on December 31 of such year, provided that we actually pay the distribution during January of the following calendar year. We will notify U.S. stockholders after the close of our taxable year as to the portions of the distributions attributable to that year that constitute ordinary income or capital gain dividends.

Taxation of U.S. Stockholders on the Disposition of the Common Stock

      In general, a U.S. stockholder who is not a dealer in securities must treat any gain or loss realized upon a taxable disposition of the common stock as long-term capital gain or loss if the U.S. stockholder has held the common stock for more than one year and otherwise as short-term capital gain or loss. However, a U.S. stockholder generally must treat any loss upon a sale or exchange of common stock held

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by such stockholder for six months or less as a long-term capital loss to the extent of capital gain dividends and other distributions from us that such U.S. stockholder treats as long-term capital gain. All or a portion of any loss a U.S. stockholder realizes upon a taxable disposition of the common stock may be disallowed if the U.S. stockholder purchases other shares of common stock within 30 days before or after the disposition.

Capital Gains and Losses

      A taxpayer generally must hold a capital asset for more than one year for gain or loss derived from its sale or exchange to be treated as long-term capital gain or loss. The highest marginal individual income tax rate for the year 2006 is 35%. The maximum tax rate on long-term capital gain applicable to non-corporate taxpayers is 15% for sales and exchanges of assets held for more than one year. For taxable years ending after December 31, 2008, the maximum tax rate on long-term capital gains will increase to 20%. The maximum tax rate on long-term capital gain from the sale or exchange of depreciable real property is 25% to the extent that such gain would have been treated as ordinary income if the property were a type of depreciable property other than real property. With respect to distributions that we designate as capital gain dividends and any retained capital gain that we are deemed to distribute, we generally may designate whether such a distribution is taxable to our non-corporate stockholders at a 15% or 25% rate. Thus, the tax rate differential between capital gain and ordinary income for non-corporate taxpayers may be significant. In addition, the characterization of income as capital gain or ordinary income may affect the deductibility of capital losses. A non-corporate taxpayer may deduct capital losses not offset by capital gains against its ordinary income only up to a maximum annual amount of $3,000. A non-corporate taxpayer may carry forward unused capital losses indefinitely. A corporate taxpayer must pay tax on its net capital gain at ordinary corporate rates. A corporate taxpayer can deduct capital losses only to the extent of capital gains, with unused losses being carried back three years and forward five years.

Information Reporting Requirements and Backup Withholding

      We will report to our stockholders and to the Internal Revenue Service the amount of distributions we pay during each calendar year, and the amount of tax we withhold, if any. Under the backup withholding rules, a stockholder may be subject to backup withholding at the rate of 28% with respect to distributions unless such holder either:

•  is a corporation or comes within another exempt category and, when required, demonstrates this fact; or

•  provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules.

      A stockholder who does not provide us with its correct taxpayer identification number also may be subject to penalties imposed by the Internal Revenue Service. Any amount paid as backup withholding will be creditable against the stockholder’s income tax liability. In addition, we may be required to withhold a portion of capital gain distributions to any stockholders who fail to certify their non-foreign status to us. The Treasury Department has issued regulations regarding the backup withholding rules as applied to non-U.S. stockholders.

Taxation of Tax-Exempt Stockholders

      Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts and annuities, generally are exempt from federal income taxation. However, they are subject to taxation on their unrelated business taxable income. While many investments in real estate generate unrelated business taxable income, the Internal Revenue Service has issued a published ruling that dividend distributions from a REIT to an exempt employee pension trust do not constitute unrelated business taxable income, provided that the exempt employee pension trust does not otherwise use the shares of the REIT in an unrelated trade or business of the pension trust. Based on that ruling, amounts

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that we distribute to tax-exempt stockholders generally should not constitute unrelated business taxable income. However, if a tax-exempt stockholder were to finance its acquisition of the common stock with debt, a portion of the income that it receives from us would constitute unrelated business taxable income under the “debt-financed property” rules. Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans that are exempt from taxation under special provisions of the federal income tax laws are subject to different unrelated business taxable income rules, which generally will require them to characterize distributions that they receive from us as unrelated business taxable income. Finally, in some circumstances, a qualified employee pension or profit sharing trust that owns more than 10% of our stock is required to treat a percentage of the dividends that it receives from us as unrelated business taxable income. The percentage of the dividends that the tax-exempt trust must treat as unrelated business taxable income is equal to the gross income we derive from an unrelated trade or business, determined as if our company were a pension trust, divided by our total gross income for the year in which we pay the dividends. The unrelated business taxable income rule applies to a pension trust holding more than 10% of our stock only if:

•  the percentage of the dividends that the tax-exempt trust must otherwise treat as unrelated business taxable income is at least 5%;

•  we qualify as a REIT by reason of the modification of the rule requiring that no more than 50% of our shares be owned by five or fewer individuals that allows the beneficiaries of the pension trust to be treated as holding our stock in proportion to their actuarial interests in the pension trust; and

•  either (A) one pension trust owns more than 25% of the value of our stock or (B) a group of pension trusts individually holding more than 10% of the value of our stock collectively owns more than 50% of the value of our stock.

Taxation of Non-U.S. Stockholders

      The rules governing U.S. federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships, and other foreign stockholders are complex. This section is only a summary of such rules. We urge those non-U.S. stockholders to consult their own tax advisors to determine the impact of federal, state, and local income tax laws on ownership of the common stock, including any reporting requirements.

      A non-U.S. stockholder that receives a distribution that is not attributable to gain from our sale or exchange of U.S. real property interests, as defined below, and that we do not designate as a capital gain dividend or retained capital gain will recognize ordinary income to the extent that we pay such distribution out of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply to such distribution unless an applicable tax treaty reduces or eliminates the tax. However, if a distribution is treated as effectively connected with the non-U.S. stockholder’s conduct of a U.S. trade or business, the non-U.S. stockholder generally will be subject to federal income tax on the distribution at graduated rates, in the same manner as U.S. stockholders are taxed with respect to such distributions. A non-U.S. stockholder may also be subject to the 30% branch profits tax. We plan to withhold U.S. income tax at the rate of 30% on the gross amount of any such distribution paid to a non-U.S. stockholder unless either:

•  a lower treaty rate applies and the non-U.S. stockholder files the required form evidencing eligibility for that reduced rate with us; or

•  the non-U.S. stockholder files an IRS Form W-8ECI with us claiming that the distribution is effectively connected income.

      The U.S. Treasury Department has issued regulations with respect to the withholding requirements for distributions made after December 31, 2000, and we will comply with these regulations.

      A non-U.S. stockholder will not incur tax on a distribution that exceeds our current and accumulated earnings and profits but does not exceed the adjusted basis of its common stock. Instead, such a

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distribution will reduce the adjusted basis of such stock. A non-U.S. stockholder will be subject to tax on a distribution that exceeds both our current and accumulated earnings and profits and the adjusted basis of its common stock, if the non-U.S. stockholder otherwise would be subject to tax on gain from the sale or disposition of its common stock, as described below. Because we generally cannot determine at the time we make a distribution whether or not the distribution will exceed our current and accumulated earnings and profits, we normally will withhold tax on the entire amount of any distribution at the same rate as we would withhold on a dividend. However, a non-U.S. stockholder may obtain a refund of amounts that we withhold if it later determines that a distribution in fact exceeded our current and accumulated earnings and profits.

      For any year in which we qualify as a REIT, a non-U.S. stockholder will incur tax on distributions that are attributable to gain from our sale or exchange of “U.S. real property interests” under special provisions of the federal income tax laws. The term “U.S. real property interests” includes interests in U.S. real property and stock in corporations at least 50% of whose assets consists of interests in U.S. real property. Under those rules, a non-U.S. stockholder is taxed on distributions attributable to gain from sales of U.S. real property interests as if such gain were effectively connected with a U.S. business of the non-U.S. stockholder. A non-U.S. stockholder thus would be taxed on such a distribution at the normal capital gain rates applicable to U.S. stockholders and might also be subject to the alternative minimum tax. A nonresident alien individual also might be subject to a special alternative minimum tax. A non-U.S. corporate stockholder not entitled to treaty relief or exemption also may be subject to the 30% branch profits tax on such distributions. We must withhold 35% of any distribution that we could designate as a capital gain dividend. A non-U.S. stockholder will receive a credit against its tax liability for the amount we withhold.

      A non-U.S. stockholder generally will not incur tax under the provisions applicable to distributions that are attributable to gain from the sale of U.S. real property interests on gain from the sale of its common stock as long as at all times non-U.S. persons hold, directly or indirectly, less than 50% in value of our stock. We cannot assure you that this test will be met. If the gain on the sale of the common stock were taxed under those provisions, a non-U.S. stockholder would be taxed in the same manner as U.S. stockholders with respect to such gain, subject to applicable alternative minimum tax, a special alternative minimum tax in the case of nonresident alien individuals, and the possible application of the 30% branch profits tax in the case of non-U.S. corporations. Furthermore, a non-U.S. stockholder will incur tax on gain not subject to the provisions applicable to distributions that are attributable to gain from the rule of U.S. real property interests if either:

•  the gain is effectively connected with the non-U.S. stockholder’s U.S. trade or business, in which case the non-U.S. stockholder will be subject to the same treatment as U.S. stockholders with respect to such gain; or

•  the non-U.S. stockholder is a nonresident alien individual who was present in the U.S. for 183 days or more during the taxable year, in which case the non-U.S. stockholder will incur a 30% tax on his capital gains.

Other Tax Consequences

      We and/or you may be subject to state and local tax in various states and localities, including those states and localities in which we or you transact business, own property, or reside. The state and local tax treatment in such jurisdictions may differ from the federal income tax treatment described above. Consequently, you should consult your own tax advisor regarding the effect of state and local tax laws upon an investment in our common stock.

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ERISA CONSIDERATIONS

      The following is a summary of material considerations arising under ERISA and the prohibited transaction provisions of the federal income tax laws that may be relevant to a prospective purchaser. This discussion does not deal with all aspects of either ERISA or the prohibited transaction provisions of the federal income tax laws or, to the extent not preempted, state law that may be relevant to particular employee benefit plan stockholders, including plans subject to Title I of ERISA, other employee benefit plans and IRAs subject to the prohibited transaction provisions of the federal income tax laws, and governmental plans and church plans that are exempt from ERISA and the prohibited transaction provisions of the federal income tax laws but that may be subject to state law requirements, in light of their particular circumstances.

      In considering whether to invest a portion of the assets of a pension, profit-sharing, retirement or other employee benefit plan, fiduciaries should consider, among other things, whether the investment:

•  will be in accordance with the documents and instruments covering the investments by such plan;

•  will allow the plan to satisfy the diversification requirements of ERISA, if applicable;

•  will result in unrelated business taxable income to the plan;

•  will provide sufficient liquidity; and

•  is prudent under the general ERISA standards.

      In addition to imposing general fiduciary standards of investment prudence and diversification, ERISA and the corresponding provisions of the federal income tax laws prohibit a wide range of transactions involving the assets of the plan and persons who have specified relationships to the plan, who are “parties in interest” within the meaning of ERISA and, “disqualified persons” within the meaning of the federal income tax laws. Thus, a designated plan fiduciary considering an investment in our shares should also consider whether the acquisition or the continued holding of our shares might constitute or give rise to a direct or indirect prohibited transaction. The fiduciary of an IRA or of an employee benefit plan not subject to Title I of ERISA because it is a governmental or church plan or because it does not cover common law employees should consider that such an IRA or plan not subject to Title I of ERISA may only make investments that are authorized by the appropriate governing documents, not prohibited under the prohibited transaction provisions of the federal income tax laws and permitted under applicable state law.

      The Department of Labor has issued regulations that provide guidance on the definition of plan assets under ERISA. Under the regulations, if a plan acquires an equity interest in an entity which is neither a “publicly-offered security” nor a security issued by an investment company registered under the Investment Company Act of 1940, the plan’s assets would include, for ERISA purposes, both the equity interest and an undivided interest in each of the entity’s underlying assets unless an exception from the plan asset regulations applies.

      The regulations define a publicly-offered security as a security that is:

•  “widely-held;”

•  “freely-transferable;” and

•  either part of a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, or sold in connection with an effective registration statement under the Securities Act, provided the securities are registered under the Securities Exchange Act of 1934 within 190 days after the end of the fiscal year of the issuer during which the offering occurred.

      Our shares of common stock are being sold in connection with an effective registration statement under the Securities Act.

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      The regulations provide that a security is “widely held” only if it is part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another. A security will not fail to be widely held because the number of independent investors falls below 100 subsequent to the initial public offering as a result of events beyond the issuer’s control. Although we anticipate that upon completion of the sale of the maximum offering, our common stock will be “widely held,” our common stock will not be widely held until we sell shares to 100 or more independent investors.

      The regulations list restrictions on transfer that ordinarily will not prevent securities from being freely transferable. Such restrictions on transfer include:

•  any restriction on or prohibition against any transfer or assignment that would result in the termination or reclassification of an entity for federal or state tax purposes, or that otherwise would violate any federal or state law or court order;

•  any requirement that advance notice of a transfer or assignment be given to the issuer;

•  any administrative procedure that establishes an effective date, or an event, such as completion of an offering, prior to which a transfer or assignment will not be effective; and

•  any limitation or restriction on transfer or assignment that is not imposed by the issuer or a person acting on behalf of the issuer.

      We believe that the restrictions imposed under our charter on the ownership and transfer of our common stock will not result in the failure of our common stock to be “freely transferable.” We also are not aware of any other facts or circumstances limiting the transferability of our common stock that are not enumerated in the regulations as those not affecting free transferability. However, no assurance can be given that the Department of Labor or the Treasury Department will not reach a contrary conclusion.

      One exception to the regulations provides that the assets of a plan or ERISA investor, which is a person acting on behalf of or using the assets of a plan, will not include any of the underlying assets of an entity in which it invests if at all times less than 25% of the value of each class of equity interests in the entity is held by ERISA investors. We refer to this as the “insignificant participation exception.” Because our common stock will not be “widely held” until we sell shares to 100 or more independent investors, prior to the date that either our common stock qualifies as a class of “publicly-offered securities” or we qualify for another exception to the regulations, other than the insignificant participation exception, our charter will prohibit ERISA investors from owning, directly or indirectly, in the aggregate, 25% or more of our common stock. Accordingly, our assets should not be deemed to be “plan assets” of any plan, IRA, or plan not subject to Title I of ERISA that invests in our common stock.

      If the underlying assets of our company were treated by the Department of Labor as “plan assets,” the management of our company would be treated as fiduciaries with respect to plan stockholders and the prohibited transaction restrictions of ERISA and the federal income tax laws would apply unless an exception under ERISA were to apply. If the underlying assets of our company were treated as “plan assets,” an investment in our company also might constitute an improper delegation of fiduciary responsibility to our company and expose the fiduciary of the plan to co-fiduciary liability under ERISA and might result in an impermissible commingling of plan assets with other property.

      If a prohibited transaction were to occur, the federal income tax laws and ERISA would impose an excise tax equal to 15% of the amount involved and authorize the Internal Revenue Service to impose an additional 100% excise tax if the prohibited transaction is not “corrected.” Such taxes will be imposed on any disqualified person who participates in the prohibited transaction. In addition, our advisor and possibly other fiduciaries of plan stockholders subject to ERISA who permitted such prohibited transaction to occur or who otherwise breached their fiduciary responsibilities would be required to restore to the plan any profits realized by these fiduciaries as a result of the transaction or beach. With respect to an IRA that invests in our company, the occurrence of a prohibited transaction involving the individual who established the IRA, or his or her beneficiary, would cause the IRA to lose its tax-exempt status under the federal income tax laws. In that event, the IRA owner generally would be taxed on the fair market

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value of all the assets in the IRA as of the first day of the owner’s taxable year in which the prohibited transaction occurred.

PLAN OF DISTRIBUTION

      The total of 105,000,000 shares registered in this offering includes:

•  a maximum of 100,000,000 shares offered to residents of our sales states; and

•  up to 5,000,000 shares offered to our stockholders under our distribution reinvestment plan.

Shares Issued Publicly to Residents of Our Sales States

      The 100,000,000 shares offered to residents of our sales states are being offered through NNN Capital Corp., the dealer manager, a registered broker dealer affiliated with our advisor, and unaffiliated broker dealers. The shares are being offered at a price of $10.00 per share on a “best efforts” basis, which means generally that the dealer manager will be required to use only its best efforts to sell the shares and has no firm commitment or obligation to purchase any of the shares.

      Our advisor purchased 22,223 shares of our common stock, at a price of $9.00 per share, or $200,007, to satisfy the requirements of NASAA. Our advisor purchased such shares for cash and may not sell such shares for as long as it serves as the advisor to our company; however, the advisor may transfer all or a portion of such shares to affiliates, but has no present intention to do so. Our advisor or its affiliates may also purchase additional shares of our company. However, any shares sold to the advisor or its affiliates will not count toward the minimum amount of shares required to break escrow. In addition, neither the dealer manager nor any other broker dealer will receive any compensation with respect to shares sold to our advisor or its affiliates.

      Our board of directors and the dealer manager have determined the offering price of the shares. While our board considered primarily the per share offering prices in similar offerings conducted by companies formed for purposes similar to ours when determining the offering price, the offering price is not related to the company’s historical book value or earnings and bears no relationship to any established criteria for valuing adjusted or outstanding shares.

      Except as provided below, the dealer manager will receive commissions of 7% of the gross offering proceeds. In addition, we will pay the dealer manager 3% of the gross offering proceeds for marketing allowance and accountable due diligence expense reimbursement as follows: (1) an amount equal to 2.5% of the gross offering proceeds as an allowance for expenses associated with non-accountable marketing fees, wholesaling fees, expense reimbursements, sales seminars and volume discounts and (2) up to 0.5% of the gross offering proceeds for reimbursement of accountable bona fide due diligence expenses. The dealer manager may reallow up to 0.5% of the gross offering proceeds for marketing fees and expenses and 0.5% of the gross offering proceeds for accountable bona fide due diligence expense reimbursements to broker dealers participating in the offering. We will not pay referral or similar fees to any accountants, attorneys or other persons in connection with the distribution of the shares.

      The dealer manager may authorize other broker dealers who are members of the NASD to sell shares. In the event of the sale of shares by such other broker dealers, the dealer manager may reallow its commissions in the amount of up to 7% of the gross offering proceeds to such participating broker dealers.

      We have agreed to indemnify the participating broker dealers, including the dealer manager, against liabilities arising under the Securities Act of 1933 unless such liability arises from information in this prospectus relating to the dealer manager and supplied by the dealer manager. Causes of action resulting from violations of federal or state securities laws will be governed by such law.

      The broker dealers are not obligated to obtain any subscriptions, and there is no assurance that any shares will be sold.

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      Our advisor and its affiliates may, at their option, purchase shares offered hereby at the public offering price, net of the selling commissions, marketing allowance and accountable due diligence expense reimbursements in which case they have advised us that they would expect to hold such shares as stockholders for investment and not for distribution. We will not pay any selling commissions in connection with any shares purchased by our advisor.

      There will be no sales to discretionary accounts without the prior specific written approval of the customer.

      Payment for shares should be made by check payable to “CommerceWest Bank, as escrow agent for NNN Apartment REIT, Inc.” or, after we have reached our minimum offering amount, checks may be made payable directly to “NNN Apartment REIT, Inc.” Subscriptions will be effective only upon acceptance by us, and we reserve the right to reject any subscription in whole or in part. In no event may a subscription for shares be accepted until at least five business days after the date the subscriber receives this prospectus. Each subscriber will receive a confirmation of his purchase. Except for purchase under the distribution reinvestment plan, all accepted subscriptions will be for whole shares and for not less than 100 shares, or $1,000, except in Minnesota, which requires a minimum investment of 250 shares, or $2,500, and North Carolina, which requires a minimum investment of 500 shares, or $5,000.

      Except as noted below, subscription proceeds will be placed in interest-bearing accounts with the escrow agent until subscriptions for at least the minimum offering of 200,000 shares aggregating at least $2,000,000 have been received and accepted by us. Neither the shares granted to or purchased by our officers, employees or directors under the 2006 incentive award plan nor the shares purchased by our advisor or its affiliates will be counted in calculating the minimum offering. Subscription proceeds held in the escrow account will be invested in obligations of, or obligations guaranteed by, the United States government or bank money-market accounts or certificates of deposit of national or state banks that have deposits insured by the Federal Deposit Insurance Corporation, including certificates of deposit of any bank acting as depository or custodian for any such funds, as directed by our advisor. Subscribers may not withdraw funds from the escrow account.

      If subscriptions for at least 200,000 shares have not been received and accepted by                     , 2007, the escrow agent will promptly so notify us and this offering will be terminated. In such event, the escrow agent is obligated to use its best efforts to obtain an executed IRS Form W-9 from each subscriber whose subscription is rejected. No later than three business days after rejection of a subscription, the escrow agent will refund and return all monies to rejected subscribers and any interest earned thereon without deducting escrow expenses. In the event that a subscriber fails to remit an executed IRS Form W-9 to the escrow agent prior to the date the escrow agent returns the subscriber’s funds, the escrow agent will be required to withhold from such funds 28% of the earnings attributable to such subscriber in accordance with Internal Revenue Service regulations. During any period in which subscription proceeds are held in escrow, interest earned thereon will be allocated among subscribers on the basis of the respective amounts of their subscriptions and the number of days that such amounts were on deposit.

      Initial subscribers may be admitted as stockholders of our company and the payments transferred from escrow to us at any time after we have received and accepted the minimum offering.

      After the close of the minimum offering, subscriptions will be accepted or rejected within 30 days of receipt by us, and if rejected, all funds will be returned to subscribers within three business days. Investors whose subscriptions are accepted will be admitted as stockholders of our company periodically, but not less often than quarterly. Escrowed proceeds will be released to us on the date that the applicable stockholder is admitted to our company.

      You have the option of placing a transfer on death, or TOD, designation on your shares purchased in this offering. A TOD designation transfers ownership of the shares to your designated beneficiary upon your death. This designation may only be made by individuals, not entities, who are the sole or joint owners with right of survivorship of the shares. This option, however, is not available to residents of the states of Louisiana, North Carolina and Texas. If you would like to place a TOD designation on your

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shares, you must complete and return the TOD form included as part of the Subscription Agreement (Exhibit B) to this prospectus in order to effect the designation.

      Our directors and officers, as well as officers, managers and employees of our advisor and its affiliates, may purchase shares in our offering at a discount. The purchase price for these shares will be $9.00 per share reflecting the fact that selling commissions in the amount of $0.70 per share, marketing allowance in the amount of $0.25 per share, and accountable due diligence expense reimbursements in the amount of $0.05 per share will not be paid in connection with these sales. The net proceeds to us from these sales made net of commissions will be substantially the same as the net proceeds we receive from other sales of shares. Our advisor and its affiliates are expected to hold their shares purchased as stockholders for investment and not with a view towards distribution.

      In addition, the dealer manager may sell shares to retirement plans of broker dealers participating in this offering, to broker dealers in their individual capacities, to IRAs and qualified plans of their registered representatives or to any one of their registered representatives in their individual capacities net of the selling commissions of $0.70, for a purchase price of $9.30, in consideration of the services rendered by such broker dealers and registered representatives in the distribution. The net proceeds of these sales to our company also will be substantially the same as our net proceeds from other sales of shares.

      A “purchaser,” as defined below, who purchases more than 50,000 shares at any one time through a single participating broker dealer will receive a mandatory discount on the purchase price of the shares above 50,000. The selling commissions payable to the participating broker dealer will be commensurately reduced. The following table shows the discounted price per share and reduced selling commissions payable for volume discounts.

			Price
	Commission		per
Shares Purchased in the Transaction	Rate		Share
1 to 50,000		7.0%	$	10.00
50,001 to 100,000		6.0%	$	9.90
100,001 to 200,000		5.0%	$	9.80
200,001 to 500,000		4.0%	$	9.70
500,001 to 750,000		3.0%	$	9.60
750,001 to 1,000,000		2.0%	$	9.50
1,000,001 and up		1.0%	$	9.40

      The reduced selling price per share and selling commissions are applied to the incremental shares falling within the indicated range only. Thus, for example, an investment of $1,499,994 would result in a total purchase of 151,530 shares as follows:

•  50,000 shares at $10.00 per share (total: $500,000) and a 7.0% commission;

•  50,000 shares at $9.90 per share (total: $495,000) and a 6.0% commission; and

•  51,530 shares at $9.80 per share (total: $504,994) and a 5.0% commission.

      Because all investors will be deemed to have contributed the same amount per share to our company for purposes of distributions of cash available for distribution, an investor qualifying for a volume discount will receive a higher return on his investment in our company than investors who do not qualify for such discount.

      Subscriptions may be combined for the purpose of determining the volume discounts in the case of subscriptions made by any “purchaser,” as that term is defined below, provided all such shares are purchased through the same broker dealer. The volume discount will be prorated among the separate subscribers considered to be a single “purchaser.” Any request to combine more than one subscription must be made in writing, and must set forth the basis for such request. Any such request will be subject to verification by our advisor that all of such subscriptions were made by a single “purchaser.” You must

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mark the “Additional Investment” space on the subscription agreement signature page in order for purchases to be combined. We are not responsible for failing to combine purchases if you fail to mark the “Additional Investment” space.

      For the purposes of such volume discounts, the term “purchaser” includes:

•  an individual, his or her spouse and their children under the age of 21 who purchase the shares for his, her or their own accounts;

•  a corporation, partnership, association, joint-stock company, trust fund or any organized group of persons, whether incorporated or not;

•  an employees’ trust, pension, profit sharing or other employee benefit plan qualified under the federal income tax laws; and

•  all commingled trust funds maintained by a given bank.

      Notwithstanding the above, in connection with volume sales made to investors in our company, the dealer manager may, in its sole discretion, waive the “purchaser” requirements and aggregate subscriptions as part of a combined order for purposes of determining the number of shares purchased, provided that any aggregate group of subscriptions must be received from the same broker dealer, including the dealer manager. Any such reduction in selling commission will be prorated among the separate subscribers except that, in the case of purchases through the dealer manager, the dealer manager may allocate such reduction among separate subscribers considered to be a single “purchaser” as it deems appropriate. An investor may reduce the amount of his purchase price to the net amount shown in the foregoing table, if applicable. If such investor does not reduce the purchase price, the excess amount submitted over the discounted purchase price will be returned to the actual separate subscribers for shares.

      In the case of subsequent investments or combined investments, a volume discount will be given only on the portion of the subsequent or combined investment that caused the investment to exceed the breakpoint. For example, if you are investing $50,000 with us today, but had previously invested $470,000, these amounts can be combined to reach the $500,000 breakpoint, which will entitle you to a lower sales commission on a $20,000 portion of your current $50,000 investment. Except as provided in this paragraph and the three immediately preceding paragraphs, separate subscriptions will not be cumulated, combined or aggregated.

      California residents should be aware that volume discounts will not be available in connection with the sale of shares made to California residents to the extent such discounts do not comply with the provisions of the California corporate securities laws. Under these laws, volume discounts can be made available to California residents only in accordance with the following conditions:

•  there can be no variance in the net proceeds to our company from the sale of the shares to different purchasers of the same offering;

•  all purchasers of the shares must be informed of the availability of quantity discounts;

•  the same volume discounts must be allowed to all purchasers of shares which are part of the offering;

•  the minimum amount of shares as to which volume discounts are allowed cannot be less than $10,000;

•  the variance in the price of the shares must result solely from a different range of commissions, and all discounts allowed must be based on a uniform scale of commissions; and

•  no discounts are allowed to any group of purchasers.

      Accordingly, volume discounts for California residents will be available in accordance with the foregoing table of uniform discount levels based on dollar volume of shares purchased, but no discounts are allowed to any group of purchasers, and no subscriptions may be aggregated as part of a combined order for purposes of determining the number of shares purchased.

141

      Investors who, in connection with their purchase of shares, have engaged the services of a registered investment advisor with whom the investor has agreed to pay a fee for investment advisory services in lieu of normal commissions based on the volume of securities sold may agree with the participating broker dealer selling such shares and the dealer manager to reduce the amount of selling commissions payable with respect to such sale to zero. The net proceeds to our company will not be affected by eliminating the commissions payable in connection with sales to investors purchasing through such investment advisors. All such sales must be made through registered broker dealers.

      Neither the dealer manager nor its affiliates will directly or indirectly compensate any person engaged as an investment advisor by a potential investor as an inducement for such investment advisor to advise favorably for investment in our company.

Shares Issued Under DRIP

      We have adopted a DRIP under which our stockholders may elect to have their cash distributions reinvested in additional shares of our common stock. Distributions will be used to purchase shares on behalf of the participants from our company. All such distributions will be invested in shares within 30 days after such payment date. Participants will not have the option to make voluntary contributions to the DRIP to purchase shares in excess of the amount of shares that can be purchased with their distributions. Until the earlier to occur of the termination of this offering or the sale of all the shares reserved for issuance under the DRIP, the purchase price for shares purchased under the DRIP will be $9.50 per share. Shares acquired under the DRIP will entitle the participant to the same rights and to be treated in the same manner as those purchased by the participants in this offering. The DRIP will be administered by us or one of our affiliates. Participants may terminate their participation in the DRIP by written notice to us.

SALES LITERATURE

      In addition to this prospectus, we may use certain supplemental sales material in connection with the offering of the shares. However, such sales material will only be used when accompanied by or preceded by the delivery of this prospectus. This material, prepared by our advisor, may include the following: a brochure describing the advisor and its affiliates and our investment objectives; a fact sheet that provides information regarding properties purchased to date and other summary information related to our offering; property brochures; a power point presentation that provides information regarding our company and our offering; and the past performance of programs managed by our advisor and its affiliates. No person has been authorized to prepare for, or furnish to, a prospective investor any sales material other than that described herein and “tombstone” newspaper advertisements or solicitations of interest that are limited to identifying the offering and the location of sources of additional information.

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

EXPERTS

      The consolidated balance sheet of NNN Apartment REIT, Inc. as of January 10, 2006 (date of inception) included in this prospectus, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, and is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

142

REPORTS TO STOCKHOLDERS

      We intend to furnish our stockholders with annual reports containing consolidated financial statements audited by our independent registered public accounting firm.

LEGAL MATTERS

      Certain legal matters will be passed upon for us by Hirschler Fleischer, Richmond, Virginia. The statements under the caption “Federal Income Tax Consequences of Our Status as a REIT” as they relate to federal income tax matters have been reviewed by Hirschler Fleischer and Hirschler Fleischer has opined as to certain federal income tax matters relating to an investment in shares of NNN Apartment REIT. Hirschler Fleischer will advise us with respect to real estate law and other matters as well. Hirschler Fleischer has also represented Triple Net Properties, an affiliate of our advisor, as well as various other affiliates of our advisor, in other matters and may continue to do so in the future. Louis J. Rogers, senior counsel to Hirschler Fleischer and president of Triple Net Properties, also owns approximately 2% of the common shares of Triple Net Properties, 16% of the shares of common stock of Realty and 10% of the capital stock of NNN Capital Corp. In connection with the offering, Mr. Rogers will not serve as an attorney on behalf of Hirschler Fleischer but will serve solely in his capacities with our company and our advisor. Venable LLP, Baltimore, Maryland has issued an opinion to us regarding certain matters of Maryland law, including the validity of the shares offered hereby.

LEGAL PROCEEDINGS

      Neither our company or our operating partnership is currently involved in any material litigation, nor to their knowledge, is any material litigation threatened against them.

      On September 16, 2004, Triple Net Properties, the parent and manager of our advisor, learned that the SEC is conducting an investigation referred to as “In the matter of Triple Net Properties, LLC.” The SEC has requested information from Triple Net Properties relating to disclosure in public and private securities offerings sponsored by Triple Net Properties and its affiliates, or the Triple Net securities offerings. The SEC also has requested information from NNN Capital Corp., the dealer manager for the Triple Net securities offerings and the dealer manager of our offering. The SEC has requested financial and other information regarding the Triple Net securities offerings and the disclosures included in the related offering documents from each of Triple Net Properties and NNN Capital Corp. This investigation could result in the assertion of fines, penalties or administrative remedies. At this time, Triple Net Properties cannot assess the outcome of the investigation by the SEC.

ADDITIONAL INFORMATION

      We have filed with the Securities and Exchange Commission a registration statement on Form S-11, as amended, of which this prospectus is a part under the Securities Act with respect to the shares offered by this prospectus. This prospectus does not contain all of the information set forth in the registration statement, portions of which have been omitted as permitted by the rules and regulations of the Securities and Exchange Commission. Statements contained in this prospectus as to the content of any contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference and the schedules and exhibits to this prospectus. For further information regarding our company and the shares offered by this prospectus, reference is made by this prospectus to the registration statement and such schedules and exhibits.

      The registration statement and the schedules and exhibits forming a part of the registration statement filed by us with the Securities and Exchange Commission can be inspected and copies obtained from the Securities and Exchange Commission at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the Securities and Exchange Commission, Room 1580, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. In addition, the Securities and Exchange Commission maintains a Web site that contains reports, proxies and information statements and other information regarding our company and other registrants that have been filed electronically with the Securities and Exchange Commission. The address of such site is http://www.sec.gov.

143

INDEX TO FINANCIAL STATEMENT

Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheet	F-3
Notes to Consolidated Balance Sheet	F-4

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder

NNN Apartment REIT, Inc.

      We have audited the accompanying consolidated balance sheet of NNN Apartment REIT, Inc., a Maryland corporation (the “Company”), as of January 10, 2006 (date of inception). The balance sheet is the responsibility of the Company’s management. Our responsibility is to express an opinion on this consolidated balance sheet based on our audit.

      We conducted our audit 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the consolidated financial statement referred to above presents fairly, in all material respects, the financial position of the Company as of January 10, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Los Angeles, California

January 10, 2006

F-2

NNN APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEET

January 10, 2006 (date of inception)

		January 10, 2006
ASSETS
Cash		$	201,007
	Total assets	$	201,007
LIABILITIES AND SHAREHOLDERS’ EQUITY
Minority interest of limited partnership in Operating Partnership		$	1,000
Common stock, $.01 par value, 100,000 shares authorized; 22,223 shares issued and outstanding			222
Additional paid in capital			199,785
	Total shareholder’s equity		200,007
	Total liabilities and shareholder’s equity	$	201,007

The accompanying notes are an integral part of this consolidated financial statement.

F-3

NNN APARTMENT REIT, INC.

NOTES TO CONSOLIDATED BALANCE SHEET

January 10, 2006 (date of inception)

1. ORGANIZATION AND NATURE OF BUSINESS

      NNN Apartment REIT, Inc. was incorporated on December 21, 2005 under the laws of the state of Maryland. If we meet the qualification requirements, we intend to elect to be treated as a real estate investment trust, or REIT for Federal income tax purposes for our first full tax year. We were incorporated to raise capital and acquire ownership interests in apartment communities. As of January 10, 2006, we do not own any properties. The use of the words “we,” “us” or “our” refers to NNN Apartment REIT, Inc. and its subsidiaries, including NNN Apartment REIT Holdings, L.P., or our operating partnership, except where the context otherwise requires.

      We are planning to commence a best efforts initial public offering, or the offering, in which we intend to offer a minimum of 200,000 shares of our common stock and a maximum of 100 million shares of our common stock for $10 per share and 5 million shares of our common stock pursuant to our distribution reinvestment plan at $9.50 per share.

      Our day-to-day operations are managed by NNN Apartment REIT Advisor, LLC, or our advisor, under an advisory agreement. Our advisor is affiliated with us in that we and our advisor have common management. Our advisor engages affiliated entities, including Triple Net Properties Realty, Inc., an affiliate of our advisor, which is 16% owned by Louis J. Rogers, our president and chairman of the board and the president of our advisor, to provide various services to us and our properties.

2. BASIS OF PRESENTATION IN FUTURE FINANCIAL STATEMENTS

      We intend to operate in an umbrella partnership REIT structure in which our majority-owned subsidiary, NNN Apartment REIT Holdings, L.P., a Virginia limited partnership, or our operating partnership, or wholly owned subsidiaries of our operating partnership, will own substantially all of the properties acquired on our behalf. We are the sole general partner of our operating partnership and own 99.99% of the equity interests therein. Our advisor is a limited partner, owning 0.01% of the limited partnership interests, and a special limited partner in the operating partnership. Once the net proceeds of this offering are contributed to our operating partnership, we will become a limited partner.

      Because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership), the accounts of our operating partnership are consolidated in our company’s financial statements. All significant intercompany accounts and transactions will be eliminated in consolidation.

3. RELATED PARTY TRANSACTIONS

      On January 10, 2006, our advisor purchased 22,223 shares of common stock of NNN Apartment REIT, Inc. for total cash consideration of $200,007. The president of our advisor is also our chairman of the board and president.

      On January 10, 2006, our advisor contributed $1,000 for a 0.01% limited partnership interest in our operating partnership.

      As of January 10, 2006, organizational and offering costs of approximately $226,000 have been incurred on our behalf. These costs are not recorded in our financial statements because such costs are not our liability until the subscriptions for the minimum number of shares are received and accepted by us. When recorded by us, organizational and offering costs will be expensed as incurred, and third party offering costs will be deferred and charged to shareholders’ equity as such amounts are reimbursed to our advisor or its affiliates from the gross proceeds of the offering.

F-4

NNN APARTMENT REIT, INC.

NOTES TO CONSOLIDATED BALANCE SHEET — (Continued)

4. STOCKHOLDERS’ EQUITY

Common Stock

      We are offering and selling to the public up to 100,000,000 shares of our $.01 par value common stock for $10.00 per share and up to 5,000,000 shares of our $.01 par value common stock to be issued pursuant to our distribution reinvestment plan at $9.50 per share.

Share Repurchase Plan

      Our board of directors has approved, but delayed the adoption of, a share repurchase plan. We will not adopt the share repurchase plan until the earlier of (i) the completion or termination of the offering, which may last until 2008, and receipt of formal or informal relief from the issuer tender offer rules or (ii) receipt by us from the SEC of exemptive relief from rules restricting issuer purchases during distributions and formal or informal relief from the issuer tender offer rules, which relief we may never obtain. The proposed share repurchase plan allows for share repurchases by us when certain criteria are met. Share repurchases will be made at the sole discretion of the board of directors.

Incentive Award Plan

      The board of directors has approved the adoption of the 2006 Incentive Award Plan, or the Plan. Under the terms of the Plan, the aggregate number of shares of our common stock subject to options, restricted stock awards, stock purchase rights, stock appreciation rights or other awards will be no more than 2,000,000 shares. Pursuant to the provisions of the Plan, we intend to grant, on the date our registration statement becomes effective, 1,000 shares of restricted stock to each of our non-officer directors. To the extent allowed by applicable law, the non-officer directors will not be required to pay any purchase price for these grants of restricted stock. The restricted stock will vest as follows: 20% on the date of grant and 20% on each one-year anniversary date for the four years following the date of grant. The unregistered public sale of restricted stock, which is governed by Rule 144 of the Securities Act of 1933, as amended, is prohibited during the first year of ownership and limited as set forth in such rule during the second year of ownership.

F-5

EXHIBIT A

PRIOR PERFORMANCE TABLES

A-1

TABLE I

EXPERIENCE IN RAISING AND INVESTING FUNDS (UNAUDITED)

PUBLIC PROGRAMS

December 31, 2004

     Table I presents the experience of Triple Net Properties, LLC in raising and investing funds in prior programs where the offering closed in the three years prior to December 31, 2004. As of December 31, 2004 there were four public programs.

				NNN						NNN		Public
				2002 Value		Initial Offering		Second Offering		2003 Value		Program
		T REIT, Inc.		Fund, LLC		G REIT, Inc.		G REIT, Inc.		Fund, LLC		Totals
Dollar Amount Offered		$	100,000,000	$	30,000,000	$	200,000,000	$	270,000,000	$	50,000,000	$	650,000,000
Dollar Amount Raised			46,395,000		29,799,000		200,000,000		237,315,000		50,000,000	$	563,509,000
Percentage Amount Raised			46.4%		99.3%		100.0%		87.9%		100.0%		86.7%
Less Offering Expenses:
	Selling Commissions		8.0%		8.0%		7.5%		7.0%		8.0%
	Marketing Support & Due Diligence Reimbursement		1.5%		2.5%		2.0%		3.0%		2.5%
	Organization & Offering Expenses (Note 1)		2.5%		2.5%		2.5%		2.0%		2.5%
	Due Diligence Allowance (Note 2)		0.0%		0.0%		0.0%		0.0%		0.0%
Reserves			0.0%		8.0%		0.0%		0.0%		8.0%
Percent Available for Investment			88.0%		79.0%		88.0%		88.0%		79.0%
Acquisition Cost:
	Cash Down Payment		87.5%		71.0%		87.5%		87.5%		71.0%
	Loan Fees		0.0%		2.5%		0.0%		0.0%		2.5%
	Acquisition Fees Paid to Affiliates		0.5%		5.5%		0.5%		0.5%		5.5%
	Total Acquisition Cost		88.0%		79.0%		88.0%		88.0%		79.0%
Percent Leveraged			34.4%		68.6%		58.4%				36.5%
Date Offering Began			22-Feb-00		15-May-02		22-Jul-02		23-Jan-04		11-Jul-03
Date Offering Ended			31-May-02		14-Jul-03		9-Feb-04		30-Apr-04		14-Oct-04
Length of Offering (days)			830		426		568		99		462
Days to Invest 90% of Amount Available for Investment (Measured from Beginning of Offering)			829		400		542		N/A		424
Number of Investors			2,040		545		13,973				785

Notes:

(1)	Includes legal, accounting, printing and other offering expenses, including amounts for the reimbursement for marketing, salaries and direct expenses of employees engaged in marketing and other organization expenses.
(2)	Nonaccountable due diligence reimbursement to Selling Group.

A-2

TABLE II

COMPENSATION TO SPONSOR (UNAUDITED)

PUBLIC PROGRAMS

December 31, 2004

     Table II presents the types of compensation paid to Triple Net Properties, LLC and its affiliates in connection with prior programs with offerings that closed in the three years prior to December 31, 2004. As of December 31, 2004, there were four public programs which paid compensation to Triple Net Properties, LLC and its affiliates. Property management fees, asset management fees, and leasing commissions are presented for consolidated properties at 100% of the amount paid by the property. Consolidated property information has not been adjusted for the respective entities for affiliated ownership percentages. Additionally, unconsolidated properties information is not included in the tabular presentation.

								2002		2003		Total
			T REIT, Inc			G REIT, Inc.		Value Fund, LLC		Value Fund, LLC		All Programs
Date Offering Commenced				22-Feb-00			22-Jul-02		15-May-02		11-Jul-03
Dollar Amount Raised			$	46,395,000		$	437,315,000	$	29,799,000	$	50,000,000	$	563,509,000
Amounts Paid to Sponsor from Proceeds of Offering:
	Selling Commissions to Selling Group Members		$	3,576,000		$	30,443,000	$	2,089,000	$	3,898,000	$	40,006,000
	Marketing Support & Due Diligence Reimbursement			671,000			10,818,000		2,005,000		1,251,000		14,745,000
	Organization & Offering Expenses			860,000			3,036,000		249,000		1,394,000		5,539,000
	Due Diligence Allowance			—			—		—		—		—
	Loan Fees			—			—		1,000		—		1,000
	Acquisition Fees			—			—		1,192,000		1,783,000		2,975,000
		Totals	$	5,107,000		$	44,297,000	$	5,536,000	$	8,326,000	$	63,266,000
Amounts Paid to Sponsor for Real Estate Commissions and Disposition Fees			$	2,292,000		$	21,074,000	$	1,730,000	$	1,135,000	$	26,231,000
Dollar Amount of Cash Generated from Operations Before Deducting Payments to Sponsor			$	8,550,000		$	52,948,000	$	7,917,000	$	2,922,000	$	72,337,000
Amounts Paid to Sponsor from Operations — Year 2001
	Property Management Fees		$	106,000		$	—	$	—	$	—	$	106,000
	Asset Management Fees			157,000			—		—		—		157,000
	Leasing Commissions			1,000			—		—		—		1,000
		Totals	$	264,000		$	—	$	—	$	—	$	264,000
Amounts Paid to Sponsor from Operations — Year 2002
	Property Management Fees		$	225,000		$	24,000	$	21,000	$	—	$	270,000
	Asset Management Fees			(157,000	)		—		—		—		(157,000	)
	Leasing Commissions			13,000			—		—		—		13,000
		Totals	$	81,000		$	24,000	$	21,000	$	—	$	126,000
Amounts Paid to Sponsor from Operations — Year 2003
	Property Management Fees		$	195,000		$	458,000	$	463,000	$	—	$	1,116,000
	Asset Management Fees			—			—		—		—		—
	Leasing Commissions			31,000			14,000		141,000		—		186,000
		Totals	$	226,000		$	472,000	$	604,000	$	—	$	1,302,000
Amounts Paid to Sponsor from Operations — Year 2004
	Property Management Fees		$	343,000		$	4,293,000	$	840,000	$	272,000	$	5,748,000
	Asset Management Fees			—			—		—		—		—
	Leasing Commissions			48,000			985,000		630,000		—		1,663,000
		Totals	$	391,000		$	5,278,000	$	1,470,000	$	272,000	$	7,411,000
	Cumulative cash flow from operations		$	7,588,000		$	47,174,000	$	5,822,000	$	2,650,000	$	63,234,000

A-3

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS BY YEAR (UNAUDITED)

PUBLIC PROGRAMS

G REIT, INC.

     Table III presents operating results for programs which have closed their offerings during the five years ended December 31, 2004.

			Year Ended December 31,
			2004			2003			2002			Total
Gross Revenues			$	94,910,000		$	12,427,000		$	733,000		$	108,070,000
Profit on Sale of Properties				—									—
Interest, Dividends & Other Income				423,000			124,000			18,000			565,000
Gain on Sale of Marketable Securities				1,231,000									1,231,000
Equity in Earnings (Loss) of Unconsolidated Real Estate				(604,000	)		204,000						(400,000	)
Income (Loss) from Discontinued Operations				—									—
Less: Operating Expenses				40,262,000			4,750,000			205,000			45,217,000
		General and Administrative Expenses		3,401,000			1,520,000			170,000			5,091,000
		Interest Expense (Note 1)		18,951,000			2,648,000			248,000			21,847,000
		Depreciation & Amortization		34,833,000			3,756,000			102,000			38,691,000
		Minority Interest		(9,000	)		3,000						(6,000	)
		Income Taxes		398,000									398,000
Net Income — GAAP Basis				(1,876,000	)		78,000			26,000		$	(1,772,000	)
Taxable Income From:
		Operations		11,273,000			1,083,000			(16,000	)		12,340,000
		Gain on Sale		251,000			—			—			251,000
Cash Generated From:
		Operating Activities		39,905,000			7,878,000			(609,000	)		47,174,000
		Investing Activities		(563,218,000	)		(291,418,000	)		(26,101,000	)		(880,737,000	)
		Financing Activities (Note 2)		552,058,000			296,053,000			35,259,000			883,370,000
Cash Generated From Operations, Investing & Financing				28,745,000			12,513,000			8,549,000			49,807,000
Less: Cash Distributions From:
		Operating Activities — to Investors		26,335,000			5,285,000			—			31,620,000
		Operating Activities — to Minority Interest		376,000			74,000						450,000
		Investing & Financing Activities		—			—			—			—
		Other (return of capital)		—			—			170,000			170,000
Cash Generated (Deficiency) after Cash Distributions				2,034,000			7,154,000			8,379,000			17,567,000
Less: Special Items (not including Sales & Refinancing)				—			—			—			—
Cash Generated (Deficiency) after Cash Distributions and Special Items			$	2,034,000		$	7,154,000		$	8,379,000		$	17,567,000
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results:
	Ordinary Income (Loss)
		— from operations	$	30.19		$	13.14		$	(3.95	)
		— from recapture		—			—			—
	Capital Gain (Loss)			—			—			—
Cash Distributions to Investors (Note 3)
	Sources (on GAAP basis)
		— Operating Activities		70.54			64.12			—
		— Investing & Financing Activities		—			—			—
		— Other (Return of Capital)		—			—			41.98
	Sources (on Cash basis)
		— Sales		—			—			—
		— Investing & Financing Activities		—			—			—
		— Operations		70.54			64.12			—
		— Other (Return of Capital)	$	—		$	—		$	41.98
Notes:
	(1) Includes amortization of deferred financing costs
	(2) Includes proceeds from issuance of common stock — net		$	236,109,000		$	138,305,000		$	18,604,000
	(3) Cash Distributions per $1,000 invested excludes distributions to minority interests

A-4

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS BY YEAR (UNAUDITED)

PUBLIC PROGRAMS

T REIT, INC.

     Table III presents operating results for programs which have closed their offerings during the five years ended December 31, 2004.

			Year Ended December 31,
			2004			2003			2002			2001			2000			Total
Gross Revenues			$	4,959,000		$	1,068,000		$	304,000		$	197,000		$	204,000		$	6,732,000
Profit on Sale of Properties				2,466,000			2,614,000			213,000			(178,000	)		—			5,115,000
Interest, Dividends & Other Income				535,000			116,000			283,000			—			—			934,000
Gain on Sale of Marketable Securities				109,000			—			—			—			—			109,000
Equity in Earnings (Loss) of Unconsolidated Real Estate				581,000			1,160,000			1,126,000			62,000			—			2,929,000
Income (Loss) from Discontinued Operations				89,000			766,000			1,042,000			27,000			4,000			1,928,000
Less: Operating Expenses				1,868,000			265,000			102,000			—			33,000			2,268,000
		General and Administrative Expenses		1,264,000			815,000			539,000			572,000			132,000			3,322,000
		Interest Expense (Note 1)		1,187,000			305,000			13,000			—			121,000			1,626,000
		Depreciation & Amortization		1,961,000			150,000			21,000			—			23,000			2,155,000
		Minority Interest		(85,000	)		—			—			—			—			(85,000	)
		Income Taxes		—			—			—			—			—			—
Net Income — GAAP Basis			$	2,544,000		$	4,189,000		$	2,293,000		$	(464,000	)	$	(101,000	)	$	8,461,000
Taxable Income From:
		Operations		1,197,000			(1,100,000	)		(683,000	)		(413,000	)		(77,000	)		(1,076,000	)
		Gain on Sale		2,545,000			2,547,000			284,000			(182,000	)		—			5,194,000
Cash Generated From:
		Operating Activities		3,590,000			2,950,000			2,290,000			(1,242,000	)		279,000			7,867,000
		Investing Activities		(14,333,000	)		2,517,000			(19,279,000	)		(7,492,000	)		(5,225,000	)		(43,812,000	)
		Financing Activities (Note 2)		9,731,000			4,439,000			22,334,000			12,996,000			5,343,000			54,843,000
Cash Generated From Operations, Investing & Financing				(1,012,000	)		9,906,000			5,345,000			4,262,000			397,000			18,898,000
Less: Cash Distributions From:
		Operating Activities — to Investors		3,438,000			2,950,000			2,290,000			—			149,000			8,827,000
		Operating Activities — to Minority Interest		152,000															152,000
		Investing & Financing Activities		—			—			—			—			—			—
		Other (return of capital)		358,000			896,000			573,000			863,000			—			2,690,000
Cash Generated (Deficiency) after Cash Distributions				(4,960,000	)		6,060,000			2,482,000			3,399,000			248,000			7,229,000
Less: Special Items (not including Sales & Refinancing)				—			—			—			—			—			—
Cash Generated (Deficiency) after Cash Distributions and Special Items			$	(4,960,000	)	$	6,060,000		$	2,482,000		$	3,399,000		$	248,000		$	7,229,000
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results:
	Ordinary Income (Loss)
		— from operations	$	25.85		$	(23.52	)	$	(17.02	)	$	(29.54	)	$	(33.73	)
		— from recapture		—			—			—			—			—
		Capital Gain (Loss)		54.97			54.47			7.08			(13.02	)		—
Cash Distributions to Investors
	Sources (on GAAP basis)
		— Operating Activities		74.25			63.09			57.06			—			65.27
		— Investing & Financing Activities		—			—			—			—			—
		— Other (Return of Capital)		7.73			19.16			14.28			61.73			—
	Sources (on Cash basis)
		— Sales		—			—			—			—			—
		— Investing & Financing Activities		—			—			—			—			—
		— Operations		74.25			63.09			57.06						65.27
		— Other (Return of Capital)	$	7.73		$	19.16		$	14.28		$	61.73		$	—
Notes:
	(1) Includes amortization of deferred financing costs
	(2) Includes proceeds from issuance of common stock — net		$	—		$	—		$	19,343,000		$	16,008,000		$	5,343,000
	(3) Cash Distributions per $1,000 invested excludes distributions to minority interests

A-5

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS BY YEAR (UNAUDITED)

PUBLIC PROGRAMS

NNN 2003 VALUE FUND, LLC

     Table III presents operating results for programs which have closed their offerings during the five years ended December 31, 2004.

						From June 19, 2003
						(Date of Inception)
			Year Ended			through
			December 31, 2004			December 31, 2003			Total
Gross Revenues			$	2,660,000		$	—		$	2,660,000
Profit on Sale of Properties				—			—			—
Interest, Dividends & Other Income				86,000			3,000			89,000
Gain on Sale of Marketable Securities				—			—			—
Equity in Earnings (Loss) of Unconsolidated Real Estate				(682,000	)		(132,000	)		(814,000	)
Income (Loss) from Discontinued Operations				(41,000	)		—			(41,000	)
Less: Operating Expenses				1,924,000			11,000			1,935,000
		General and Administrative Expenses		414,000			7,000			421,000
		Interest Expense (Note 1)		957,000			—			957,000
		Depreciation & Amortization		1,212,000			—			1,212,000
		Minority Interest		(182,000	)		(31,000	)		(213,000	)
		Income Taxes		—			—			—
Net Income — GAAP Basis			$	(2,302,000	)	$	(116,000	)	$	(2,418,000	)
Taxable Income From:
		Operations		680,000			231,000			911,000
		Gain on Sale		—			—			—
Cash Generated From:
		Operating Activities		2,476,000			174,000			2,650,000
		Investing Activities		(45,158,000	)		(9,932,000	)		(55,090,000	)
		Financing Activities		52,269,000			12,437,000			64,706,000
Cash Generated From Operations, Investing & Financing				9,587,000			2,679,000			12,266,000
Less: Cash Distributions From:
		Operating Activities — to Investors		1,908,000			35,000			1,943,000
		Operating Activities — to Minority Interest		408,000			19,000			427,000
		Investing & Financing Activities		—			—			—
		Other (return of capital)		—			—			—
Cash Generated (Deficiency) after Cash Distributions				7,271,000			2,625,000			9,896,000
Less: Special Items (not including Sales & Refinancing)				—			—			—
Cash Generated (Deficiency) after Cash Distributions and Special Items			$	7,271,000		$	2,625,000		$	9,896,000
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results:
	Ordinary Income (Loss)
		— from operations	$	22.09		$	71.19
		— from recapture		—			—
	Capital Gain (Loss)			—			—
Cash Distributions to Investors (Note 2)
	Sources (on GAAP basis)
		— Operating Activities		61.97			10.79
		— Investing & Financing Activities		—			—
		— Other (Return of Capital)		—			—
	Sources (on Cash basis)
		— Sales		—			—
		— Investing & Financing Activities		—			—
		— Operations		61.97			10.79
		— Other (Return of Capital)	$	—		$	—

Notes:
	(1) Includes amortization of deferred financing costs
	(2) Cash Distributions per $1,000 invested excludes distributions to minority interests

A-6

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS BY YEAR (UNAUDITED)

PUBLIC PROGRAMS

NNN 2002 VALUE FUND, LLC

     Table III presents operating results for programs which have closed their offerings during the five years ended December 31, 2004.

									From May 15, 2002
			Year Ended December 31,						(Date of Inception)
									through
			2004			2003			December 31, 2002			Total
Gross Revenues			$	10,008,000		$	4,904,000		$	—		$	14,912,000
Profit on Sale of Properties													—
Interest, Dividends & Other Income				55,000			57,000			2,000			114,000
Gain on Sale of Marketable Securities				—									—
Equity in Earnings (Loss) of Unconsolidated Real Estate				(278,000	)		84,000						(194,000	)
Income (Loss) from Discontinued Operations				(115,000	)		(651,000	)		(109,000	)		(875,000	)
Less: Operating Expenses				3,885,000			2,311,000						6,196,000
		General and Administrative Expenses		380,000			119,000			25,000			524,000
		Interest Expense(1)		1,647,000			886,000			40,000			2,573,000
		Depreciation & Amortization		3,630,000			1,559,000						5,189,000
		Minority Interest		312,000			54,000						366,000
		Income Taxes		—									—
Net Income — GAAP Basis			$	(184,000	)	$	(535,000	)	$	(172,000	)	$	(891,000	)
Taxable Income From:
		Operations		732,000			137,000			132,000			1,001,000
		Gain on Sale		—			—			—			—
Cash Generated From:
		Operating Activities		2,984,000			2,140,000			698,000			5,822,000
		Investing Activities		(2,170,000	)		(47,060,000	)		(7,959,000	)		(57,189,000	)
		Financing Activities		2,068,000			44,416,000			11,619,000			58,103,000
Cash Generated From Operations, Investing & Financing				2,882,000			(504,000	)		4,358,000			6,736,000
Less: Cash Distributions From:
		Operating Activities — to Investors		2,027,000			1,693,000			35,000			3,755,000
		Operating Activities — to Minority Interest		957,000			447,000			—			1,404,000
		Investing & Financing Activities					—						—
		Other (return of capital)		410,000			100,000						510,000
Cash Generated (Deficiency) after Cash Distributions				(512,000	)		(2,744,000	)		4,323,000			1,067,000
Less: Special Items (not including Sales & Refinancing)							—						—
Cash Generated (Deficiency) after Cash Distributions and Special Items			$	(512,000	)	$	(2,744,000	)	$	4,323,000		$	1,067,000
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results:
	Ordinary Income (Loss)
		— from operations	$	24.56		$	5.64		$	67.35
		— from recapture		—			—			—
	Capital Gain (Loss)			—			—			—
Cash Distributions to Investors
	Sources (on GAAP basis)
		— Operating Activities		68.02			69.71			17.86
		— Investing & Financing Activities		—			—			—
		— Other (Return of Capital)		13.76			4.12			—
	Sources (on Cash basis)
		— Sales
		— Investing & Financing Activities		—			—			—
		— Operations		68.02			69.71			17.86
		— Other (Return of Capital)	$	13.76		$	4.12		$	—
Notes:
	(1) Includes amortization of deferred financing costs
	(2) Cash Distributions per $1,000 invested excludes distributions to minority interests

A-7

TABLE V

SALES OR DISPOSALS OF PROPERTIES (UNAUDITED)

PUBLIC PROGRAMS

December 31, 2004

      Table V presents the sales or disposals of properties in prior public programs during the three years prior to December 31, 2004.

					Selling Price, Net of Closing Costs & GAAP Adjustments
									Purchase		Adjustments
					Cash Received		Mortgage		Mortgage		Resulting from
	Date		Date of		Net of Closing		Balance at		Taken Back		Application of
Property	Acquired		Sale(1)		Costs(2)		Time of Sale		By Program		GAAP		Total
Seguin Corners(5)		Nov-00		Aug-02	$	192,000	$	440,000		N/A		N/A	$	632,000
Plaza Del Rey(6)		Nov-00		Sep-02	$	197,000	$	814,000		N/A		N/A	$	1,011,000
Titan Land		Apr-02		Oct-02	$	111,000				N/A		N/A	$	111,000
Northstar Crossing		Oct-00		Jan-03	$	1,015,000	$	2,867,000		N/A		N/A	$	3,882,000
Thousand Oaks		Dec-00		Aug-03	$	6,100,000	$	8,750,000		N/A		N/A	$	14,850,000
Pahrump		May-01		Sep-03	$	5,950,000	$	11,884,000		N/A		N/A	$	17,834,000
Gateway Mall		Jan-03		Mar-04	$	2,452,000	$	4,876,000	$	8,700,000		N/A	$	16,028,000
Gateway Mall Land		Feb-04		Sep-04	$	794,000			$	528,000		N/A	$	1,322,000
Saddleback Financial Center(7)		Sep-02		Dec-04	$	1,619,000	$	1,817,000		N/A		N/A	$	3,436,000

(1)	No sales were to affiliated parties.
(2)	Net cash received plus assumption of certain liabilities by buyer.
(3)	Does not include pro-rata share of original offering costs.
(4)	After a $50,000 real estate commission refund from the Advisor.
(5)	Represents results only for T REITs 26% tenant in common interest.
(6)	Represents results only for T REITs 16.5% tenant in common interest.
(7)	Represents results only for T REITs 25% tenant in common interest.

All sales and dispositions of properties are for investments of T REIT, Inc.

A-8

TABLE V

SALES OR DISPOSALS OF PROPERTIES (UNAUDITED) — (Concluded)

PUBLIC PROGRAMS

December 31, 2004

      Table V presents the sales or disposals of properties in prior public programs during the three years prior to December 31, 2004.

	Cost of Properties Including Closing & Soft Costs
										Excess
			Total							(Deficiency)
			Acquisition							of Property
			Costs, Capital							Operating
	Original		Improvements				Gain on			Cash Receipts
	Mortgage		Closing & Soft				sale of			Over Cash
Property	Financing(3)		Costs(3)		Total		Investment			Expenditures
Seguin Corners(5)	$	142,000	$	386,000	$	528,000	$	104,000			N/A
Plaza Del Rey(6)	$	659,000	$	282,000	$	941,000	$	70,000			N/A
Titan Land			$	76,000	$	76,000	$	35,000			N/A
Northstar Crossing	$	2,695,000	$	1,378,000	$	4,073,000	$	(191,000	)		N/A
Thousand Oaks	$	10,838,000	$	1,912,000	$	12,750,000	$	2,100,000			N/A
Pahrump	$	12,435,000	$	4,525,000	$	16,960,000	$	874,000			N/A
Gateway Mall	$	5,000,000	$	10,259,000	$	15,259,000	$	769,000			N/A
Gateway Mall Land			$	468,000	$	468,000	$	854,000			N/A
Saddleback Financial Center(7)	$	1,913,000	$	670,000	$	2,583,000	$	853,000			N/A

(1)	No sales were to affiliated parties.
(2)	Net cash received plus assumption of certain liabilities by buyer.
(3)	Does not include pro-rata share of original offering costs.
(4)	After a $50,000 real estate commission refund from the Advisor.
(5)	Represents results only for T REITs 26% tenant in common interest.
(6)	Represents results only for T REITs 16.5% tenant in common interest.
(7)	Represents results only for T REITs 25% tenant in common interest.

All sales and dispositions of properties are for investments of T REIT, Inc.

A-9

TABLE I

EXPERIENCE IN RAISING AND INVESTING FUNDS (UNAUDITED)

PRIVATE PROGRAMS

December 31, 2004

     Table I presents the experience of Triple Net Properties, LLC in raising and investing funds in prior programs where the offering closed in the three years prior to December 31, 2004. As of December 31, 2004, there were 61 private programs which closed in the preceding three years. 60 programs are presented in the aggregate, having similar investment objectives providing Tenant In Common (TIC) interests, a form of ownership which complies with Section 1031 of the Internal Revenue Code, to investors involved in a tax deferred exchange. NNN 2001 Value Fund, LLC is a blind pool LLC membership investment and has invested in three properties. Our Advisor is the Advisor and Sponsor to four public programs which have invested as LLC members or TICs in certain private programs. At December, 31 2004 there were 14 affiliated investments by public programs in private programs. These affiliated investments are aggregated and disclosed in Table I. Table I further reflects the impact of the aggregate affiliated ownership on offering proceeds by excluding the affiliated program ownerships.

										Total Private
								Less:		Programs
		NNN		60		Subtotal of		14 Affiliated		Excluding
		2001 Value		TIC		61 Private		Program		Affiliated
		Fund, LLC		Programs		Programs		Ownerships		Ownerships
Dollar Amount Offered		$	11,000,000	$	590,154,344	$	601,154,344	$	62,134,586	$	539,019,758
Dollar Amount Raised			10,992,321		586,141,928		597,134,249		62,134,586	$	534,999,663
Percentage Amount Raised			99.9%		99.3%		99.3%		100.0%		99.3%
Less Offering Expenses:
	Selling Commissions		8.0%		7.6%		7.6%		7.5%		7.6%
	Marketing Support & Due Diligence Reimbursement		2.5%		2.6%		2.6%		2.4%		2.7%
	Organization & Offering Expenses(1)		3.5%		3.7%		3.7%		3.7%		3.7%
	Due Diligence Allowance(2)		0.0%		0.0%		0.0%		0.0%		0.0%
Reserves			20.6%		6.3%		6.6%		9.7%		6.1%
Percent Available for Investment			65.4%		79.8%		79.5%		76.6%		79.9%
Acquisition Cost:
	Cash Down Payment		60.0%		77.3%		76.9%		73.2%		77.3%
	Loan Fees		2.4%		2.2%		2.2%		2.0%		2.2%
	Acquisition Fees Paid to Affiliates		3.0%		0.3%		0.4%		n/a		0.4%
	Total Acquisition Cost		65.4%		79.8%		79.5%		75.3%		79.9%
Percent Leveraged			48%		66%
					August 16, 2001 to
Date Offering Began			12-Mar-01		October 7, 2004
					February 6, 2002 to
Date Offering Ended			30-Jun-02		May 13, 2005
Length of Offering (days)			476		32 to 362 days
Days to Invest 90% of Amount Available for Investment (Measured from Beginning of Offering)			453		9 to 227 days
Number of Investors
	Shareholders		—		—		—		—		—
	LLC Members		266		837		1,103		10		1,093
	Tenants In Common (TICs)		—		978		978		4		974
	Total		266		1,815		2,081		14		2,067

(1)	Includes legal, accounting, printing and other offering expenses, including amounts for the reimbursement for marketing, salaries and direct expenses of employees engaged in marketing and other organization expenses.
(2)	Nonaccountable due diligence reimbursement to Selling Group.

A-10

TABLE II

COMPENSATION TO SPONSOR (UNAUDITED)

PRIVATE PROGRAMS

December 31, 2004

     Table II presents the types of compensation paid to Triple Net Properties, LLC and its affiliates in connection with prior programs during the three years prior to December 31, 2004. As of December 31, 2004, there were 84 programs which paid compensation to Triple Net Properties, LLC and its affiliates during the preceding three years. 61 private program offerings closed in the past three years. 60 are presented in the aggregate, having similar investment objectives providing Tenant In Common (TIC) interests, a form of ownership which complies with Section 1031 of the Internal Revenue Code, to investors involved in a tax deferred exchange. At December 31, 2004, there were 14 affiliated investments by public programs in private programs. For programs with affiliated ownerships, the pro rata share of payments relating to affiliated ownerships are aggregated and disclosed in Table II. Table II further discloses the impact of the pro rata share of aggregate affiliated ownership payments on total payments to sponsor by excluding amounts relating to public program (affiliated) ownership in private programs.

     23 Other Programs have offerings which closed before December 31, 2001 and made payments to Triple Net Properties, LLC and its affiliates in the three years prior to December 31, 2004.

											Less:
			NNN		60		23		Subtotal of		14 Affiliated		Excluding
			2001 Value		TIC		Other		84 Private		Program		Affiliated
			Fund, LLC		Programs		Programs		Programs		Ownerships		Ownerships
Date Offering Commenced				12-Mar-01
Dollar Amount Raised			$	10,992,321	$	586,141,928	$	107,341,555	$	704,475,804	$	62,134,586	$	642,341,218
Amounts Paid to Sponsor from Proceeds of Offering:
	Selling Commissions to Selling Group Members		$	879,386	$	44,554,331	$	—	$	45,433,716	$	4,682,685	$	40,751,031
	Marketing Support & Due Diligence Reimbursement			274,808		15,521,167		—		15,795,975		1,504,401		14,291,574
	Organization & Offering Expenses			384,731		21,693,501		—		22,078,233		2,288,123		19,790,110
	Due Diligence Allowance			—		—		—		—		—		—
	Loan Fees			—		2,352,342		—		2,352,342		—		2,352,342
	Acquisition Fees			329,770		1,867,404		—		2,197,174		—		2,197,174
		Totals	$	1,868,695	$	85,988,745	$	—	$	87,857,439	$	8,475,209	$	79,382,230
Amounts paid to Sponsor by Seller at Acquisition
	Real Estate Commissions — Acquisition		$	435,000	$	38,188,418	$	—	$	38,623,418	$	3,726,024	$	34,897,394
Dollar Amount of Cash Generated from Operations
	Before Deducting Payments to Sponsor		$	909,151	$	93,618,688	$	38,853,509	$	133,381,349	$	11,727,387	$	121,653,961
Amounts Paid to Sponsor from Operations — Year 2002
	Property Management Fees		$	134,054	$	462,511	$	2,192,940	$	2,789,505	$	24,823	$	2,764,682
	Asset Management Fees			—		—		441,124		441,124		—		441,124
	Leasing Commissions			55,320		50,883		725,838		832,042		15,054		816,988
		Totals	$	189,374	$	513,394	$	3,359,903	$	4,062,671	$	39,877	$	4,022,794
Amounts Paid to Sponsor from Operations — Year 2003
	Property Management Fees		$	84,023	$	776,166	$	1,060,568	$	1,920,757	$	86,828	$	1,833,929
	Asset Management Fees			—		—		105,465		105,465		—		105,465
	Leasing Commissions			120,579		280,072		522,791		923,442		66,725		856,717
		Totals	$	204,602	$	1,056,238	$	1,688,824	$	2,949,664	$	153,554	$	2,796,110
Amounts Paid to Sponsor from Operations — Year 2004
	Property Management Fees		$	80,479	$	7,657,755	$	1,728,538	$	9,466,772	$	1,058,081	$	8,408,691
	Asset Management Fees			—		58,549		954,351		1,012,900		—		1,012,900
	Leasing Commissions			68,928		2,305,901		488,463		2,863,292		342,925		2,520,367
		Totals	$	149,407	$	10,022,205	$	3,171,352	$	13,342,963	$	1,401,006	$	11,941,958

A-11

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS BY YEAR (UNAUDITED)

PRIVATE PROGRAMS

W REIT, INC.

      Table III presents certain operating results for programs where the offering closed during the five years ended December 31, 2004. Western Real Estate Investment Trust, Inc., or W REIT, was formed as a private real estate investment trust and is qualified as a REIT for federal income tax purposes. W REIT was formed to acquire office and industrial properties and retail shopping centers primarily in the western United States with the offering proceeds. W REIT closed its private placement offering in April, 2000 after raising $14,000,000 from 345 investors.

			For the Years Ended December 31,
			2004			2003			2002			2001		2000			1999			1998
Gross Revenues			$	890,555		$	2,144,916		$	3,535,350		$	4,323,400	$	5,248,209		$	4,210,027		$	542,089
Profit on Sale of Properties				2,059,230			(104,904	)		2,292,182			—		2,726,179			—			—
Less: Operating Expenses				782,530			1,039,695			1,434,695			1,365,101		2,744,785			1,726,702			265,030
		Owners Expenses		—			99,238			51,401			63,817		—			—			—
		Interest Expense		242,186			733,352			1,745,056			1,718,773		2,445,150			2,088,597			127,260
		Depreciation & Amortization		272,117			348,708			692,363			664,515		958,020			687,904			101,826
Net Income — Tax Basis				1,652,952			(180,981	)		1,904,017			511,194		1,826,433			(293,176	)		47,973
Taxable Income From:
		Operations		(406,278	)		(76,077	)		(388,165	)		511,194		(899,746	)	$	(293,176	)		47,973
		Gain on Sale		2,059,230			(104,904	)		2,292,182			—		2,726,179			—			—
Cash Generated From:
		Operations		(53,527	)		122,252			239,508			1,379,820		(154,749	)		721,821			370,800
		Sales		3,434,518			2,905,000			5,039,423			—		5,867,267			—			—
		Refinancing		—			—			—			—		—			225,793			—
Cash Generated From Operations, Sales & Refinancing
		Before Additional Cash Adjustments		3,380,991			3,027,252			5,278,931			1,379,820		5,712,518			947,614			370,800
		Additional Cash Adjustments
Less: Monthly Mortgage Principal Repayments				58,873			114,964			180,468			177,585		223,887			(14,010	)
Cash Generated From Operations, Sales & Refinancing				3,322,118			2,912,288			5,098,463			1,202,235		5,488,631			961,624			370,800
Less: Cash Distributions to Investors From:
		Operating Cash Flow		—			122,252			239,508			905,901		—			599,564			48,186
		Sales & Refinancing		3,418,624			2,500,847			1,662,016			—		5,832,350			—			—
		Other (return of capital)		—			—			—			—		—			—			—
Cash Generated (Deficiency) after Cash Distributions				(96,506	)		289,189			3,196,939			296,334		(343,719	)		362,060			322,614
Less: Special Items (not including Sales & Refinancing)				—			—			—			—		—			—			—
Cash Generated (Deficiency) after Cash Distributions and Special Items			$	(96,506	)	$	289,189		$	3,196,939		$	296,334	$	(343,719	)	$	362,060		$	322,614
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results:
	Ordinary Income (Loss)
		— from operations	$	(28.91	)	$	(5.41	)	$	(27.63	)	$	36.38	$	(64.03	)	$	(35.66	)	$	14.09
		— from recapture		146.55			(7.47	)		—			—		4.81			—			—
	Capital Gain (Loss)			—			—			163.13			—		189.21			—			—
Cash Distributions to Investors
	Sources (on Tax basis)
		— Investment Income		—			—			—			—		—			—			—
		— Return of Capital		—			—			—			—		—			—			—
	Sources (on Cash basis)
		— Sales		243.30			177.98			118.28			—		415.08			—			—
		— Refinancing		—			—			—			—		—			—			—
		— Operations	$	—		$	8.70		$	17.05		$	64.47	$	—		$	72.93		$	14.15

A-12

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS BY YEAR (UNAUDITED)

PRIVATE PROGRAMS

NNN VALUE FUND 2001, LLC

      Table III presents certain operating results for programs which have closed their offering during the five years ended December 31, 2004. NNN 2001 Value Fund, LLC was formed as a Virginia limited liability company for the purpose of acquiring interests in multiple properties that would likely be office buildings, mixed-use, research and development and industrial facilities, and/or shopping centers. NNN 2001 Value Fund, LLC closed its private placement offering in June, 2002 after raising $10,992,000 from 266 investors.

			For the Years Ended December 31,
			2004			2003			2002			2001
Gross Revenues			$	2,034,929		$	1,903,524		$	2,154,090		$	131,060
Profit on Sale of Properties				—			181,367			148,478			—
Less: Operating Expenses				980,612			885,929			999,943			62,336
		Owners Expenses		94,807			138,261			127,893			—
		Interest Expense		558,522			494,086			793,565			68,223
		Depreciation & Amortization		636,822			423,758			473,500			35,452
Net Income — Tax Basis				(235,834	)		142,857			(92,333	)		(34,951	)
Taxable Income From:
		Operations		(235,834	)		(38,510	)		(240,811	)		(34,951	)
		Gain on Sale		—			181,367			148,478			—
Cash Generated From:
		Operations		648,863			412,827			280,598			501
		Sales		—			588,766			208,200			—
		Refinancing		(88,806	)		—			—			—
Cash Generated From Operations, Sales & Refinancing
		Before Additional Cash Adjustments		560,057			1,001,593			488,798			501
		Additional Cash Adjustments
Less: Monthly Mortgage Principal Repayments				77,695			66,812			62,020			—
Cash Generated From Operations, Sales & Refinancing				482,362			934,781			426,778			501
Less: Cash Distributions to Investors From:
		Operating Cash Flow		647,681			180,696			218,578			501
		Sales & Refinancing		—			588,766			208,200			—
		Other (return of capital)		121,775			—			130,342			17,848
Cash Generated (Deficiency) after Cash Distributions				(287,094	)		165,319			(130,342	)		(17,848	)
Less: Special Items (not including Sales & Refinancing)				—			—			—			—
Cash Generated (Deficiency) after Cash Distributions and Special Items			$	(287,094	)	$	165,319		$	(130,342	)	$	(17,848	)
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results:
	Ordinary Income (Loss)
		— from operations	$	(21.45	)	$	(3.50	)	$	(21.91	)	$	(13.66	)
		— from recapture		—			—			—			—
	Capital Gain (Loss)			—			16.50			13.51			—
Cash Distributions to Investors
	Sources (on Tax basis)
		— Investment Income		—			—			—			—
		— Return of Capital		11.08			—			11.86			6.98
	Sources (on Cash basis)
		— Sales		—			53.56			18.94			—
		— Refinancing		—			—			—			—
		— Operations	$	58.92		$	16.44		$	19.88		$	0.20

A-13

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS BY YEAR (UNAUDITED)

PRIVATE PROGRAMS

TENANT IN COMMON (TIC) PROGRAMS

      Table III presents certain operating results for programs which have closed their offerings during the five years ended December 31, 2004. The programs presented are aggregated, having similar investment objectives providing Tenant In Common (TIC) interests, a form of ownership which complies with Section 1031 of the Internal Revenue Code, to investors involved in a tax deferred exchange.

			For the Years Ended December 31,
			2004		2003		2002		2001			2000			1999
			77		55		37		21			11			5
			TIC Programs		TIC Programs		TIC Programs		TIC Programs			TIC Programs			TIC Programs
Gross Revenues			$	170,400,362	$	90,684,745	$	47,705,181	$	31,682,895		$	16,425,659		$	3,970,617
Profit on Sale of Properties				14,012,332		7,787,477		4,650,374		(367,103	)		8,344			—
Less: Operating Expenses				59,066,527		31,978,234		16,081,862		12,255,618			6,400,561			1,249,785
		Owners Expenses		3,637,703		2,172,900		2,001,471		971,270			654,887			311,652
		Interest Expense		46,494,211		27,262,586		16,919,043		13,180,392			7,611,678			1,605,769
		Depreciation & Amortization
Net Income (Note A)				75,214,253		37,058,502		17,353,179		4,908,512			1,766,877			803,411
Taxable Income (loss) (Note A):
Cash Generated From:
		Operations		61,923,142		30,083,375		14,861,908		5,994,872			1,774,665			803,411
		Sales		21,524,597		9,157,134		7,865,245		393,112			398,591			—
		Refinancing		819,282		—		3,048,220		969,733			—			—
Cash Generated From Operations, Sales & Refinancing
		Before Additional Cash Adjustments		84,267,021		39,240,509		25,775,373		7,357,717			2,173,256			803,411
		Additional Cash Adjustments
Less: Monthly Mortgage Principal Repayments				6,654,017		3,200,925		1,757,359		841,011			206,864			26,598
Cash Generated From Operations, Sales & Refinancing				77,613,004		36,039,584		24,018,014		6,516,706			1,966,392			776,813
Less: Cash Distributions to Investors From:
		Operating Cash Flow		35,390,086		16,717,685		8,087,902		3,777,738			1,621,357			455,684
		Sales & Refinancing		22,227,052		9,040,891		10,471,500		462,481			—			—
		Other (return of capital)		618,334		446,583		382,306		400,448			1,076,363			—
Cash Generated (Deficiency) after Cash Distributions				19,377,532		9,834,425		5,076,306		1,876,039			(731,328	)		321,129
Less: Special Items (not including Sales & Refinancing)				—		—		—		—			—			—
Cash Generated (Deficiency) after Cash Distributions and Special Items			$	19,377,532	$	9,834,425	$	5,076,306	$	1,876,039		$	(731,328	)	$	321,129
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results (Note A):
Cash Distributions to Investors
	Sources (on Tax basis)
		— Investment Income	$	—	$	—	$	—	$	—		$	—		$	—
		— Return of Capital		0.93		1.23		2.35		4.50			21.92			—
	Sources (on Cash basis)
		— Sales and Refinancing		33.52		25.00		64.48		5.20			—			—
		— Operations	$	53.37	$	46.22	$	49.81	$	42.47		$	33.02		$	15.05

Note A:  For the Tenant In Common (TIC) programs, individual investors are involved in a tax deferred exchange. Each TIC has an individual tax bases for depreciation and amortization and is responsible for their own calculations of depreciation and amortization.

A-14

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS BY YEAR (UNAUDITED)

PRIVATE PROGRAMS

AFFILIATED OWNERSHIP IN TENANT IN COMMON (TIC) PROGRAMS

      Table III presents operating results for programs which have closed their offerings during the five years ended December 31, 2004. The programs presented are aggregated, having similar investment objectives providing Tenant In Common (TIC) interests, a form of ownership which complies with Section 1031 of the Internal Revenue Code, to investors involved in a tax deferred exchange. In some instances, other programs affiliated with Triple Net Properties, LLC have invested in TIC programs either as a TIC or as a member of the LLC. This table presents, in aggregate, the results of affiliated programs investing in a TIC program.

			For the Years Ended December 31,
			2004		2003		2002		2001
			14 Affiliated		6 Affiliated		2 Affiliated		1 Affiliated
			Programs		Programs		Programs		Program
Gross Revenues			$	18,500,226	$	6,352,154	$	594,889	$	22,090
Profit on Sale of Properties				—		158,777		145,659		—
Less: Operating Expenses				6,699,094		2,815,081		233,660		4,264
		Owners Expenses		154,620		81,474		12,452		—
		Interest Expense		3,662,498		1,244,057		196,158		7,528
		Depreciation & Amortization
Net Income (Note A)				7,984,014		2,370,319		298,278		10,298
Taxable Income (loss) (Note A):
Cash Generated From:
		Operations		7,669,401		2,227,233		179,878		10,298
		Sales		—		334,987		118,459		—
		Refinancing		287,066		—		—		—
Cash Generated From Operations, Sales & Refinancing
		Before Additional Cash Adjustments		7,956,467		2,562,220		298,337		10,298
		Additional Cash Adjustments		—		—		—		—
Less: Monthly Mortgage Principal Repayments				105,701		34,142		10,842		1,709
Cash Generated From Operations, Sales & Refinancing				7,850,766		2,528,078		287,495		8,589
Less: Cash Distributions to Investors From:
		Operating Cash Flow		3,965,091		1,229,694		133,559		—
		Sales & Refinancing		259,288		292,767		—		—
		Other (return of capital)		20,997		—		—		—
Cash Generated (Deficiency) after Cash Distributions				3,605,390		1,005,617		153,936		8,589
Less: Special Items (not including Sales & Refinancing)				—		—		—		—
Cash Generated (Deficiency) after Cash Distributions and Special Items			$	3,605,390	$	1,005,617	$	153,936	$	8,589
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results (Note A):
Cash Distributions to Investors
	Sources (on Tax basis)
		— Investment Income	$	—	$	—	$	—	$	—
		— Return of Capital		0.34		—		—		—
	Sources (on Cash basis)
		— Sales and Refinancings		4.17		8.93		—		—
		— Operations	$	63.81	$	37.50	$	49.47	$	—

Note A:  For the Tenant In Common (TIC) programs, individual investors are involved in a tax deferred exchange. Each TIC has an individual tax bases for depreciation and amortization and is responsible for their own calculations of depreciation and amortization.

A-15

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS BY YEAR (UNAUDITED)

PRIVATE PROGRAMS

TENANT IN COMMON (TIC) PROGRAMS EXCLUDING AFFILIATED OWNERSHIP

      Table III presents operating results for programs which have closed their offerings during the five years ended December 31, 2004. The programs presented are aggregated, having similar investment objectives providing Tenant In Common (TIC) interests, a form of ownership which complies with Section 1031 of the Internal Revenue Code, to investors involved in a tax deferred exchange. In select cases, other programs affiliated with Triple Net Properties, LLC have invested in TIC programs either as a TIC or as a member of the LLC. This table presents, in aggregate, the results of aggregated TIC programs without affiliated ownership results.

			For the Years Ended December 31,
			2004		2003		2002		2001			2000			1999
			77		55		37		21			11			5
			TIC Programs		TIC Programs		TIC Programs		TIC Programs			TIC Programs			TIC Programs
Gross Revenues			$	151,900,136	$	84,332,591	$	47,110,292	$	31,660,805		$	16,425,659		$	3,970,617
Profit on Sale of Properties				14,012,332		7,628,700		4,504,715		(367,103	)		8,344			—
Less: Operating Expenses				52,367,433		29,163,153		15,848,202		12,251,354			6,400,561			1,249,785
	Owners Expenses			3,483,083		2,091,426		1,989,019		971,270			654,887			311,652
	Interest Expense			42,831,713		26,018,529		16,722,885		13,172,864			7,611,678			1,605,769
	Depreciation & Amortization
Net Income (Note A)				67,230,239		34,688,183		17,054,901		4,898,214			1,766,877			803,411
Taxable Income (loss) (Note A):
Cash Generated From:
		Operations		54,253,741		27,856,142		14,682,030		5,984,574			1,774,665			803,411
		Sales		21,524,597		8,822,147		7,746,786		393,112			398,591			—
		Refinancing		532,216		—		3,048,220		969,733			—			—
Cash Generated From Operations, Sales & Refinancing
		Before Additional Cash Adjustments		76,310,554		36,678,289		25,477,036		7,347,419			2,173,256			803,411
		Additional Cash Adjustments
Less: Monthly Mortgage Principal Repayments				6,548,316		3,166,783		1,746,517		839,302			206,864			26,598
Cash Generated From Operations, Sales & Refinancing				69,762,238		33,511,506		23,730,519		6,508,117			1,966,392			776,813
Less: Cash Distributions to Investors From:
		Operating Cash Flow		31,424,995		15,487,991		7,954,343		3,777,738			1,621,357			455,684
		Sales & Refinancing		21,967,764		8,748,124		10,471,500		462,481			—			—
		Other (return of capital)		597,337		446,583		382,306		400,448			1,076,363			—
Cash Generated (Deficiency) after Cash Distributions				15,772,142		8,828,808		4,922,370		1,867,450			(731,328	)		321,129
Less: Special Items (not including Sales & Refinancing)				—		—		—		—			—			—
Cash Generated (Deficiency) after Cash Distributions and Special Items			$	15,772,142	$	8,828,808	$	4,922,370	$	1,867,450		$	(731,328	)	$	321,129
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results (Note A):
Cash Distributions to Investors
		Sources (on Tax basis)
		— Investment Income	$	—	$	—	$	—	$	—		$	—		$	—
		— Return of Capital		0.99		1.36		2.39		4.53			21.92			—
		Sources (on Cash basis)
		— Sales and Refinancings		36.55		26.60		65.57		5.23			—			—
		— Operations	$	52.29	$	47.09	$	49.81	$	42.71		$	33.02		$	15.05

Note A:  For the Tenant In Common (TIC) programs, individual investors are involved in a tax deferred exchange. Each TIC has an individual tax bases for depreciation and amortization and is responsible for their own calculations of depreciation and amortization.

A-16

TABLE IV

RESULTS OF COMPLETED PROGRAMS (UNAUDITED)

PRIVATE PROGRAMS

PERIOD ENDING DECEMBER 31, 2004

      Table IV presents the results of completed programs for prior programs which have sold properties and completed operations during the five years prior to December 31, 2004.

							NNN		NNN
			Tellride		Kiwi		2000 Value		Town &		Program
			Barstow, LLC		Assoc, LLC		Fund, LLC		Country, LLC		Totals
Dollar Amount Raised			$	1,619,550	$	2,681,352	$	4,816,000	$	7,200,000	$	16,316,902
	Number of Properties Purchased			1		1		7		1		10
	Date of Closing of Offering			16-Dec-98		4-Feb-01		27-Feb-01		29-Mar-00
	Date of First Sale of Property			19-Feb-03		25-Feb-03		26-Oct-01		6/25/2004
	Date of Final Sale of Property			19-Feb-03		25-Feb-03		15-Oct-02		6/25/2004
Tax and Distribution Data Per $1,000 Invested
Federal Income Tax Results (Note A):
	Cash Distributions to Investors
		Sources (on Tax basis)
		— Investment Income		—		—		—		—		—
		— Return of Capital		—		26.58		34.78		71.23		132.59
		Sources (on Cash basis)
		— Sales		884.53		1,053.34		880.51		1,221.31		4,039.69
		— Refinancing		—		—		195.48		68.33		263.81
		— Operations	$	401.16	$	175.12	$	155.63	$	268.98	$	1,000.89

Note A:  All the programs included in this table are TIC programs with investors generally involved in tax deferred exchanges. Accordingly, each TIC has an individual tax basis for determining amortization and depreciation. Therefore, there is no presentation of Federal Income Tax Results.

A-17

TABLE V

SALES OR DISPOSALS OF PROPERTIES (UNAUDITED)

PRIVATE PROGRAMS

December 31, 2004

      Table V presents sales or disposals of properties in prior programs during the three years prior to December 31, 2004. Three sales are WREIT properties, three sales are NNN Fund VIII, LLC properties (a TIC program with multiple property ownership) and six sales are of other TIC properties.

					Selling Price, Net of Closing Costs & GAAP Adjustments
									Purchase		Adjustments
					Cash Received		Mortgage		Mortgage		Resulting from
	Date		Date of		Net of Closing		Balance at		Taken Back		Application of
Property	Acquired		Sale(1)		Costs(2)		Time of Sale		by Program		GAAP		Total
Village Fashion Center, Wichita, KS		Jun-99		Mar-02	$	3,947,510	$	6,935,625		N/A		N/A	$	10,883,135
Bryant Ranch Shopping Center, Yorba Linda, CA(5)		Dec-98		Sep-02	$	3,447,009	$	7,041,207		N/A		N/A	$	10,488,216
Bowling Green Business Park, Sacramento, CA(6)		Dec-00		Oct-02	$	5,181,976	$	9,672,100		N/A		N/A	$	14,854,076
Phelan Village Shopping Center, Phelan, CA		Oct-98		Dec-02	$	1,592,615	$	3,464,414		N/A		N/A	$	5,057,029
Orange Street Plaza, Redlands, CA		Jul-00		Feb-03	$	2,656,381	$	7,400,000		N/A		N/A	$	10,056,381
Barstow Road Center, Barstow, CA		May-98		Feb-03	$	1,444,131	$	2,743,242		N/A		N/A	$	4,187,373
Palm Court at Empire Center, Fontana, CA		Aug-99		May-03	$	5,449,605	$	7,045,741		N/A		N/A	$	12,495,346
Belmont Plaza Shopping Center, Pueblo, CO		Jun-99		Jan-04	$	1,291,445	$	2,737,342		N/A		N/A	$	4,028,787
Century Plaza East Shopping Center, Lancaster, CA		Nov-98		Feb-04	$	3,434,518	$	6,557,693		N/A		N/A	$	9,992,211
Town and Country Village Shopping Center, Sacramento, CA		Jul-99		Jun-04	$	8,848,316	$	33,420,982		N/A		N/A	$	42,269,298
Bryant Ranch Shopping Center, Yorba Linda, CA		Sep-02		Nov-04	$	6,030,873	$	5,910,623		N/A		N/A	$	11,941,496
Saddleback Financial Center, Laguna Hills, CA(7)		Sep-02		Dec-04	$	5,353,963	$	5,451,975		N/A		N/A	$	10,805,938

(1)	No sales were to affiliated parties except as noted below.
(2)	Net cash received plus assumption of certain liabilities by buyer.
(3)	Does not include pro-rata share of original offering costs.
(4)	Includes add back of monthly principal reductions during the operating cycle (see Table III) as total cost includes balance of Original Mortgage Financing.

A-18

TABLE V

SALES OR DISPOSALS OF PROPERTIES (UNAUDITED) — (Concluded)

PRIVATE PROGRAMS

December 31, 2004

	Cost of Properties
	Including Closing & Soft Costs
			Total							(Deficiency)
			Acquisition							of Property
			Costs, Capital							Operating
	Original		Improvements				Gain on			Cash Receipts
	Mortgage		Closing & Soft				Sale of			Over Cash
Property	Financing(3)		Costs(3)		Total		Investment			Expenditures(4)
Village Fashion Center, Wichita, KS	$	7,200,000	$	2,339,266	$	9,539,266	$	1,343,869		$	242,611
Bryant Ranch Shopping Center, Yorba Linda, CA(5)	$	7,000,000	$	2,368,268	$	9,368,268	$	1,119,948			N/A
Bowling Green Business Park, Sacramento, CA(6)	$	9,792,900	$	3,941,409	$	13,734,309	$	1,119,767		$	(103,922	)
Phelan Village Shopping Center, Phelan, CA	$	3,625,000	$	1,276,583	$	4,901,583	$	155,446			N/A
Orange Street Plaza, Redlands, CA	$	6,500,000	$	2,146,956	$	8,646,956	$	1,409,425		$	(745,386	)
Barstow Road Center, Barstow, CA	$	2,871,000	$	1,481,875	$	4,352,875	$	(165,502	)	$	208,647
Palm Court at Empire Center, Fontana, CA	$	6,522,500	$	4,167,794	$	10,690,294	$	1,805,052		$	113,905
Belmont Plaza Shopping Center, Pueblo, CO	$	2,840,000	$	980,428	$	3,820,428	$	208,359		$	84,960
Century Plaza East Shopping Center, Lancaster, CA	$	6,937,000	$	2,029,944	$	8,966,944	$	1,025,267			N/A
Town and Country Village Shopping Center, Sacramento, CA	$	34,000,000	$	6,472,676	$	40,472,676	$	1,796,622		$	845,694
Bryant Ranch Shopping Center, Yorba Linda, CA	$	6,222,000	$	4,295,532	$	10,517,532	$	1,423,964		$	441,907
Saddleback Financial Center, Laguna Hills, CA(7)	$	5,737,500	$	3,127,204	$	8,864,704	$	1,941,234		$	195,610

(5)	This property was sold to an affiliated party.
(6)	A portion of this property was sold to an affiliated party.
(7)	A Private Program owned 75% of the property. TREIT, Inc, an affiliate owned 25% of the property. The above reflects the sale results of the Program’s 75% ownership.

* Partial sales of the Pacific Corporate Park, White Lakes Mall and the Moreno property have occurred; however, a portion of the original acquisitions still remain in the program.

No reporting of these sales will occur until the entire original acquisition has been disposed of.

A-19

Exhibit B

NNN APARTMENT REIT, INC.

SUBSCRIPTION AGREEMENT

To: NNN Apartment REIT, Inc.
4 Hutton Centre Drive, Suite 700
South Coast Metro, CA 92707

Ladies and Gentlemen:

      The undersigned, by signing and delivering a copy of the attached Subscription Agreement Signature Page, hereby tenders this subscription and applies for the purchase of the number of shares of common stock (“Shares”) in NNN Apartment REIT, Inc., a Maryland corporation (the “Company”), set forth on such Subscription Agreement Signature Page. Payment for the Shares is hereby made by check payable to [“CommerceWest Bank, as escrow agent for NNN Apartment REIT, Inc.,” or, after the Company breaks escrow as described below, checks may be made payable directly to “NNN Apartment REIT, Inc.”]

      Payments for Shares will be held in an interest-bearing escrow account until the Company has received and accepted subscriptions for an aggregate of 200,000 shares ($2,000,000), at which time CommerceWest Bank will release the proceeds to the Company. If the Company does not sell 200,000 Shares before                    , 2007, the offering will be terminated and the Company will refund all the monies in escrow (plus interest without deducting for escrow expenses) to subscribers pro rata.

      I hereby acknowledge receipt of the Prospectus for the offering of the Shares dated                    , 2006, as supplemented to date (the “Prospectus”).

      I agree that if this subscription is accepted, it will be held, together with the accompanying payment, and disbursed on the terms described in the Prospectus. I agree that subscriptions may be rejected in whole or in part by the Company in its sole and absolute discretion. In addition, I understand and agree that subscriptions are irrevocable, and I will not have the right to cancel or rescind my subscription, except as required under applicable law.

      Any person selling Shares on behalf of the Company may not complete a sale of Shares to me until at least five business days after the date that I receive a copy of the final Prospectus (does not apply to Minnesota residents). Moreover, any person selling Shares on behalf of the Company must send me a confirmation of my purchase.

      Prospective investors are hereby advised of the following:

      (a) The assignability and transferability of the Shares is restricted and will be governed by the Amended and Restated Articles of Incorporation and the Amended and Restated Bylaws and all applicable laws as described in the Prospectus.

      (b) Prospective investors should not invest in Shares unless they have an adequate means of providing for their current needs and personal contingencies and have no need for liquidity in this investment.

      (c) There will be no public market for the Shares, and accordingly, it may not be possible to readily liquidate their investment in the Shares.

B-1

SPECIAL NOTICE FOR CALIFORNIA RESIDENTS ONLY

      In connection with secondary trading of the Shares, the Commissioner of the State of California Department of Corporations will withhold the Section 25104(h) exemption which permits secondary trading of the Shares for 18 months from the date of qualification of the Shares.

STANDARD REGISTRATION REQUIREMENTS

      The following requirements have been established for the various forms of registration. Accordingly, complete Subscription Agreements and such supporting material as may be necessary must be provided.

TYPE OF OWNERSHIP AND SIGNATURE(S) REQUIRED

      (1) INDIVIDUAL:     One signature required.

      (2) JOINT TENANTS WITH RIGHT OF SURVIVORSHIP:     All parties must sign.

      (3) TENANTS IN COMMON:     All parties must sign.

      (4) COMMUNITY PROPERTY:     Only one investor signature required.

      (5) QUALIFIED PENSION OR PROFIT SHARING PLANS:     The trustee signs the Signature Page.

      (6) TRUST:     The trustee signs the Signature Page. Provide the name of the trust, the name of the trustee and the name of the beneficiary. You must provide a copy of the trust agreement if the trust is registered under a separate Tax I.D. number.

      (7) PARTNERSHIP:     Identify whether the entity is a general or limited partnership. The general partners must be identified and their signatures obtained on the Signature Page. In the case of an investment by a general partnership, all partners must sign (unless a “managing partner”) has been designated for the partnership, in which case he may sign on behalf of the partnership if a certified copy of the document granting him authority to invest on behalf of the partnership is submitted.

      (8) COMPANY OR CORPORATION:     The Subscription Agreement must be accompanied by (1) a certified copy of the resolution of the Board of Directors designating the officer(s) of the company or corporation authorized to sign on behalf of the company or corporation and (2) a certified copy of the Board’s resolution authorizing the investment.

      (9) IRA AND IRA ROLLOVERS:     Requires signature of investor and authorized signer (e.g., an officer) of the bank, trust company or other fiduciary. The address of the trustee must be provided in order for the trustee to receive checks and other pertinent information regarding the investment. Please note that NNN Apartment REIT and its affiliates do not act as custodian for IRA accounts.

      (10) KEOGH:     Same rules as those applicable to IRAs.

      (11) UNIFORM GIFT TO MINORS ACT (UGMA) or UNIFORM TRANSFERS TO MINORS ACT (UTMA):     The required signature is that of the custodian, not of the parent (unless the parent has been designated as the custodian). Only one child is permitted in each investment under UGMA or UTMA. In addition, designate the state under which the gift is being made and provide the social security number of the child.

B-2

INSTRUCTIONS TO SUBSCRIPTION AGREEMENT SIGNATURE PAGE

TO NNN APARTMENT REIT, INC. SUBSCRIPTION AGREEMENT

Investment Instructions

      Please follow these instructions carefully. Failure to do so may result in the rejection of your subscription. All information on the Subscription Agreement Signature Page should be completed as follows:

1.     INVESTMENT

A minimum investment of $1,000 (100 Shares) is required, except for Minnesota which requires a $2,500 (250 Shares) minimum investment and North Carolina which requires a $5,000 (500 Shares) minimum investment. A check for the full purchase price of the Shares subscribed for should be made payable to the order of “CommerceWest Bank, as escrow agent for NNN Apartment REIT, Inc.,” or, after the Company breaks escrow, should be made payable to the order of “NNN Apartment REIT, Inc.” Shares may be purchased only by persons meeting the standards set forth under the Section of the Prospectus entitled “Investor Suitability Standards.” (Certain states have imposed special financial suitability standards as set forth in the Prospectus and on page B-4 below). Please indicate the state in which the sale was made.

All additional investments must be increments of at least $100 (10 Shares). If additional investments in the Company are made, the investor agrees to notify the Company and the Broker-Dealer named on the Subscription Agreement Signature Page in writing if at any time he fails to meet the applicable suitability standards or he is unable to make any other representations or warranties set forth in the Prospectus or the Subscription Agreement. The investor acknowledges that the Broker-Dealer named in the Subscription Agreement Signature Page may receive a commission not to exceed 7.00% of any such additional investments in the Company.

2.     TYPE OF OWNERSHIP

Please check the appropriate box to indicate the type of entity or type of individuals subscribing. If you check the Individual Ownership box and you wish to designate a Transfer on Death beneficiary, you must fill out the Transfer on Death Form in order to effect the designation.

3.     REGISTRATION NAME AND ADDRESS

Please enter the exact name in which the Shares are to be held. For joint tenants with right of survivorship or tenants in common, include the names of all investors. In the case of partnerships or corporations include the name of an individual to whom correspondence will be addressed. Trusts should include the name of the trustee. All investors must complete the space provided for taxpayer identification number or social security number. By signing in Section 5, the investor is certifying that this number is correct. Enter the mailing address and telephone numbers of the registered owner of this investment. In the case of a Qualified Plan or trust, this will be the address of the trustee. Indicate the birth date and occupation of the registered owner unless the registered owner is a partnership, corporation or trust.

4.     INVESTOR NAME AND ADDRESS

Complete this Section only if the investor’s name and address is different from the registration name and address provided in Section 3. If the Shares are registered in the name of a trust, enter the name, address, telephone number, social security number, birth date and occupation of the beneficial owner of the trust.

5.     INVESTOR SIGNATURE

Please separately initial each representation made by the investor where indicated. Each investor must sign and date this Section. If title is to be held jointly, all parties must sign. If the registered

B-3

owner is a partnership, corporation or trust, a general partner, officer or trustee of the entity must sign. PLEASE NOTE THAT THESE SIGNATURES DO NOT HAVE TO BE NOTARIZED.

6.     DISTRIBUTIONS

a.     DISTRIBUTION REINVESTMENT PLAN: By electing to participate in the Distribution Reinvestment Plan, the investor elects to reinvest distributions in the Company. The investor agrees to notify the Company and the Broker-Dealer named on the Subscription Agreement Signature Page in writing if at any time he fails to meet the applicable suitability standards or he is unable to make any other representations and warranties as set forth in the Prospectus or Subscription Agreement.

b.     DISTRIBUTION ADDRESS: If cash distributions are to be sent to an address other than that provided in Section 3 (i.e., a bank, brokerage firm or savings and loan, etc.), please provide the name, account number and address in Section 7.

7.     BROKER-DEALER

This Section is to be completed by the Registered Representative. Please complete all BROKER-DEALER information contained in Section 8 including suitability certification. THE SIGNATURE PAGE MUST BE SIGNED BY AN AUTHORIZED REPRESENTATIVE.

      The Subscription Agreement Signature Page, which has been delivered with this Prospectus, together with a check for the full purchase price, should be delivered or mailed to your Broker-Dealer. Only original, completed copies of Subscription Agreements can be accepted. Photocopied or otherwise duplicated Subscription Agreements cannot be accepted by the Company.

SPECIAL SUITABILITY STANDARDS

      Certain states have imposed special financial suitability standards for subscribers who purchase Shares.

Arizona, California, Iowa, Kansas, Massachusetts, Michigan, North Carolina and Tennessee: Investors must have either (1) a net worth of at least $225,000 or (2) gross annual income of $60,000 and a net worth of at least $60,000.

Maine: Investors must have either (1) a minimum net worth of at least $50,000 and gross annual income of at least $50,000 or (2) a minimum net worth of at least $200,000.

Arizona, Kansas, Massachusetts, Missouri, Nebraska and Ohio: An Investor’s investment in our Shares cannot exceed 10% of that investor’s net worth.

New Hampshire: Investors must have either (1) a net worth of at least $250,000 or (2) a net worth of at least $125,000 and an annual gross income of at least $50,000.

B-4

NNN APARTMENT REIT, INC.

SUBSCRIPTION AGREEMENT SIGNATURE PAGE

FOR PROSPECTUS DATED                    , 2006

IF YOU NEED FURTHER ASSISTANCE IN COMPLETING THIS

SUBSCRIPTION AGREEMENT SIGNATURE PAGE,

PLEASE CALL INVESTOR SERVICES 1-877-888-7348

1.              INVESTMENT                                                                                                                              

Make Investment Check Payable to:

“CommerceWest Bank, as escrow agent for NNN Apartment REIT, Inc.” or “NNN Apartment REIT, Inc.,” as applicable.

# of Shares          Total $ Invested (# Shares x $10.00) = $ Invested)	Minimum initial purchase = 100 Shares or $1,000 (250 Shares or $2,500 in Minnesota; 500 Shares or $5,000 in North Carolina)
o  INITIAL INVESTMENT  o  ADDITIONAL INVESTMENT	Minimum additional purchase: 10 shares or $100

2.              TYPE OF OWNERSHIP                                                                                                      

o	Individual (01)	o	Company or Corporation (08)
o	Joint Tenants With Right of Survivorship (02)	o	IRA (09)
o	Tenants in Common (03)	o	Keogh (10)
o	Community Property (04)	o	Custodian: Under the Uniform Gift to Minors Act or
o	Qualified Pension or Profit Sharing Plan (05)		the Uniform Transfers to Minors Act of the State
o	Trust (06)		of (11)
o	Partnership (07)	o	Other

3.              REGISTRATION NAME AND ADDRESS                                                    

3(a) Please print name(s) in which Shares are to be registered. Include trust, entity or IRA custodian name and account number, if applicable.

    o Mr.    o Mrs.    o Ms.    o MD    o Ph.D.    o DDS    o Other                         

      Name(s) 

Taxpayer Identification Number        -                     

Social Security Number           -      -            

    Street Address or P.O. Box                                                         

    City                                   State                                   Zip Code                              

    Home Telephone No. (     )                                 Business Telephone No. (      )                              

    Birth Date                                                Occupation                                              

    Email Address                                         

    3(b) IRA Custodian:                                                  

    Custodian Tax-ID:                                                     

    Custodian Address:                                                    

    City:                    State:           Zip Code:                       Account #:                                     

Transfer on Death Form: Fill out attached TOD form to effect designation.

BY SIGNING THIS AGREEMENT, YOU ARE NOT WAIVING ANY RIGHTS

UNDER FEDERAL OR STATE SECURITIES LAWS.

Signature of Custodian Date

MUST BE SIGNED AND SIGNATURE GUARANTEED BY

CUSTODIAN(S) IF IRA, KEOGH OR QUALIFIED PLAN

(NNN Apartment REIT and its affiliates do not act as IRA custodians)

B-5

6.              DISTRIBUTION REINVESTMENT PLAN                                                                                                                                                   &n bsp;     

ENROLLMENT FORM

To Join the Distribution Reinvestment Plan (the “DRIP”):

      Complete this form. Be sure to include your signature in order to indicate your participation in the DRIP.

      I hereby appoint NNN Apartment REIT, Inc. (the “Company”) (or any designee or successor), acting as DRIP Administrator, as my agent to receive cash distributions that may hereafter become payable to me on shares of Common Stock of the Company registered in my name as set forth below, and authorize the Company to apply such distributions to the purchase of full shares and fractional interests in shares of the Common Stock.

      I understand that the purchases will be made under the terms and conditions of the DRIP as described in the Prospectus and that I may revoke this authorization at any time by notifying the DRIP Administrator, in writing, of my desire to terminate my participation.

Sign below if you would like to participate in the Distribution Reinvestment Plan. You must participate with respect to 100% of your shares.

Signature	Date
Signature of Joint Owner	Date

7.              DISTRIBUTIONS                                                                                                                                                         ; 

7(a) For direct deposit to checking account, please complete Direct Deposit Authorization form on page B-9.

7(b) Complete the following section only to direct distributions to an address other than registration address:

       Name (as it appears on depository account)                                                    

       Account Number (if applicable) 

       Street Address or P.O. Box                                                         

       City                                    State                                      Zip Code                   

Return of Capital Distributions:	o	Send to registered owner address of record
	o	Send to distribution address
		(Return of capital distributions for IRA account investments will be sent directly to custodian.)

B-6

8.              BROKER-DEALER                                                                                                                                                         ; 

(TO BE COMPLETED BY REGISTERED REPRESENTATIVE)

Investor Name(s)                                                         

The Broker-Dealer or authorized representative must sign below to complete the subscription. The Broker-Dealer warrants that it is a duly licensed Broker-Dealer and may lawfully offer Shares in the state designated as the investor’s address or the state in which the sale was made, if different. The Broker-Dealer or authorized representative warrants that he has reasonable grounds to believe this investment is suitable for the subscriber as set forth in the Section of the Prospectus entitled “INVESTOR SUITABILITY STANDARDS” and that he has informed the subscriber of all aspects of liquidity and marketability of this investment as required by the Dealer Manager Agreement and/or the Participating Broker-Dealer Agreement.

    Broker-Dealer Name                                       Telephone No.                                          

    Broker-Dealer Street Address or P.O. Box                                                         

    City                                   State                                   Zip Code                            

    Registered Representative Name                                          Representative #                         

    Telephone No.                             Fax No.                             E-Mail Address                       

    Reg. Rep. Street Address or P.O. Box                                                         

    City                                   State                                   Zip Code                            

I hereby certify that I hold a Series 7 or Series 62 NASD license and am registered in                , the State of Sale.

Signature of Registered Representative

    (Required):                                                                  Date:                                   

This Subscription Agreement representing an investment in NNN Apartment REIT, Inc. for the above referenced investor has been reviewed and approved as complete and correct by the undersigned principal of the above-referenced broker-dealer.

Signature of Broker-Dealer

    (Required):                                                                  Date:                                   

Please send completed subscription agreement
(with all signatures) with checks made payable to
“CommerceWest Bank, as escrow agent for
NNN Apartment REIT, Inc.” or “NNN Apartment REIT, Inc.,”
as applicable, to:

CommerceWest Bank
2111 Business Center Drive
Irvine, CA 92612

NNN Apartment REIT, Inc.
4 Hutton Centre Drive, Suite 700
Santa Ana, CA 92707

B-7

B-8

Transfer On Death Form (T.O.D.)

PLEASE MAIL THIS FORM TO:

NNN Apartment REIT, Inc.
4 Hutton Centre Drive, Suite 700

South Coast Metro, CA 92707

Fax: (714)667-6860

A.                 INVESTOR INFORMATION                                                                                                                                          

1.  Name of registered owner(s), exactly as name(s) appear(s) on stock certificate or subscription agreement:


_________________________________________________________________


_________________________________________________________________
2. Social Security number(s) of registered owner(s):


_________________________________________________________________


_________________________________________________________________
3. Daytime phone number:
(            )
_________________________________________________________________


4. State of Residence:


_________________________________________________________________

B.                 TRANSFER ON DEATH DESIGNATION                                                                                                                            

I authorize NNN Apartment REIT, Inc. to register all of my shares of its common stock in beneficiary form, assigning ownership on my death to my beneficiary(ies). I understand that if more than one beneficiary is listed, percentages for each must be designated. If percentages are not designated, the shares will be divided equally. Percentages must equal 100%.

1. Name of Primary Beneficiary:

______________________________________________________________

2.  Social Security Number OR Tax Identification Number:

_________________________________________________________________

3. Percentage: _______%

1. Name of Primary Beneficiary:

______________________________________________________________

2.  Social Security Number OR Tax Identification Number:

_________________________________________________________________

3. Percentage: _______%

C.                 SIGNATURE                                                                                                                                                    

By signing below, I (we) authorize NNN Apartment REIT, Inc. to register all of my (our) shares of its common stock in T.O.D. form. The designation(s) will be effective on the date of receipt. Accordingly, I (we) hereby revoke any beneficiary designation(s) made previously with respect to my (our) NNN Apartment REIT shares. I (we) have reviewed the information set forth below. I (we) agree on behalf of myself (ourselves) and my (our) heirs, assigns, executors, administrators and beneficiaries to indemnify and hold harmless NNN Apartment REIT, Inc. and any and all of its affiliates, agents, successors and assigns, and their respective directors, managers, officers and employees, from and against any and all claims, liability, damages, actions and expenses arising directly or indirectly out of or resulting from the transfer of my (our) shares in accordance with this T.O.D. designation. I (we) further understand that NNN Apartment REIT, Inc. cannot provide any legal advice and I (we) agree to consult with my (our) attorney, if necessary, to make certain that the T.O.D. designation is consistent with my (our) estate and tax planning.

Sign exactly as the name(s) appear(s) on the stock certificate or subscription agreement. All registered owners must sign. This authorization form is subject to the acceptance of NNN Apartment REIT, Inc.

X		X
Signature	Date	Signature	Date

TRANSFER ON DEATH INFORMATION                                                                                                                                                    

• A Transfer on Death (T.O.D.) designation transfers ownership of shares to the registered owner’s beneficiary(ies) upon death; provided that NNN Apartment REIT, Inc. receives proof of death and other documentation it deems necessary or appropriate.

• Until the death of the account owner(s), the T.O.D. beneficiary(is) has (have) no present interest in, or authority over, the T.O.D. account.

• A T.O.D. designation will be accepted only where shares are owned by a natural person and registered in that individual’s name or by (2) two or more natural persons as joint tenants with rights of survivorship.

• Accounts registered to trusts, corporations, charities, and other such entities may not declare a T.O.D. designation because they are considered perpetual. These entities, however, may be listed as a beneficiary on a T.O.D. for accounts registered to a natural person.

• A T.O.D. designation made by joint tenants with rights of survivorship does not take effect until the last of all multiple owners die. The surviving owners may revoke or change the T.O.D. designation at any time.

• If the beneficiary(ies) does (do) not survive the registered owner(s), the shares will be treated as belonging to the decedent’s estate.

• A minor may not be named as a beneficiary.

• A T.O.D. designation and all rights related thereto shall be governed by the laws of the State of Maryland.

• A T.O.D. designation may be voided at any time by NNN Apartment REIT, Inc., in its sole discretion, if there is any doubt as to the validity or effectiveness of a T.O.D. designation.

• A T.O.D. designation will not be accepted from residents of Louisiana, North Carolina or Texas.

B-9

EXHIBIT C

NNN APARTMENT REIT, INC.

DISTRIBUTION REINVESTMENT PLAN

      The Distribution Reinvestment Plan (the “DRIP”) for NNN Apartment REIT, Inc., a Maryland corporation (the “Company”), offers to holders of the Company’s common stock, $.01 par value per share (the “Common Stock”) the opportunity to purchase, through reinvestment of distributions, additional shares of Common Stock, on the terms, subject to the conditions and at the prices herein stated.

      The DRIP will be implemented in connection with the Company’s Registration Statement under the Securities Act of 1933 on Form S-11, including the prospectus contained therein (the “Prospectus”) and the registered initial public offering of 105,000,000 shares of the Company’s Common Stock (the “Initial Offering”), of which amount 5,000,000 shares will be registered and reserved for distribution pursuant to the DRIP.

      Distributions reinvested pursuant to the DRIP will be applied to the purchase of shares of Common Stock at a price per share (the “DRIP Price”) equal to $9.50 until all 5,000,000 shares reserved initially for the DRIP (the “Initial DRIP Shares”) have been purchased or until the termination of the initial public offering, whichever occurs first. Thereafter, the Company may, in its sole discretion, effect additional registrations of common stock for use in the DRIP. In any case, the per share purchase price under the DRIP for such additionally acquired shares will equal the DRIP Price.

The DRIP

      The DRIP provides you with a simple and convenient way to invest your cash distributions in additional shares of Common Stock. As a participant in the DRIP, you may purchase shares at the DRIP Price until all 5,000,000 Initial DRIP Shares have been purchased or until the Company elects to terminate the DRIP. The Company may, in its sole discretion, effect registration of additional shares of Common Stock for issuance under the DRIP.

      You receive free custodial service for the shares you hold through the DRIP.

      Shares for the DRIP will be purchased directly from the Company. Such shares will be authorized and may be either previously issued or unissued shares. Proceeds from the sale of the DRIP Shares provide the Company with funds for general corporate purposes.

Eligibility

      Holders of record of Common Stock are eligible to participate in the DRIP only with respect to 100% of their shares. If your shares are held of record by a broker or nominee and you want to participate in the DRIP, you must make appropriate arrangements with your broker or nominee.

      The Company may refuse participation in the DRIP to stockholders residing in states where shares offered pursuant to the DRIP are neither registered under applicable securities laws nor exempt from registration.

Administration

      As of the date of this Prospectus, the DRIP will be administered by the Company or an affiliate of the Company (the “DRIP Administrator”), but a different entity may act as DRIP Administrator in the future. The DRIP Administrator will keep all records of your DRIP account and send statements of your account to you. Shares of Common Stock purchased under the DRIP will be registered in the name of each participating stockholder.

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Enrollment

      You must own shares of Common Stock in order to participate in the DRIP. You may become a participant in the DRIP by completing and signing the enrollment form enclosed with this Prospectus and returning it to us at the time you subscribe for shares. If you receive a copy of the Prospectus or a separate prospectus relating solely to the DRIP and have not previously elected to participate in the DRIP, then you may so elect at any time by completing the enrollment form attached to such prospectus or by other appropriate written notice to the Company of your desire to participate in the DRIP.

      Your participation in the DRIP will begin with the first distribution payment after your signed enrollment form is received, provided such form is received on or before ten days prior to the record date established for that distribution. If your enrollment form is received after the record date for any distribution and before payment of that distribution, that distribution will be paid to you in cash and reinvestment of your distributions will not begin until the next distribution payment date.

Costs

      Purchases under the DRIP will not be subject to selling commissions, marketing allowance and accountable due diligence reimbursements. All costs of administration of the DRIP will be paid by the Company. However, any interest earned on distributions on shares within the DRIP will be paid to the Company to defray certain costs relating to the DRIP.

Purchases and Price of Shares

      Common Stock distributions will be invested within 30 days after the date on which Common Stock distributions are paid (the “Investment Date”). Payment dates for Common Stock distributions will be ordinarily on or about the last calendar day of each month but may be changed to quarterly in the sole discretion of the Company. Any distributions not so invested will be returned to participants in the DRIP.

      You become an owner of shares purchased under the DRIP as of the Investment Date. Distributions paid on shares held in the DRIP (less any required withholding tax) will be credited to your DRIP account. Distributions will be paid on both full and fractional shares held in your account and are automatically reinvested.

      Reinvested Distributions. The Company will use the aggregate amount of distributions to all participants for each distribution period to purchase shares for the participants. If the aggregate amount of distributions to participants exceeds the amount required to purchase all shares then available for purchase, the Company will purchase all available shares and will return all remaining distributions to the participants within 30 days after the date such distributions are made. The Company will allocate the purchased shares among the participants based on the portion of the aggregate distributions received on behalf of each participant, as reflected on the Company’s books.

      You may elect distribution reinvestment only with respect to 100% of shares registered in your name on the records of the Company. Specify on the enrollment form the number of shares for which you want distributions reinvested. Distributions on all shares purchased pursuant to the DRIP will be automatically reinvested. The number of shares purchased for you as a participant in the DRIP will depend on the amount of your distributions on these shares (less any required withholding tax) and the DRIP Price. Your account will be credited with the number of shares, including fractions computed to four decimal places, equal to the total amount invested divided by the DRIP Price.

      Optional Cash Purchases. Until determined otherwise by the Company, DRIP participants may not make additional cash payments for the purchase of Common Stock under the DRIP.

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Distributions on Shares Held in the DRIP

      Distributions paid on shares held in the DRIP (less any required withholding tax) will be credited to your DRIP account. Distributions will be paid on both full and fractional shares held in your account and will be automatically reinvested.

Account Statements

      You will receive a statement of your account within 90 days after the end of the fiscal year. The statements will contain a report of all transactions with respect to your account since the last statement, including information with respect to the distributions reinvested during the year, the number of shares purchased during the year, the per share purchase price for such shares, the total administrative charge retained by the Company or DRIP Administrator on your behalf and the total number of shares purchased on your behalf pursuant to the DRIP. In addition, tax information with respect to income earned on shares under the DRIP for the year will be included in the account statements. These statements are your continuing record of the cost of your purchase and should be retained for income tax purposes.

Certificates for Shares

      The ownership of shares purchased under the DRIP will be noted in book-entry form. The number of shares purchased will be shown on your statement of account. This feature permits ownership of fractional shares, protects against loss, theft or destruction of stock certificates and reduces the costs of the DRIP.

      Certificates for any number of whole shares credited to your account may be issued in your name upon written request to the DRIP Administrator. Certificates for fractional shares will not be issued. Should you want your certificates issued in a different name, you must notify the DRIP Administrator in writing and comply with applicable transfer requirements. If you wish to sell any whole shares credited to your account under the DRIP, you will have to receive a certificate for such whole number of shares and arrange for the sale yourself. If you wish to pledge shares credited to your account, you must first have the certificate for those shares issued in your name.

Termination of Participation

      You may discontinue reinvestment of distributions under the DRIP with respect to all, but not less than all, of your shares (including shares held for your account in the DRIP) at any time without penalty by notifying the DRIP Administrator in writing no less than ten days prior to the next record date. A notice of termination received by the DRIP Administrator after such cutoff date will not be effective until the next following Investment Date. Participants who terminate their participation in the DRIP may thereafter rejoin the DRIP by notifying the Company and completing all necessary forms and otherwise as required by the Company.

      If you notify the DRIP Administrator of your termination of participation in the DRIP or if your participation in the DRIP is terminated by the Company, the stock ownership records will be updated to include the number of whole shares in your DRIP account. For any fractional shares of stock in your DRIP account, the DRIP Administrator may either (i) send you a check in payment for any fractional shares in your account, or (ii) credit your stock ownership account with any such fractional shares.

      A participant who changes his or her address must promptly notify the DRIP Administrator. If a participant moves his or her residence to a state where shares offered pursuant to the DRIP are neither registered nor exempt from registration under applicable securities laws, the Company may deem the participant to have terminated participation in the DRIP.

      The Company reserves the right to prohibit certain employee benefit plans from participating in the DRIP if such participation could cause the underlying assets of the Company to constitute “plan assets” of such plans.

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Amendment and Termination of the DRIP

      The Board of Directors may, in its sole discretion, terminate the DRIP or amend any aspect of the DRIP without the consent of participants or other stockholders, provided that written notice of any material amendment is sent to participants at least 10 days prior to the effective date thereof. You will be notified if the DRIP is terminated or materially amended. The Board of Directors also may terminate any participant’s participation in the DRIP at any time by notice to such participant if continued participation will, in the opinion of the Board of Directors, jeopardize the status of the Company as a real estate investment trust under the Internal Revenue Code.

Voting of Shares Held Under the DRIP

      You will be able to vote all shares of Common Stock (including fractional shares) credited to your account under the DRIP at the same time that you vote the shares registered in your name on the records of the Company.

Stock Dividends, Stock Splits and Rights Offerings

      Your DRIP account will be amended to reflect the effect of any stock dividends, splits, reverse splits or other combinations or recapitalizations by the Company on shares held in the DRIP for you. If the Company issues to its stockholders rights to subscribe to additional shares, such rights will be issued to you based on your total share holdings, including shares held in your DRIP account.

Responsibility of the DRIP Administrator and the Company Under the DRIP

      The DRIP Administrator will not be liable for any claim based on an act done in good faith or a good faith omission to act. This includes, without limitation, any claim of liability arising out of failure to terminate a participant’s account upon a participant’s death, the prices at which shares are purchased, the times when purchases are made, or fluctuations in the market price of Common Stock.

      All notices from the DRIP Administrator to a participant will be mailed to the participant at his or her last address of record with the DRIP Administrator, which will satisfy the DRIP Administrator’s duty to give notice. Participants must promptly notify the DRIP Administrator of any change in address.

      You should recognize that neither the Company nor the DRIP Administrator can provide any assurance of a profit or protection against loss on any shares purchased under the DRIP.

Interpretation and Regulation of the DRIP

      The Company reserves the right, without notice to participants, to interpret and regulate the DRIP as it deems necessary or desirable in connection with its operation. Any such interpretation and regulation shall be conclusive.

Federal Income Tax Consequences of Participation in the DRIP

      The following discussion summarizes the principal federal income tax consequences, under current law, of participation in the DRIP. It does not address all potentially relevant federal income tax matters, including consequences peculiar to persons subject to special provisions of federal income tax law (such as tax-exempt organizations, insurance companies, financial institutions, broker dealers and foreign persons). The discussion is based on various rulings of the Internal Revenue Service regarding several types of distribution reinvestment plans. No ruling, however, has been issued or requested regarding the DRIP. The following discussion is for your general information only, and you must consult your own tax advisor to determine the particular tax consequences (including the effects of any changes in law) that may result from your participation in the DRIP and the disposition of any shares purchased pursuant to the DRIP.

      Reinvested Distributions. Stockholders subject to federal income taxation who elect to participate in the DRIP will incur a tax liability for distributions allocated to them even though they have elected not to

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receive their distributions in cash but rather to have their distributions reinvested pursuant to the DRIP. Specifically, participants will be treated as if they received the distribution from the Company and then applied such distribution to purchase the shares in the DRIP. To the extent that a stockholder purchases shares through the DRIP at a discount to fair market value, the stockholders will be treated for tax purposes as receiving an additional distribution equal to the amount of such discount. A stockholder designating a distribution for reinvestment will be taxed on the amount of such distribution as ordinary income to the extent such distribution is from current or accumulated earnings and profits, unless the Company has designated all or a portion of the distribution as a capital gain dividend. In such case, such designated portion of the distribution will be taxed as a capital gain. The amount treated as a distribution to you will constitute a dividend for federal income tax purposes to the same extent as a cash distribution.

      Receipt of Share Certificates and Cash. You will not realize any income if you receive certificates for whole shares credited to your account under the DRIP. Any cash received for a fractional share held in your account will be treated as an amount realized on the sale of the fractional share. You therefore will recognize gain or loss equal to any difference between the amount of cash received for a fractional share and your tax basis in the fractional share.

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ENROLLMENT FORM

NNN APARTMENT REIT, INC.

DISTRIBUTION REINVESTMENT PLAN

To Join the Distribution Reinvestment Plan:

      Complete and return this form. Be sure to include your signature in order to indicate your participation in the DRIP.

      I hereby appoint NNN Apartment REIT, Inc. (the “Company”) (or any designee or successor), acting as DRIP Administrator, as my agent to receive cash distributions that may hereafter become payable to me on shares of Common Stock of the Company registered in my name as set forth below, and authorize the Company to apply such distributions to the purchase of full shares and fractional interests in shares of the Common Stock.

      I understand that the purchases will be made under the terms and conditions of the DRIP as described in the Prospectus and that I may revoke this authorization at any time by notifying the DRIP Administrator, in writing, of my desire to terminate my participation.

      Sign below if you would like to participate in the Distribution Reinvestment Plan. You must participate with respect to 100% of your shares.

Signature	Date
Signature of Joint Owner	Date

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EXHIBIT D

      Our board of directors has approved (but delayed the effectiveness of) the share repurchase plan below. The plan will not become effective until the earlier of (i) the completion or termination of this offering, which may last until                     , 2008, and receipt of formal or informal relief from the issuer tender offer rules or (ii) receipt by us of SEC exemptive relief from rules restricting issuer purchases during distributions and formal or informal relief from the issuer tender offer rules, which relief we may never obtain. Moreover, even when one of these conditions is met, our board of directors could choose not to implement the proposed repurchase plan or to amend its provisions without stockholder approval. We will notify you upon the effectiveness of the repurchase plan.

NNN Apartment REIT, INC.

PROPOSED SHARE REPURCHASE PLAN

      The Board of Directors (the “Board”) of NNN Apartment REIT, Inc., a Virginia corporation (the “Company”), has adopted and elected, effective                     , 2006, to implement a share repurchase plan (the “Repurchase Plan”) by which shares of the Company’s Common Stock (“Shares”) may be repurchased by the Company from stockholders subject to certain conditions and limitations. The purpose of this Repurchase Plan is to provide limited interim liquidity for stockholders (under the conditions and limitations set forth below) until a liquidity event occurs. No stockholder is required to participate in the Repurchase Plan.

      1. Repurchase of Shares. The Company may, at its sole discretion, repurchase Shares presented to the Company for cash to the extent it has sufficient proceeds to do so. Any and all Shares repurchased by the Company shall be canceled, and will have the status of authorized but unissued Shares. Shares acquired by the Company through the Repurchase Plan will not be reissued unless they are first registered with the Securities and Exchange Commission under the Securities Act of 1933 and other appropriate state securities laws or otherwise issued in compliance with such laws.

      2. Repurchase Price.

      During Public Offerings. For the period during which the Company is engaged in a public offering of Shares (the “Offering”), the repurchase price for Shares will be $9.00.

      Non-Offering Periods. During the twelve-month period immediately following the termination of the Offering (the “First Period”), the repurchase price for Shares will be $9.25 per Share. During the twelve-month period immediately following the termination of the First Period (the “Second Period”), the repurchase price for Shares will be $9.50 per Share. During the twelve-month period immediately following the termination of the Second Period (the “Third Period”), the repurchase price per Share will be $9.75 per Share. After the termination of the Third Period, the repurchase price per Share will be the greater of: (i) $10.00 per Share; or (ii) a price equal to 10 times the Company’s “funds available for distribution” per weighted average Share outstanding for the prior calendar year.

      3. Funding and Operation of Repurchase Plan. The Company may make purchases under the Repurchase Plan quarterly, at its sole discretion, on a pro rata basis. Subject to funds being available, the Company will limit the number of Shares repurchased during any calendar year to five percent (5%) of the weighted average number of Shares outstanding during the prior calendar year. Funding for the Repurchase Plan will come exclusively from proceeds received from the sale of Shares under the Company’s Distribution Reinvestment Plan.

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      4. Stockholder Requirements. Any stockholder may request a repurchase with respect to all or a designated portion of this Shares, subject to the following conditions and limitations:

      Holding Period. Only Shares that have been held by the presenting stockholder for at least one (1) year are eligible for repurchase by the Company, except as follows. Subject to the conditions and limitations below, the Board will have the discretion to redeem Shares held for less than the one-year holding period upon the death of a stockholder who is a natural person, including Shares held by such stockholder through a revocable grantor trust, or an IRA or other retirement or profit-sharing plan, after receiving written notice from the estate of the stockholder, the recipient of the Shares through bequest or inheritance, or, in the case of a revocable grantor trust, the trustee of such trust, who shall have the sole ability to request redemption on behalf of the trust. The Company must receive the written notice within 180 days after the death of the stockholder. If spouses are joint registered holders of Shares, the request to redeem the shares may be made if either of the registered holders dies. This discretionary waiver of the one-year holding period will not apply to a stockholder is not a natural person, such as a trust other than a revocable grantor trust, partnership, corporation or other similar entity.

      Furthermore, and subject to the conditions and limitations described below, the Board will have the discretion to redeem Shares held by a stockholder who is a natural person, including Shares held by such stockholder through a revocable grantor trust, or an IRA or other retirement or profit-sharing plan, with a “qualifying disability,” as determined by the Board, after receiving written notice from such stockholder. The Company must receive the written notice within 180 days after such stockholder’s qualifying disability. This discretionary waiver of the one-year holding period will not apply to a stockholder is not a natural person, such as a trust other than a revocable grantor trust, partnership, corporation or other similar entity.

      Minimum — Maximum. A stockholder must present for repurchase a minimum of 25%, and a maximum of 100%, of the Shares owned by the stockholder on the date of presentment. Fractional shares may not be presented for repurchase unless the stockholder is presenting 100% of his Shares.

      No Encumbrances. All Shares presented for repurchase must be owned by the stockholder(s) making the presentment, or the party presenting the Shares must be authorized to do so by the owner(s) of the Shares. Such Shares must be fully transferable and not subject to any liens or other encumbrances.

      Share Repurchase Form. The presentment of Shares must be accompanied by a completed Share Repurchase Request form, a copy of which is attached hereto as Exhibit “A.” All Share certificates must be properly endorsed.

      Deadline for Presentment. The Company will repurchase Shares on or about the last day of each calendar quarter. All Shares presented and all completed Share Repurchase Request forms must be received by the Repurchase Agent (as defined below) on or before the last day of the second month of each calendar quarter in order to have such Shares eligible for repurchase in that same quarter.

      Repurchase Request Withdrawal. You may withdraw your repurchase request upon written notice to the Company at any time prior to the date of repurchase.

      Repurchase Agent. All repurchases will be effected on behalf of the Company by a registered broker dealer (the “Repurchase Agent”), who shall contract with the Company for such services. All recordkeeping and administrative functions required to be performed in connection with the Repurchase Plan will be performed by the Repurchase Agent.

      Termination, Amendment or Suspension of Plan. The Repurchase Plan will terminate and the Company will not accept Shares for repurchase in the event the Shares of common stock of the Company are listed on any national securities exchange, the subject of bona fide quotes on any inter-

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dealer quotation system or electronic communications network or are the subject of bona fide quotes in the pink sheets. Additionally, the Board of Directors of the Company, in its sole discretion, may terminate, amend or suspend the Repurchase Plan if it determines to do so is in the best interest of the Company. A determination by the Company’s Board of Directors to terminate, amend or suspend the Repurchase Plan will require the affirmative vote of a majority of the directors, including a majority of the independent directors. If the Company terminates, amends or suspends the Repurchase Plan, the Company will provide stockholders with 30 days advance notice and the Company will disclose the changes in the appropriate report filed with the Securities and Exchange Commission.

      Miscellaneous.

      Advisor Ineligible. The Advisor to the Company, NNN Apartment REIT Advisor, LLC, shall not be permitted to participate in the Repurchase Plan.

      Liability. Neither the Company nor the Repurchase Agent shall have any liability to any stockholder for the value of the stockholder’s Shares, the repurchase price of the stockholder’s Shares, or for any damages resulting from the stockholder’s presentation of his Shares or the repurchase of the Shares under this Repurchase Plan, except as result from the Company’s or the Repurchase Agent’s gross negligence, recklessness or violation of applicable law; provided, however, that nothing contained herein shall constitute a waiver or limitation of any rights or claims a stockholder may have under federal or state securities laws.

      Taxes. Stockholders shall have complete responsibility for payment of all taxes, assessments, and other applicable obligations resulting from the Company’s repurchase of Shares.

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EXHIBIT “A”

SHARE REPURCHASE REQUEST

      The undersigned stockholder of NNN Apartment REIT, Inc. (the “Company”) hereby requests that, pursuant to the Company’s Share Repurchase Plan, the Company repurchase the number of shares of Company Common Stock (the “Shares”) indicated below.

      STOCKHOLDER’S NAME:

      STOCKHOLDER’S ADDRESS:

      TOTAL SHARES OWNED BY STOCKHOLDER:

      NUMBER OF SHARES PRESENTED FOR REPURCHASE:

      (Note: number of shares presented for repurchase must be equal to or exceed 25% of total shares owned.)

      By signing and submitting this form, the undersigned hereby acknowledges and represents to each of the Company and the Repurchase Agent the following:

      The undersigned is the owner (or duly authorized agent of the owner) of the Shares presented for repurchase, and thus is authorized to present the Shares for repurchase.

      The Shares presented for repurchase are eligible for repurchase pursuant to the Repurchase Plan. The Shares are fully transferable and have not been assigned, pledged, or otherwise encumbered in any way.

      The undersigned hereby indemnifies and holds harmless the Company, the Repurchase Agent, and each of their respective officers, directors and employees from and against any liabilities, damages, expenses, including reasonable attorneys’ fees, arising out of or in connection with any misrepresentation made herein.

      Stock certificates for the Shares presented for repurchase (if applicable) are enclosed, properly endorsed with signature guaranteed.

      It is recommended that this Share Repurchase Request and any attached stock certificates be sent to the Repurchase Agent, at the address below, via overnight courier, certified mail, or other means of guaranteed delivery.

NNN Capital Corp.

NNN Apartment REIT Repurchase Agent

1551 N. Tustin Avenue, Suite 200

Santa Ana, California 92705

(877) 888-7348

Date: Stockholder Signature: Office Use Only

Date Request Received:

Dealer Prospectus Delivery Requirements

      All dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Advised by NNN Apartment REIT Advisor, LLC

1551 N. Tustin Avenue, Suite 200, Santa Ana, California 92705

(877) 888-7348

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 30.     Quantitative and Qualitative Disclosure About Market Risk

      Not applicable (per Item 305(e) of Regulation S-K) as the Company meets the definition of “Small Business Issuer” under Rule 405 promulgated under the Securities Act.

Item 31.     Other Expenses of Issuance and Distribution

      Set forth below is an estimate of the approximate amount of the fees and expenses payable by the Registrant in connection with the issuance and distribution of the Shares.

Securities and Exchange Commission registration fee		$	112,083
NASD filing fee			75,500
Printing and postage			**
Legal fees and expenses			**
Accounting fees and expenses			**
Advertising			**
Blue Sky Expenses			**
Miscellaneous			**
	Total	$	**

**  To be filed by amendment.

Item 32.     Sales to Special Parties

      None.

Item 33.     Recent Sales of Unregistered Securities

      On January 10, 2006, the Company was capitalized with the issuance to NNN Apartment REIT Advisor, LLC of 22,223 shares of common stock for a purchase price of $9.00 per share for an aggregate purchase of $200,007. The shares were purchased for investment and for the purpose of organizing the Company. The Company issued this common stock in reliance on an exemption from registration under Section 4(2) of the Securities Act.

Item 34.     Indemnification of Directors and Officers

      Subject to any applicable conditions set forth under Maryland law or below, (i) no director or officer of the Company shall be liable to the Company or its stockholders for money damages and (ii) the Company shall indemnify and pay or reimburse reasonable expenses in advance of the final disposition of a proceeding to (A) any individual who is a present or former director or officer of the Company; (B) any individual who, while a director or officer of the Company and at the request of the Company, serves or has served as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise; or (C) the Advisor or any of its affiliates acting as an agent of the Company and their respective officers, directors, managers and employees, from and against any claim or liability to which such person may become subject or which such person may incur by reason of his service in such capacity.

      Notwithstanding anything to the contrary contained in clause (i) or (ii) of the paragraph above, the Company shall not provide for indemnification of or hold harmless a director, an Advisor or any affiliate of

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an advisor (the “Indemnitee”) for any liability or loss suffered by any of them, unless all of the following conditions are met:

      (i) the Indemnitee has determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company;

      (ii) the Indemnitee was acting on behalf of or performing services for the Company;

      (iii) such liability or loss was not the result of (A) negligence or misconduct, in the case that the Indemnitee is a director (other than an independent director), an Advisor or an affiliate of an Advisor or (B) gross negligence or willful misconduct, in the case that the Indemnitee is an independent director;

      (iv) such indemnification or agreement to hold harmless is recoverable only out of net assets and not from stockholders; and

      (v) with respect to losses, liability or expenses arising from or out of an alleged violation of federal or state securities laws, one or more of the following conditions are met: (A) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the Indemnitee; (B) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the Indemnitee; or (C) a court of competent jurisdiction approves a settlement of the claims against the Indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.

      Neither the amendment nor repeal of the provision for indemnification in our charter, nor the adoption or amendment or amendment of any other provision of our charter or bylaws inconsistent with the provision for indemnification in our charter, shall apply to or affect in any respect the applicability of the provision for indemnification in our charter with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption.

      The Company shall pay or reimburse reasonable legal expenses and other costs incurred by the directors or the Advisors or its affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the MGCL) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company, (b) the legal proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (c) the directors, officers, employees or agents or the Advisor or its Affiliates provide the Company with written affirmation of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and undertake to repay the amount paid or reimbursed by the Company, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification.

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Item 35.     Treatment of Proceeds from Stock Being Registered

      None.

Item 36.     Financial Statements and Exhibits

      (a) Index to Financial Statements

      The following financial statements of the Registrant are filed as part of this Registration Statement and included in the Prospectus:

     Audited Financial Statements

      (1) Report of Independent Registered Public Accounting Firm

      (2) Consolidated Balance Sheet as of January 9, 2006

      (3) Notes to Consolidated Balance Sheet

      (b) Exhibits:

Exhibit
Number			Exhibit
	1	.1	Form of Dealer Manager Agreement between NNN Apartment REIT, Inc. and NNN Capital Corp.
	1	.2	Form of Participating Broker-Dealer Agreement
	3	.1	Articles of Incorporation of the Registrant
	3	.2	Amended Articles of Incorporation of the Registrant
	3	.3	Bylaws of the Registrant
	3	.4	Form of Articles of Amendment and Restatement of the Registrant
	3	.5	Form of Amended and Restated Bylaws of the Registrant
	3	.6*	Form of Agreement of Limited Partnership of NNN Apartment REIT Holdings, L.P.
	4	.1	Specimen Share Certificate
	5	.1*	Opinion of Venable LLP
	8	.1*	Opinion of Hirschler Fleischer, a Professional Corporation as to Tax Matters
	10	.1	Dividend Reinvestment Plan (included as Exhibit C to the Prospectus)
	10	.2	Proposed Share Repurchase Plan (included as Exhibit D to the Prospectus)
	10	.3*	2006 Incentive Award Plan
	10	.4	Advisory Agreement between NNN Apartment REIT, Inc. and NNN Apartment REIT Advisor, LLC
	10	.5*	Form of Escrow Agreement
	23	.1*	Consent of Venable LLP (included in Exhibit 5.1)
	23	.2*	Consent of Hirschler Fleischer, a Professional Corporation (included in Exhibit 8.1)
	23	.3	Consent of Deloitte & Touche LLP
	24	.1	Power of Attorney (included on Signature Page)

*  To be filed by amendment.

Item 37.     Undertakings

      Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Act”) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referred to in Item 34 of this registration statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for

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indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question as to whether such indemnification by it is against public policy as expressed in the Act, and will be governed by the final adjudication of such issue.

      The undersigned Registrant hereby undertakes that:

      (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

      (i) To include any prospectus required by Section 10(a)(3) of the Act;

      (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and

      (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

      (2) That, for the purpose of determining liability under the Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

      (3) That, all post-effective amendments will comply with the applicable forms, rules and regulations of the U.S. Securities and Exchange Commission (the “Commission”) in effect at the time such post-effective amendments are filed.

      (4) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

      (5) That, for the purpose of determining liability under the Act to any purchaser in the initial distribution of the securities:

      The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

      (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

      (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

      (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

      (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

      The Registrant undertakes to send to each stockholder at least on an annual basis a detailed statement of any transactions with the advisor or its affiliates, and of fees, commissions, compensation and

II-4

other benefits paid, or accrued to the advisor or its affiliates for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed.

      The Registrant undertakes to provide to the stockholders the financial statements required by Form 10-K for the first full year of operations of the Company.

      The Registrant undertakes to file a sticker supplement pursuant to Rule 424(c) under the Act during the distribution period describing each property not identified in the prospectus at such time as there arises a reasonable probability that such property will be acquired and to consolidate all such stickers into a post-effective amendment filed at least once every three months, with the information contained in such amendment provided simultaneously to the existing stockholders. Each sticker supplement should disclose all compensation and fees received by the advisor and its affiliates in connection with any such acquisition. The post-effective amendment shall include audited financial statements meeting the requirements of Rule 3-14 of Regulation S-X only for properties acquired during the distribution period.

      The Registrant also undertakes to file, after the end of the distribution period, a current report on Form 8-K containing the financial statements and any additional information required by Rule 3-14 of Regulation S-X, to reflect each commitment (i.e., the signing of a binding purchase agreement) made after the end of the distribution period involving the use of 10 percent or more (on a cumulative basis) of the net proceeds of the offering and to provide the information contained in such report to the stockholders at least once each quarter after the distribution period of the offering has ended.

II-5

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED)

December 31, 2004

     Table VI presents acquisitions of properties by programs completed during the three years prior to December 31, 2004. The information provided is for 100% of the property’s acquisition, without regard to percentage ownership of a property by an affiliated program either directly or through the affiliated program’s LLC. Additional information can be found in the Prior Performance Summary and Tables I through V.

Public Programs

Program:	T REIT, Inc.		T REIT, Inc.
Name, location, type of property	City Center West ‘A’(1)		Pacific Corp. Park(2)
	Las Vegas, NV		Lake Forest, CA
	Office		Office
Gross leasable square footage		106,000		167,000
Date of purchase		3/15/2002		3/25/2002
Mortgage financing at date of purchase	$	13,000,000	$	15,500,000
Cash down payment	$	8,670,000	$	8,229,000
Contract purchase price plus acquisition fee	$	21,670,000	$	23,729,000
Other cash expenditures expensed/(credited)	$	13,000	$	63,000
Other cash expenditures capitalized	$	272,000	$	367,000
Total acquisition cost	$	21,955,000	$	24,159,000

Program:	T REIT, Inc.			T REIT, Inc.
Name, location, type of property	Titan Bldg. & Plaza(3)			University Heights
	San Antonio, TX 78217			San Antonio, TX
	Office			Office
Gross leasable square footage		131,000			68,000
Date of purchase		4/17/2002			8/22/2002
Mortgage financing at date of purchase	$	6,000,000		$	—
Cash down payment	$	3,167,000		$	6,750,000
Contract purchase price plus acquisition fee	$	9,167,000		$	6,750,000
Other cash expenditures expensed/(credited)	$	(73,000	)	$	(22,000	)
Other cash expenditures capitalized	$	280,000		$	13,000
Total acquisition cost	$	9,374,000		$	6,741,000

Program:	T REIT, Inc.
Name, location, type of property	Saddleback Financial Center(4)			T REIT, Inc.
	Laguna Hills, CA			Congress Center(5)
	Office			Chicago, IL
				Office
Gross leasable square footage		72,000			525,000
Date of purchase		9/25/2002			1/9/2003
Mortgage financing at date of purchase	$	7,650,000		$	95,875,000
Cash down payment	$	3,423,000		$	40,233,000
Contract purchase price plus acquisition fee	$	11,073,000		$	136,108,000
Other cash expenditures expensed/(credited)	$	(44,000	)	$	(138,000	)
Other cash expenditures capitalized	$	286,000		$	2,543,000
Total acquisition cost	$	11,315,000		$	138,513,000

(1)	Owns an 89.1% tenant in common interest in the property.
(2)	Owns 22.8% of the property through a membership interest in NNN Pacific Corporate Park 1, LLC which owns 60.0% of the property as a tenant in common.
(3)	Owns a 48.5% tenant in common interest in the property.
(4)	Owned a 25.0% tenant in common interest in the property.
(5)	Owns 10.2% of the property through a membership interest in NNN Congress Center, LLC, which owns 28.9% of the property as a tenant in common.

II-6

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Public Programs

Program:	T REIT, Inc.		T REIT, Inc.
Name, location, type of property	Gateway Mall		Enclave Parkway(1)
	Bismarck, ND		Clear Lake, TX
	Retail		Office
Gross leasable square footage		333,000		207,000
Date of purchase		1/29/2003		12/22/2003
Mortgage financing at date of purchase	$	5,000,000	$	23,600,000
Cash down payment	$	4,000,000	$	10,900,000
Contract purchase price plus acquisition fee	$	9,000,000	$	34,500,000
Other cash expenditures expensed/(credited)	$	254,000	$	(49,000	)
Other cash expenditures capitalized	$	95,000	$	106,000
Total acquisition cost	$	9,349,000	$	34,557,000

Program:	T REIT, Inc.			T REIT, Inc.
Name, location, type of property	AmberOaks(2)			Oakey Building(3)
	Austin, TX			Las Vegas, NV
	Office			Office
Gross leasable square footage		207,000			98,000
Date of purchase		1/20/2004			4/2/2004
Mortgage financing at date of purchase	$	15,000,000		$	4,000,000
Cash down payment	$	7,965,000		$	4,137,000
Contract purchase price plus acquisition fee	$	22,965,000		$	8,137,000
Other cash expenditures expensed/(credited)	$	(127,000	)	$	45,000
Other cash expenditures capitalized	$	198,000		$	100,000
Total acquisition cost	$	23,036,000		$	8,282,000

Program:	T REIT, Inc.
Name, location, type of property	Emerald Plaza(4)
	San Diego, CA
	Office
Gross leasable square footage		355,000
Date of purchase		6/14/2004
Mortgage financing at date of purchase	$	68,500,000
Cash down payment	$	32,440,000
Contract purchase price plus acquisition fee	$	100,940,000
Other cash expenditures expensed/(credited)	$	(1,492,000	)
Other cash expenditures capitalized	$	1,858,000
Total acquisition cost	$	101,306,000

(1)	Owns 3.3% of the property through a membership interest in NNN Enclave Parkway, LLC which owns 7.0% of the property as a tenant in common.
(2)	Owns a 75% tenant in common interest in the property.
(3)	Owns 9.8% of the property through a membership interest in NNN Oakey Building 2003, LLC which owns 100% of the property.
(4)	Owns 2.7% of the property through a membership interest in NNN Emerald Plaza, LLC which owns 20.5% of the property as a tenant in common.

II-7

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Public Programs

Program:	G REIT, Inc.			G REIT, Inc.
Name, location, type of property	5508 Hwy. 290 West			Two Corporate Plaza
	Austin, TX			Houston, TX
	Office			Office/Retail
Gross leasable square footage		74,000			161,000
Date of purchase		9/13/2002			11/27/2002
Mortgage financing at date of purchase	$	6,700,000		$	10,160,000
Cash down payment	$	3,600,000		$	3,420,000
Contract purchase price plus acquisition fee	$	10,300,000		$	13,580,000
Other cash expenditures expensed/(credited)	$	(61,000	)	$	34,000
Other cash expenditures capitalized	$	459,000		$	482,000
Total acquisition cost	$	10,698,000		$	14,096,000

Program:	G REIT, Inc.			G REIT, Inc.
Name, location, type of property	Congress Center(1)			The Atrium Building
	Chicago, IL			Lincoln, NE
	Office			Office
Gross leasable square footage		525,000			167,000
Date of purchase		1/9/2003			1/31/2003
Mortgage financing at date of purchase	$	95,875,000		$	2,200,000
Cash down payment	$	40,233,000		$	2,332,000
Contract purchase price plus acquisition fee	$	136,108,000		$	4,532,000
Other cash expenditures expensed/(credited)	$	(138,000	)	$	(4,000	)
Other cash expenditures capitalized	$	2,543,000		$	449,000
Total acquisition cost	$	138,513,000		$	4,977,000

Program:	G REIT, Inc.			G REIT, Inc.
Name, location, type of property	Park Sahara(2)			Dept. of Children & Families Bldg.
	Las Vegas, NV			Plantation, FL
	Office			Office
Gross leasable square footage		124,000			124,000
Date of purchase		3/18/2003			4/25/2003
Mortgage financing at date of purchase	$	8,400,000		$	7,605,000
Cash down payment	$	3,800,000		$	3,975,000
Contract purchase price plus acquisition fee	$	12,200,000		$	11,580,000
Other cash expenditures expensed/(credited)	$	(33,000	)	$	(49,000	)
Other cash expenditures capitalized	$	486,000		$	378,000
Total acquisition cost	$	12,653,000		$	11,909,000

(1)	Owns a 30% tenant in common interest in the property.
(2)	Owns a 4.75% tenant in common interest in the property.

II-8

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Public Programs

Program:	G REIT, Inc.		G REIT, Inc.
Name, location, type of property	Gemini Plaza		Bay View(1)
	Houston, TX		Alameda, CA
	Office		Office
Gross leasable square footage		159,000		61,000
Date of purchase		5/2/2003		7/31/2003
Mortgage financing at date of purchase	$	9,815,000	$	—
Cash down payment	$	5,185,000	$	11,655,000
Contract purchase price plus acquisition fee	$	15,000,000	$	11,655,000
Other cash expenditures expensed/(credited)	$	4,000	$	(16,000	)
Other cash expenditures capitalized	$	539,000	$	384,000
Total acquisition cost	$	15,543,000	$	12,023,000

Program:				G REIT, Inc.
Name, location, type of property	G REIT, Inc.			824 Market Street
	North Pointe Corporate			Wilmington, DE
	Sacramento, CA
	Office			Office
Gross leasable square footage		133,000			202,000
Date of purchase		8/11/2003			10/10/2003
Mortgage financing at date of purchase	$	15,600,000		$	—
Cash down payment	$	8,605,000		$	31,900,000
Contract purchase price plus acquisition fee	$	24,205,000		$	31,900,000
Other cash expenditures expensed/(credited)	$	(160,000	)	$	136,000
Other cash expenditures capitalized	$	727,000		$	1,504,000
Total acquisition cost	$	24,772,000		$	33,540,000

Program:	G REIT, Inc.			G REIT, Inc.
Name, location, type of property	Sutter Square			One World Trade Center
	Sacramento, CA			Long Beach, CA
	Office/Retail			Office
Gross leasable square footage		61,000			573,000
Date of purchase		10/28/2003			12/5/2003
Mortgage financing at date of purchase	$	4,024,000		$	77,000,000
Cash down payment	$	4,216,000		$	36,648,000
Contract purchase price plus acquisition fee	$	8,240,000		$	113,648,000
Other cash expenditures expensed/(credited)	$	(10,000	)	$	(294,000	)
Other cash expenditures capitalized	$	309,000		$	3,378,000
Total acquisition cost	$	8,539,000		$	116,732,000

(1)  Owns a 97.68% tenant in common interest in the property.

II-9

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Public Programs

Program:				G REIT, Inc.
Name, location, type of property	G REIT, Inc.			AmberOaks Corporate Center
	Centerpointe Corporate Park			Austin, TX
	Kent, WA
	Office
Gross leasable square footage		436,000			282,000
Date of purchase		12/30/2003			1/20/2004
Mortgage financing at date of purchase	$	25,029,000		$	14,250,000
Cash down payment	$	29,191,000		$	21,275,000
Contract purchase price plus acquisition fee	$	54,220,000		$	35,525,000
Other cash expenditures expensed/(credited)	$	(83,000	)	$	(191,000	)
Other cash expenditures capitalized	$	1,690,000		$	1,191,000
Total acquisition cost	$	55,827,000		$	36,525,000

Program:	G REIT, Inc.			G REIT, Inc.
Name, location, type of property	Public Ledger Building			Madrona Building
	Philadelphia, PA			Torrence, CA
	Office			Office
Gross leasable square footage		472,000			211,000
Date of purchase		2/13/2004			3/31/2004
Mortgage financing at date of purchase	$	25,000,000		$	28,458,000
Cash down payment	$	8,950,000		$	17,442,000
Contract purchase price plus acquisition fee	$	33,950,000		$	45,900,000
Other cash expenditures expensed/(credited)	$	(118,000	)	$	88,000
Other cash expenditures capitalized	$	1,747,000		$	1,908,000
Total acquisition cost	$	35,579,000		$	47,896,000

Program:	G REIT, Inc.		G REIT, Inc.
Name, location, type of property	Brunswig Square		North Belt Corporate Center
	Los Angeles, CA		Houston, TX
	Office		Office
Gross leasable square footage		136,000		156,000
Date of purchase		4/5/2004		4/8/2004
Mortgage financing at date of purchase	$	15,830,000	$	—
Cash down payment	$	7,975,000	$	12,675,000
Contract purchase price plus acquisition fee	$	23,805,000	$	12,675,000
Other cash expenditures expensed/(credited)	$	—	$	(17,000	)
Other cash expenditures capitalized	$	773,000	$	405,000
Total acquisition cost	$	24,578,000	$	13,063,000

II-10

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Public Programs

Program:	G REIT, Inc.			G REIT, Inc.
Name, location, type of property	Hawthorne Plaza			Pacific Place
	San Francisco, CA			Dallas, TX
	Office			Office
Gross leasable square footage		419,000			324,000
Date of purchase		4/20/2004			5/26/2004
Mortgage financing at date of purchase	$	62,750,000		$	—
Cash down payment	$	34,250,000		$	29,900,000
Contract purchase price plus acquisition fee	$	97,000,000		$	29,900,000
Other cash expenditures expensed/(credited)	$	(49,000	)	$	(65,000	)
Other cash expenditures capitalized	$	3,354,000		$	1,240,000
Total acquisition cost	$	100,305,000		$	31,075,000

Program:	G REIT, Inc.			G REIT, Inc.
Name, location, type of property	525 B Street (Golden Eagle)			600 B Street (Golden Eagle)
	San Diego, CA			San Diego, CA
	Office			Office
Gross leasable square footage		424,000			339,000
Date of purchase		6/14/2004			6/14/2004
Mortgage financing at date of purchase	$	69,943,000		$	56,057,000
Cash down payment	$	26,367,000		$	21,133,000
Contract purchase price plus acquisition fee	$	96,310,000		$	77,190,000
Other cash expenditures expensed/(credited)	$	(387,000	)	$	(235,000	)
Other cash expenditures capitalized	$	2,318,000		$	1,917,000
Total acquisition cost	$	98,241,000		$	78,872,000

Program:	G REIT, Inc.			G REIT, Inc.
Name, location, type of property	Western Place I & II(1)			Pax River Office Park
	Fort Worth, TX			Lexington Park, MD
	Office			Office
Gross leasable square footage		429,000			172,000
Date of purchase		7/23/2004			8/6/2004
Mortgage financing at date of purchase	$	24,000,000		$	—
Cash down payment	$	9,500,000		$	14,000,000
Contract purchase price plus acquisition fee	$	33,500,000		$	14,000,000
Other cash expenditures expensed/(credited)	$	(137,000	)	$	(88,000	)
Other cash expenditures capitalized	$	1,569,000		$	720,000
Total acquisition cost	$	34,932,000		$	14,632,000

(1)  Owns a 78.5% tenant in common interest in the property.

II-11

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Public Programs

Program:	G REIT, Inc.			NNN 2003 Value Fund, LLC
Name, location, type of property	One Financial Plaza(1)			Executive Center II & III(2)
	St. Louis, MO			Dallas, TX
	Office			Office
Gross leasable square footage		434,000			381,000
Date of purchase		8/6/2004			8/1/2003
Mortgage financing at date of purchase	$	30,750,000		$	14,950,000
Cash down payment	$	6,250,000		$	9,650,000
Contract purchase price plus acquisition fee	$	37,000,000		$	24,600,000
Other cash expenditures expensed/(credited)	$	(728,000	)	$	(183,000	)
Other cash expenditures capitalized	$	1,186,000		$	865,000
Total acquisition cost	$	37,458,000		$	25,282,000

Program:	NNN 2003 Value Fund, LLC		NNN 2003 Value Fund, LLC
Name, location, type of property	Executive Center I		801K Street(3)
	Dallas, TX		Sacramento, CA
	Office		Office
Gross leasable square footage		208,000		336,000
Date of purchase		12/30/2003		3/31/2004
Mortgage financing at date of purchase	$	4,500,000	$	41,350,000
Cash down payment	$	3,678,000	$	24,430,000
Contract purchase price plus acquisition fee	$	8,178,000	$	65,780,000
Other cash expenditures expensed/(credited)	$	3,000	$	665,000
Other cash expenditures capitalized	$	322,000	$	2,060,000
Total acquisition cost	$	8,503,000	$	68,505,000

Program:	NNN 2003 Value Fund, LLC		NNN 2003 Value Fund, LLC
Name, location, type of property	Oakey Building(4)		Enterprise Technology Center(5)
	Las Vegas, NV		Scotts Valley, CA
	Office		Office
Gross leasable square footage		98,000		370,000
Date of purchase		4/2/2004		5/7/2004
Mortgage financing at date of purchase	$	4,000,000	$	36,500,000
Cash down payment	$	4,137,000	$	24,800,000
Contract purchase price plus acquisition fee	$	8,137,000	$	61,300,000
Other cash expenditures expensed/(credited)	$	45,000	$	(329,000	)
Other cash expenditures capitalized	$	100,000	$	2,080,000
Total acquisition cost	$	8,282,000	$	63,051,000

(1)	Owns a 77.6% tenant in common interest in the property.
(2)	Owns a 38.1% tenant in common interest in the property.
(3)	Owns 18.3% of the property through a membership interest in NNN 801 K Street, LLC which owns 21.5% of the property as a tenant in common.
(4)	Owns 75.4% of the property through a membership interest in NNN Oakey Building 2003, LLC which owns 100% of the property.
(5)	Owns 8.5% of the property through a membership interest in NNN Enterprise Way, LLC which owns 11.6% of the property as a tenant in common.

II-12

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Public Programs

Program:	NNN 2003 Value Fund, LLC			NNN 2003 Value Fund, LLC
Name, location, type of property	Emerald Plaza(1)			Southwood Tower
	San Diego, CA			Houston, TX
	Office			Office
Gross leasable square footage		355,000			79,000
Date of purchase		6/14/2004			10/27/2004
Mortgage financing at date of purchase	$	68,500,000		$	—
Cash down payment	$	32,440,000		$	5,461,000
Contract purchase price plus acquisition fee	$	100,940,000		$	5,461,000
Other cash expenditures expensed/(credited)	$	(1,492,000	)	$	121,000
Other cash expenditures capitalized	$	1,858,000		$	169,000
Total acquisition cost	$	101,306,000		$	5,751,000

Program:	NNN 2003 Value Fund, LLC			NNN 2003 Value Fund, LLC
Name, location, type of property	Financial Plaza			Satellite Place
	Omaha, NE			Atlanta, GA
	Office			Office
Gross leasable square footage		86,000			178,000
Date of purchase		10/29/2004			11/29/2004
Mortgage financing at date of purchase	$	4,125,000		$	11,000,000
Cash down payment	$	1,535,000		$	7,300,000
Contract purchase price plus acquisition fee	$	5,660,000		$	18,300,000
Other cash expenditures expensed/(credited)	$	(6,000	)	$	4,000
Other cash expenditures capitalized	$	189,000		$	586,000
Total acquisition cost	$	5,843,000		$	18,890,000

Program:	NNN 2002 Value Fund, LLC			NNN 2002 Value Fund, LLC
Name, location, type of property	Congress Center(2)			Netpark(3)
	Chicago, IL			Tampa, FL
	Office			Office
Gross leasable square footage		525,000			911,000
Date of purchase		1/9/2003			6/11/2003
Mortgage financing at date of purchase	$	95,875,000		$	31,500,000
Cash down payment	$	40,233,000		$	15,500,000
Contract purchase price plus acquisition fee	$	136,108,000		$	47,000,000
Other cash expenditures expensed/(credited)	$	(138,000	)	$	(454,000	)
Other cash expenditures capitalized	$	2,543,000		$	1,957,000
Total acquisition cost	$	138,513,000		$	48,503,000

(1)	Owns 4.6% of the property through a membership interest in NNN Emerald Plaza, LLC which owns 20.5% of the property as a tenant in common.
(2)	Owns 12.3% of the property through a membership interest in NNN Congress Center, LLC which owns 28.9% of the property as a tenant in common.
(3)	Owns a 50% tenant in common interest in the property.

II-13

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Public Programs

Program:	NNN 2002 Value Fund, LLC
Name, location, type of property	Bank of America West
	Las Vegas, NV
	Office
Gross leasable square footage		82,000
Date of purchase		9/20/2002
Mortgage financing at date of purchase	$	14,200,000
Cash down payment	$	2,700,000
Contract purchase price plus acquisition fee	$	16,900,000
Other cash expenditures expensed/(credited)	$	25,000
Other cash expenditures capitalized	$	299,000
Total acquisition cost	$	17,224,000

II-14

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED)

PRIVATE PROGRAMS

December 31, 2004

     Table VI presents acquisitions of properties by programs during the three years prior to December 31, 2004. The information provided is at 100% of the property’s acquisition, without regard to percentage ownership of a property by another affiliated program or another affiliated program’s investment through the program presented. Footnotes disclose the percentage owned by the program as well as the percentage owned by affiliated entities investing in the program. More complete disclosure can be found in the Prior Performance Summary and Tables I through V.

Private Programs

Program:	NNN City Center West ‘B’, LLC		NNN City Center West ‘A’, LLC(1)
Name, location, type of property	City Center West ‘B’		City Center West ‘A’
	Las Vegas, NV		Las Vegas, NV
	Office		Office
Gross leasable square footage		104,000		106,000
Date of purchase		1/23/2002		3/15/2002
Mortgage financing at date of purchase	$	14,650,000	$	13,000,000
Cash down payment	$	6,150,000	$	8,670,000
Contract purchase price plus acquisition fee	$	20,800,000	$	21,670,000
Other cash expenditures expensed/(credited)	$	56,000	$	13,000
Other cash expenditures capitalized	$	188,000	$	272,000
Total acquisition cost	$	21,044,000	$	21,955,000

			NNN Pacific Corporate Park 1,
Program:	NNN 2001 Value Fund, LLC(2)		LLC(3)
Name, location, type of property	Pacific Corporate Park		Pacific Corporate Park
	Lake Forest, CA		Lake Forest, CA
	Office		Office
Gross leasable square footage		167,000		167,000
Date of purchase		3/25/2002		3/25/2002
Mortgage financing at date of purchase	$	15,500,000	$	15,500,000
Cash down payment	$	8,229,000	$	8,229,000
Contract purchase price plus acquisition fee	$	23,729,000	$	23,729,000
Other cash expenditures expensed/(credited)	$	63,000	$	63,000
Other cash expenditures capitalized	$	367,000	$	367,000
Total acquisition cost	$	24,159,000	$	24,159,000

Program:	NNN Arapahoe Svc. Center II, LLC			NNN Titan Bldg. & Plaza, LLC(4)
Name, location, type of property	Arapahoe Service Center II			The Titan Building & Plaza
	Englewood, CO			San Antonio, TX
	Office			Office
Gross leasable square footage		79,000			131,000
Date of purchase		4/19/2002			4/17/2002
Mortgage financing at date of purchase	$	5,000,000		$	6,000,000
Cash down payment	$	3,038,000		$	3,167,000
Contract purchase price plus acquisition fee	$	8,038,000		$	9,167,000
Other cash expenditures expensed/(credited)	$	(23,000	)	$	(73,000	)
Other cash expenditures capitalized	$	146,000		$	280,000
Total acquisition cost	$	8,161,000		$	9,374,000

(1)	The program owns a 10.9% tenant in common interest in the property.
(2)	The program owns a 40% tenant in common interest in the property.
(3)	T REIT, Inc., an affiliated public entity, owns a membership interest of 37.93% in NNN Pacific Corporate Park I, LLC which owns 60% of the property as a tenant in common.
(4)	The program owns a 51.5% tenant in common interest in the property.

II-15

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Private Programs

Program:	NNN Brookhollow Park, LLC			NNN North Reno Plaza, LLC
Name, location, type of property	Brookhollow Park			North Reno Plaza Shopping Center
	San Antonio, TX			Reno, NV
	Office			Shopping Center
Gross leasable square footage		102,000			130,000
Date of purchase		7/3/2002			6/19/2002
Mortgage financing at date of purchase	$	10,250,000		$	5,400,000
Cash down payment	$	5,110,000		$	1,800,000
Contract purchase price plus acquisition fee	$	15,360,000		$	7,200,000
Other cash expenditures expensed/(credited)	$	(181,000	)	$	(5,000	)
Other cash expenditures capitalized	$	125,000		$	148,000
Total acquisition cost	$	15,304,000		$	7,343,000

Program:	NNN 1397 Galleria Drive, LLC			NNN Bryant Ranch, LLC
Name, location, type of property	Galleria Office Building			Bryant Ranch Shopping Center
	Henderson, NV			Yorba Linda, CA
	Office			Shopping Center
Gross leasable square footage		14,000			94,000
Date of purchase		9/11/2002			9/5/2002
Mortgage financing at date of purchase	$	1,962,000		$	6,222,000
Cash down payment	$	1,458,000		$	3,858,000
Contract purchase price plus acquisition fee	$	3,420,000		$	10,080,000
Other cash expenditures expensed/(credited)	$	(21,000	)	$	(36,000	)
Other cash expenditures capitalized	$	39,000		$	249,000
Total acquisition cost	$	3,438,000		$	10,293,000

Program:	NNN 4241 Bowling Green, LLC			NNN Wolf Pen Plaza, LLC
Name, location, type of property	4241 Bowling Drive			Wolf Pen Plaza
	Sacramento, CA			College Station, TX
	Office			Shopping Center
Gross leasable square footage		68,000			170,000
Date of purchase		9/25/2002			9/24/2002
Mortgage financing at date of purchase	$	3,092,000		$	12,265,000
Cash down payment	$	2,108,000		$	3,955,000
Contract purchase price plus acquisition fee	$	5,200,000		$	16,220,000
Other cash expenditures expensed/(credited)	$	(24,000	)	$	(93,000	)
Other cash expenditures capitalized	$	5,000		$	607,000
Total acquisition cost	$	5,181,000		$	16,734,000

II-16

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Private Programs

			NNN Saddleback Financial,
Program:			LLC(1)
	NNN Alamosa Plaza, LLC
Name, location, type of property	Alamosa Plaza Shopping Center		Saddleback Financial Center
	Las Vegas, NV		Laguna Hills, CA
	Shopping Center		Office
Gross leasable square footage		78,000		72,000
Date of purchase		10/8/2002		9/25/2002
Mortgage financing at date of purchase	$	13,500,000	$	7,650,000
Cash down payment	$	5,000,000	$	3,423,000
Contract purchase price plus acquisition fee	$	18,500,000	$	11,073,000
Other cash expenditures expensed/(credited)	$	158,000	$	(44,000	)
Other cash expenditures capitalized	$	167,000	$	286,000
Total acquisition cost	$	18,825,000	$	11,315,000

Program:				NNN Springtown Mall, DST
	NNN Kahana Gateway Center, LLC
Name, location, type of property	Kahana Gateway Shopping Center &			Springtown Mall Shopping Center
	Professional Building			San Marcos, TX
	Maui, HI			Shopping Center
	Retail/Office
Gross leasable square footage		80,000			96,000
Date of purchase		12/20/2002			12/9/2002
Mortgage financing at date of purchase	$	13,041,000		$	4,700,000
Cash down payment	$	6,359,000		$	1,790,000
Contract purchase price plus acquisition fee	$	19,400,000		$	6,490,000
Other cash expenditures expensed/(credited)	$	(3,000	)	$	4,000
Other cash expenditures capitalized	$	268,000		$	413,000
Total acquisition cost	$	19,665,000		$	6,907,000

Program:	NNN Congress Center, LLC(2)			NNN Parkwood Complex, LLC
Name, location, type of property	Congress Center			Parkwood I & II
	Chicago, IL			Woodlands, TX
	Office			Office
Gross leasable square footage		525,000			196,000
Date of purchase		1/9/2003			12/31/2002
Mortgage financing at date of purchase	$	95,875,000		$	13,922,000
Cash down payment	$	40,233,000		$	6,514,000
Contract purchase price plus acquisition fee	$	136,108,000		$	20,436,000
Other cash expenditures expensed/(credited)	$	(138,000	)	$	(484,000	)
Other cash expenditures capitalized	$	2,543,000		$	17,000
Total acquisition cost	$	138,513,000		$	19,969,000

(1)	The program owns 75% of the property through NNN Saddleback Financial, LLC and other tenant in common interests.
(2)	The program owns 64.5% of the property through NNN Congress Center, LLC and other tenant in common interests. Two affiliated public entities, NNN 2002 Value Fund, LLC and T REIT, Inc., own membership interests in NNN Congress Center, LLC which has a tenant in common interest in the program.

II-17

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Private Programs

Program:	NNN Park Sahara, DST(1)			NNN Buschwood, LLC
Name, location, type of property	Park Sahara Office Park			Buschwood III Office Park
	Las Vegas, NV			Tampa, FL
	Office			Office
Gross leasable square footage		124,000			77,000
Date of purchase		3/18/2003			3/25/2003
Mortgage financing at date of purchase	$	8,400,000		$	4,600,000
Cash down payment	$	3,800,000		$	2,383,000
Contract purchase price plus acquisition fee	$	12,200,000		$	6,983,000
Other cash expenditures expensed/(credited)	$	(33,000	)	$	(11,000	)
Other cash expenditures capitalized	$	486,000		$	121,000
Total acquisition cost	$	12,653,000		$	7,093,000

Program:	NNN Beltline/Royal Ridge, LLC			NNN Parkway Towers, DST
Name, location, type of property	Beltline/Royal Ridge Tech.			Parkway Towers Office Park
	Irving, TX			Nashville, TN
	Office			Office
Gross leasable square footage		84,000			190,000
Date of purchase		4/1/2003			5/9/2003
Mortgage financing at date of purchase	$	6,150,000		$	6,000,000
Cash down payment	$	3,400,000		$	6,450,000
Contract purchase price plus acquisition fee	$	9,550,000		$	12,450,000
Other cash expenditures expensed/(credited)	$	(81,000	)	$	(46,000	)
Other cash expenditures capitalized	$	86,000		$	244,000
Total acquisition cost	$	9,555,000		$	12,648,000

Program:	NNN 602 Sawyer, LLC			NNN Netpark, LLC(2)
Name, location, type of property	602 Sawyer			Netpark Tampa Bay
	Houston, TX			Tampa, FL
	Office			Office
Gross leasable square footage		86,000			911,000
Date of purchase		6/5/2003			6/11/2003
Mortgage financing at date of purchase	$	5,850,000		$	31,500,000
Cash down payment	$	3,420,000		$	15,500,000
Contract purchase price plus acquisition fee	$	9,270,000		$	47,000,000
Other cash expenditures expensed/(credited)	$	(102,000	)	$	(454,000	)
Other cash expenditures capitalized	$	107,000		$	1,957,000
Total acquisition cost	$	9,275,000		$	48,503,000

(1)	The program owns 95.25% of the property through NNN Park Sahara, DST.
(2)	NNN 2002 Value Fund, LLC, an affiliated public entity, owns a 50% tenant in common interest in the program.

II-18

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Private Programs

Program:	NNN 1851 E. First Street, LLC			NNN Jamboree Promenade, LLC
Name, location, type of property	Xerox Centre			Jamboree Promenade
	Santa Ana, CA			Irvine, CA
	Office			Retail
Gross leasable square footage		318,000			59,000
Date of purchase		6/16/2003			7/25/2003
Mortgage financing at date of purchase	$	45,375,000		$	15,000,000
Cash down payment	$	14,925,000		$	5,200,000
Contract purchase price plus acquisition fee	$	60,500,000		$	20,200,000
Other cash expenditures expensed/(credited)	$	(275,000	)	$	(36,000	)
Other cash expenditures capitalized	$	975,000		$	251,000
Total acquisition cost	$	61,200,000		$	20,415,000

Program:	NNN Jefferson Square, LLC			NNN Executive Center, LLC
Name, location, type of property	Jefferson Square			Executive Center II & III
	Seattle, WA			Dallas, TX
	Office/retail			Office
Gross leasable square footage		146,000			381,000
Date of purchase		7/28/2003			8/1/2003
Mortgage financing at date of purchase	$	13,070,000		$	14,950,000
Cash down payment	$	7,055,000		$	9,650,000
Contract purchase price plus acquisition fee	$	20,125,000		$	24,600,000
Other cash expenditures expensed/(credited)	$	(14,000	)	$	(183,000	)
Other cash expenditures capitalized	$	128,000		$	865,000
Total acquisition cost	$	20,239,000		$	25,282,000

Program:	NNN Arapahoe Business Park, LLC			NNN 901 Corporate Center, LLC
Name, location, type of property	Arapahoe Business Park I & II			901 Corporate Center
	Centennial, CO			Monterey Park, CA
	Office			Office
Gross leasable square footage		133,000			101,000
Date of purchase:		8/11/2003			8/15/2003
Mortgage financing at date of purchase	$	5,200,000		$	11,310,000
Cash down payment	$	2,788,000		$	4,840,000
Contract purchase price plus acquisition fee	$	7,988,000		$	16,150,000
Other cash expenditures expensed/(credited)	$	(45,000	)	$	(72,000	)
Other cash expenditures capitalized	$	74,000		$	62,000
Total acquisition cost	$	8,017,000		$	16,140,000

(1)  NNN 2003 Value Fund, LLC, an affiliated public entity, owns a 76.8% membership interest in NNN Executive Center, LLC which has a 49.625% tenant in common interest in the program.

II-19

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Private Programs

Program:	NNN Union Pines, LLC			NNN 1410 Renner, LLC
Name, location, type of property	Union Pines			1410 Renner Road
	Tulsa, OK			Richardson, TX
	Office			Office
Gross leasable square footage		134,000			117,000
Date of purchase		10/8/2003			10/29/2003
Mortgage financing at date of purchase	$	9,060,000		$	8,740,000
Cash down payment	$	5,940,000		$	5,160,000
Contract purchase price plus acquisition fee	$	15,000,000		$	13,900,000
Other cash expenditures expensed/(credited)	$	(116,000	)	$	(7,000	)
Other cash expenditures capitalized	$	136,000		$	101,000
Total acquisition cost	$	15,020,000		$	13,994,000

	NNN Parkway Corporate
Program:	Plaza, LLC			NNN Twain, LLC
Name, location, type of property	Parkway Corporate Plaza			Business Bank of Nevada
	Roseville, CA			Las Vegas, NV
	Office			Office
Gross leasable square footage		287,000			27,000
Date of purchase		11/10/2003			12/8/2003
Mortgage financing at date of purchase	$	45,000,000		$	3,750,000
Cash down payment	$	18,650,000		$	1,950,000
Contract purchase price plus acquisition fee	$	63,650,000		$	5,700,000
Other cash expenditures expensed/(credited)	$	(40,000	)	$	(10,000	)
Other cash expenditures capitalized	$	938,000		$	55,000
Total acquisition cost	$	64,548,000		$	5,745,000

Program:	NNN Westbay Office Park, LLC		NNN Enclave Parkway, LLC(1)
Name, location, type of property	Westbay Office Park		1401 Enclave Parkway
	Las Vegas, NV		Houston, TX
	Office		Office
Gross leasable square footage		108,000		207,000
Date of purchase		12/15/2003		12/22/2003
Mortgage financing at date of purchase	$	15,000,000	$	23,600,000
Cash down payment	$	8,600,000	$	10,900,000
Contract purchase price plus acquisition fee	$	23,600,000	$	34,500,000
Other cash expenditures expensed/(credited)	$	43,000	$	(49,000	)
Other cash expenditures capitalized	$	107,000	$	106,000
Total acquisition cost	$	23,750,000	$	34,557,000

(1)  T REIT, Inc., an affiliated public entity, owns a 46.5% membership interest in NNN Enclave Parkway, LLC which has a 7% tenant in common interest in the program.

II-20

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Private Programs

				NNN Arapahoe Service Center 1,
Program:	NNN Amber Oaks, LLC(1)			LLC
Name, location, type of property	AmberOaks Corporate Center			Arapahoe Service Center
	Austin, TX			Englewood, CO
	Office			Office
Gross leasable square footage		207,000			144,000
Date of purchase		1/20/2004			1/29/2004
Mortgage financing at date of purchase	$	15,000,000		$	6,500,000
Cash down payment	$	7,965,000		$	3,600,000
Contract purchase price plus acquisition fee	$	22,965,000		$	10,100,000
Other cash expenditures expensed/(credited)	$	(127,000	)	$	45,000
Other cash expenditures capitalized	$	198,000		$	54,000
Total acquisition cost	$	23,036,000		$	10,199,000

Program:	NNN Lakeside Tech, LLC			NNN 100 Cyberonics Drive, LLC
Name, location, type of property	Lakewide Tech Center			100 Cyberonics Drive
	Tampa, FL			Houston, TX
	Office			Office
Gross leasable square footage		223,000			144,000
Date of purchase		2/6/2004			3/19/2004
Mortgage financing at date of purchase	$	14,625,000		$	10,500,000
Cash down payment	$	5,163,000		$	5,080,000
Contract purchase price plus acquisition fee	$	19,788,000		$	15,580,000
Other cash expenditures expensed/(credited)	$	(99,000	)	$	(122,000	)
Other cash expenditures capitalized	$	192,000		$	96,000
Total acquisition cost	$	19,881,000		$	15,554,000

Program:	NNN Corporate Court, LLC			NNN 801 K Street, LLC(2)
Name, location, type of property	Corporate Court			801 K Street
	Irving, TX			Sacramento, CA
	Office			Office
Gross leasable square footage		67,000			336,000
Date of purchase		3/25/2004			3/31/2004
Mortgage financing at date of purchase	$	5,000,000		$	41,350,000
Cash down payment	$	2,570,000		$	24,430,000
Contract purchase price plus acquisition fee	$	7,570,000		$	65,780,000
Other cash expenditures expensed/(credited)	$	(57,000	)	$	665,000
Other cash expenditures capitalized	$	116,000		$	2,060,000
Total acquisition cost	$	7,629,000		$	68,505,000

(1)	T REIT, Inc., an affiliated public entity, owns a tenant in common interest of 75% in the program.
(2)	NNN 2003 Value Fund, LLC, an affiliated public entity, owns an 85% membership interest in NNN 801 K Street, LLC which has a 21.5% tenant in common interest in the program.

II-21

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Private Programs

	NNN Oakey Building 2003,
Program:	LLC(1), (2)		NNN Enterprise Way, LLC(3)
Name, location, type of property	Oakey Building		Enterprise Technology Center
	Las Vegas, NV		Scotts Valley, CA
	Office		Office
Gross leasable square footage		98,000		370,000
Date of purchase		4/2/2004		5/7/2004
Mortgage financing at date of purchase	$	4,000,000	$	36,500,000
Cash down payment	$	4,137,000	$	24,800,000
Contract purchase price plus acquisition fee	$	8,137,000	$	61,300,000
Other cash expenditures expensed/(credited)	$	45,000	$	(329,000	)
Other cash expenditures capitalized	$	100,000	$	2,080,000
Total acquisition cost	$	8,282,000	$	63,051,000

	NNN River Rock Business Center,
Program:	LLC			NNN Emerald Plaza, LLC(4), (5)
Name, location, type of property	River Rock Business Center			Emerald Plaza
	Murfreesboro, TN			San Diego, CA
	Office			Office
Gross leasable square footage		158,000			355,000
Date of purchase		6/11/2004			6/14/2004
Mortgage financing at date of purchase	$	9,300,000		$	68,500,000
Cash down payment	$	5,900,000		$	32,440,000
Contract purchase price plus acquisition fee	$	15,200,000		$	100,940,000
Other cash expenditures expensed/(credited)	$	(36,000	)	$	(1,492,000	)
Other cash expenditures capitalized	$	181,000		$	1,858,000
Total acquisition cost	$	15,345,000		$	101,306,000

Program:	NNN Great Oaks Center, LLC			NNN Sugar Creek Center, LLC
Name, location, type of property	Great Oaks Center			Two Sugar Creek
	Atlanta, GA			Houston, TX
	Office			Office
Gross leasable square footage		233,000			143,000
Date of purchase		6/30/2004			7/12/2004
Mortgage financing at date of purchase	$	20,000,000		$	16,000,000
Cash down payment	$	7,050,000		$	5,850,000
Contract purchase price plus acquisition fee	$	27,050,000		$	21,850,000
Other cash expenditures expensed/(credited)	$	(131,000	)	$	(220,000	)
Other cash expenditures capitalized	$	126,000		$	231,000
Total acquisition cost	$	27,045,000		$	21,861,000

(1)	T REIT, Inc., an affiliated public entity, owns a membership interest of 9.76% in NNN Oakey Building 2003, LLC which owns 100.00% of the property.
(2)	NNN 2003 Value Fund, LLC, an affiliated public entity, owns a membership interest of 75.46% in NNN Oakey Building 2003, LLC which owns 100.00% of the property.
(3)	NNN 2003 Value Fund, LLC, an affiliated public entity, owns a 73.3% membership interest in NNN Enterprise Way, LLC which has an 11.625% tenant in common interest in the program.
(4)	T REIT, Inc., an affiliated public entity, owns a 13.17% membership interest in NNN Emerald Plaza, LLC which owns a 20.5% tenant in common interest in the program.
(5)	NNN 2003 Value Fund, LLC, an affiliated public entity, owns a 22.4% membership interest in NNN Emerald Plaza, LLC which owns a 20.5% tenant in common interest in the program.

II-22

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Private Programs

	NNN Beltway 8 Corporate Centre,
Program:	LLC			NNN Western Place, LLC(1)
Name, location, type of property	Beltway 8 Corporate Centre			Western Place I and II
	Houston, TX			Fort Worth, TX
	Office			Office
Gross leasable square footage		101,000			429,000
Date of purchase		7/22/2004			7/23/2004
Mortgage financing at date of purchase	$	10,530,000		$	24,000,000
Cash down payment	$	5,670,000		$	9,500,000
Contract purchase price plus acquisition fee	$	16,200,000		$	33,500,000
Other cash expenditures expensed/(credited)	$	(173,000	)	$	(137,000	)
Other cash expenditures capitalized	$	469,000		$	1,569,000
Total acquisition cost	$	16,496,000		$	34,932,000

Program:	NNN One Financial Plaza, LLC(2)			NNN Reserve at Maitland, LLC
Name, location, type of property	One Financial Plaza			Reserve at Maitland
	St. Louis, MO			Maitland, FL
	Office			Office
Gross leasable square footage		434,000			197,000
Date of purchase		8/6/2004			8/18/2004
Mortgage financing at date of purchase	$	30,750,000		$	21,750,000
Cash down payment	$	6,250,000		$	8,120,000
Contract purchase price plus acquisition fee	$	37,000,000		$	29,870,000
Other cash expenditures expensed/(credited)	$	(728,000	)	$	(256,000	)
Other cash expenditures capitalized	$	1,186,000		$	322,000
Total acquisition cost	$	37,458,000		$	29,936,000

Program:	NNN Las Cimas, LLC			NNN 9800 Goethe Road, LLC
Name, location, type of property	Las Cimas II and III			9800 Goethe Road
	Austin, TX			Sacramento, CA
	Office			Office
Gross leasable square footage		313,000			111,000
Date of purchase		9/27/2004			10/7/2004
Mortgage financing at date of purchase	$	46,800,000		$	14,800,000
Cash down payment	$	26,300,000		$	3,050,000
Contract purchase price plus acquisition fee	$	73,100,000		$	17,850,000
Other cash expenditures expensed/(credited)	$	(547,000	)	$	219,000
Other cash expenditures capitalized	$	775,000		$	977,000
Total acquisition cost	$	73,328,000		$	19,046,000

(1)	The program owns a 21.5% tenant in common interest in the property.
(2)	The program owns a 22.4% tenant in common interest in the property.

II-23

TABLE VI

ACQUISITION OF PROPERTIES BY PROGRAM (UNAUDITED) — (Continued)

December 31, 2004

Private Programs

Program:	NNN Fountain Square, LLC			NNN Embassy Plaza, LLC
Name, location, type of property	Fountain Square			Embassy Plaza
	Boca Raton, FL			Omaha, NE
	Office			Office
Gross leasable square footage		242,000			132,000
Date of purchase		10/28/2004			10/29/2004
Mortgage financing at date of purchase	$	36,250,000		$	9,900,000
Cash down payment	$	15,250,000		$	7,100,000
Contract purchase price plus acquisition fee	$	51,500,000		$	17,000,000
Other cash expenditures expensed/(credited)	$	(510,000	)	$	(189,000	)
Other cash expenditures capitalized	$	1,059,000		$	153,000
Total acquisition cost	$	52,049,000		$	16,964,000

Program:	NNN City Centre Place, LLC		NNN Oak Park Office Center, LLC
Name, location, type of property	City Centre Place		Oak Park Office Center
	Las Vegas, NV		Houston, TX
	Office		Office
Gross leasable square footage		103,000		173,000
Date of purchase		11/5/2004		11/12/2004
Mortgage financing at date of purchase	$	21,500,000	$	21,800,000
Cash down payment	$	7,980,000	$	7,349,000
Contract purchase price plus acquisition fee	$	29,480,000	$	29,149,000
Other cash expenditures expensed/(credited)	$	111,000	$	(90,000	)
Other cash expenditures capitalized	$	170,000	$	598,000
Total acquisition cost	$	29,761,000	$	29,657,000

Program:	NNN 2800 East Commerce, LLC
Name, location, type of property	2800 East Commerce Place
	Tucson, AZ
	Office
Gross leasable square footage		136,000
Date of purchase		11/19/2004
Mortgage financing at date of purchase	$	11,375,000
Cash down payment	$	6,650,000
Contract purchase price plus acquisition fee	$	18,025,000
Other cash expenditures expensed/(credited)	$	93,000
Other cash expenditures capitalized	$	195,000
Total acquisition cost	$	18,313,000

II-24

SIGNATURE PAGE

      Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that is has reasonable grounds to believe that it meets all of the requirements for filing on Form S-11 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Richmond, Commonwealth of Virginia, on the 10th day of January, 2006.

NNN APARTMENT REIT, INC.

By:  /s/ Stanley J. Olander, Jr.

Stanley J. Olander, Jr.,

Chief Executive Officer

POWER OF ATTORNEY

      Each of the persons whose signature appears below hereby constitutes and appoints Stanley J. Olander, Jr. and Louis J. Rogers, and each of them or either of them as his true and lawful attorney-in-fact with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, or any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to cause the same to be filed, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby granting to said attorneys-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite or desirable to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could in person, hereby ratifying and confirming all acts and things that said attorneys-in-fact and agents, or either of them, or their substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Stanley J. Olander, Jr. Stanley J. Olander, Jr.	Chief Executive Officer (Principal Executive Officer)	January 10, 2006
/s/ Scott D. Peters Scott D. Peters	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	January 10, 2006
/s/ Louis J. Rogers Louis J. Rogers	President and Chairman of the Board	January 10, 2006
/s/ Glenn W. Bunting Glenn W. Bunting	Director	January 10, 2006
/s/ Robert A. Gary, IV Robert A. Gary, IV	Director	January 10, 2006
/s/ W. Brand Inlow W. Brand Inlow	Director	January 10, 2006
/s/ D. Fleet Wallace D. Fleet Wallace	Director	January 10, 2006

II-25

EXHIBIT LIST

Exhibit
Number			Exhibit
	1	.1	Form of Dealer Manager Agreement between NNN Apartment REIT, Inc. and NNN Capital Corp.
	1	.2	Form of Participating Broker-Dealer Agreement
	3	.1	Articles of Incorporation of the Registrant
	3	.2	Amended Articles of Incorporation of the Registrant
	3	.3	Bylaws of the Registrant
	3	.4	Form of Articles of Amendment and Restatement of the Registrant
	3	.5	Form of Amended and Restated Bylaws of the Registrant
	3	.6*	Form of Agreement of Limited Partnership of NNN Apartment REIT Holdings, L.P.
	4	.1	Specimen Share Certificate
	5	.1*	Opinion of Venable LLP
	8	.1*	Opinion of Hirschler Fleischer, a Professional Corporation as to Tax Matters
	10	.1	Dividend Reinvestment Plan (included as Exhibit C to the Prospectus)
	10	.2	Proposed Share Repurchase Plan (included as Exhibit D to the Prospectus)
	10	.3*	2006 Incentive Award Plan
	10	.4	Advisory Agreement between NNN Apartment REIT, Inc. and NNN Apartment REIT Advisor, LLC
	10	.5*	Form of Escrow Agreement
	23	.1*	Consent of Venable LLP (included in Exhibit 5.1)
	23	.2*	Consent of Hirschler Fleischer, a Professional Corporation (included in Exhibit 8.1)
	23	.3	Consent of Deloitte & Touche LLP
	24	.1	Power of Attorney (included on Signature Page)

*  To be filed by amendment.

EX-1.1

                                                                     EXHIBIT 1.1

                            DEALER-MANAGER AGREEMENT

                            NNN APARTMENT REIT, INC.
                        1551 N. TUSTIN AVENUE, SUITE 200
                           SANTA ANA, CALIFORNIA 92705

______, 2006

NNN Capital Corp.
1551 N. Tustin Avenue, Suite 200
Santa Ana, California  92705

   RE: DEALER-MANAGER AGREEMENT

Gentlemen:

   This letter confirms and comprises the agreement (the "Agreement") between
NNN Apartment REIT, Inc., a Maryland corporation (the "Company"), and NNN
Capital Corp., a California corporation (the "Agent"), regarding the offering
and sale by the Company (the "Offering") of up to 100,000,000 shares (the
"Shares") of the Company's common stock at an offering price of $10.00 per Share
through the Agent and other broker-dealers for whom the Agent will serve as
manager (the "Soliciting Dealers").

   l. Appointment of the Agent.

      (a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions set forth
herein, the Agent is hereby appointed and agrees to sell the Shares on a "best
efforts" basis. The Agent is authorized to enlist other members of the National
Association of Securities Dealers, Inc. ("NASD") acceptable to the Company to
sell the Shares as Soliciting Dealers.

      (b) It is understood and agreed that no sale of the Shares shall be
regarded as effective unless and until accepted by the Company. The Company
reserves the right in its sole discretion to refuse to sell any of the Shares to
any person. The Offering will terminate on the first to occur of (i) the sale of
an aggregate of 100,000,000 Shares (excluding any Shares sold pursuant to the
Company's Distribution Reinvestment Plan) or (ii) _________, 2008 (the "Offering
Termination Date"). If subscriptions for at least 300,000 Shares (the "Minimum
Offering") have not been received and accepted by the Company by ________, 2007,
none of the Shares will be sold and all funds tendered will be refunded in full
to each subscriber (plus interest and without deducting for escrow expenses) in
accordance with the Prospectus (as defined in Section 2(c)).

      (c) Subject to the performance by the Company of all the obligations to be
performed hereunder, and to the completeness and accuracy of all the
representations and warranties contained herein, the Agent hereby accepts such
agency and agrees on the terms and conditions herein set forth to use its best
efforts during the offering period to find qualified subscribers for the Shares
on the terms set forth in this Agreement and the Prospectus (as defined in
Section 2(c)).

      (d) The Agent further understands and agrees that the compensation to the
Agent for a sale of Shares described herein is conditional upon the sale of at
least the Minimum Offering and acceptance of said sales by the Company and that
the failure to sell at least the Minimum Offering by that date shall relieve the
Company or any other party of any obligation to pay the Agent for any services
rendered by the Agent in connection with the sale of the Shares under this
Agreement or otherwise.

   2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Agent that:





      (a) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland, has all
requisite authority to enter into this Agreement and has all requisite authority
to conduct its business as described in the Prospectus (as defined below).

      (b) No defaults exist in the due performance and observance of any
material obligation, term, covenant or condition of any agreement or instrument
to which the Company is a party or by which it is bound.

      (c) A registration statement with respect to the Offering has been
prepared by the Company in accordance with applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the applicable
rules and regulations of the Securities and Exchange Commission (the "SEC")
promulgated thereunder, covering the Shares. Said registration statement, which
includes a preliminary prospectus, was initially filed with the SEC on ________,
2006. Copies of such registration statement and each amendment thereto have been
or will be delivered to the Agent. (The registration statement and prospectus
contained therein, as finally amended and revised at the effective date of the
registration statement are respectively hereinafter referred to as the
"Registration Statement" and the "Prospectus," except that if the prospectus
first filed by the Company pursuant to Rule 424(b) under the Securities Act
shall differ from the Prospectus, the term "Prospectus" shall also include the
prospectus filed pursuant to Rule 424(b).)

      (d) The Registration Statement and Prospectus comply with the Securities
Act and the rules and regulations promulgated thereunder and do not contain any
untrue statements of material facts or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; provided, however, that the foregoing provisions of this Section
2(d) will not extend to such statements contained in or omitted from the
Registration Statement or Prospectus as are primarily within the knowledge of
the Agent or any of the Soliciting Dealers and are based upon information
furnished by the Agent in writing to the Company specifically for inclusion
therein.

      (e) No consent, approval, authorization or other order of any governmental
authority is required in connection with the execution or delivery by the
Company of this Agreement or the issuance and sale by the Company of the Shares,
except such as may be required under the Securities Act, rules of the NASD or
applicable state securities laws.

      (f) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against the Company at law or in equity or
before or by any federal or state commission, regulatory body or administrative
agency or other governmental body, domestic or foreign, which will have a
material adverse effect on the business or property of the Company.

      (g) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance with the terms of this Agreement
by the Company shall not conflict with or constitute a default under any
charter, bylaw, indenture, mortgage, deed of trust, lease, rule, regulation,
writ, injunction or decree of any government, governmental instrumentality or
court, domestic or foreign, having jurisdiction over the Company, except to the
extent that the enforceability of the indemnity provisions contained in Section
10 of this Agreement may be limited under applicable securities laws.

      (h) The Company has full legal right, power and authority to enter into
this Agreement and to perform the transactions contemplated hereby, except to
the extent that the enforceability of the indemnity provisions contained in
Section 10 of this Agreement may be limited under applicable securities laws.

      (i) At the time of the issuance of the Shares, the Shares will have been
duly authorized and validly issued, and upon payment therefor, will be fully
paid and nonassessable and will conform to the description thereof contained in
the Prospectus.




   3. Covenants of the Company. The Company agrees that:

      (a) It will deliver to the Agent such numbers of copies of the Prospectus
and all amendments and supplements thereto, as the Agent may reasonably request.

      (b) It will comply with all requirements of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), other federal
securities laws, applicable state securities laws and the rules and regulations
promulgated thereunder to permit the continuance of offers and sales of the
Shares in accordance with the provisions hereof and as set forth in the
Prospectus and will amend or supplement the Prospectus as may be required in
order for the Prospectus to comply with the requirements of federal and state
securities laws and regulations prior to the Offering Termination Date.

      (c) If at any time when the Prospectus is required to be delivered, any
event occurs as a result of which the Prospectus would include an untrue
statement of material fact or, in view of the circumstances under which they
were made, omit to state any material fact necessary to make the statements
therein not misleading, it will promptly notify the Agent thereof, affect the
preparation of an amended or supplemental Prospectus, as the case may be, which
will correct such statement or omission and deliver to the Agent as many copies
of such amended or supplemental Prospectus as the Agent may reasonably request.

      (d) The Company will furnish the holders of Shares ("Stockholders") with
certain reports described in the Prospectus under "Reports to Stockholders," and
will deliver to the Agent copies of each such report at the time that such
reports are furnished to the Stockholders, and such other information concerning
the Company, as the Agent may reasonably request from time to time before and
after the Offering Termination Date.

      (e) The Company will apply the net proceeds from the Offering received by
it in the manner set forth in the "Estimated Use of Proceeds of This Offering"
section of the Prospectus.

      (f) Subject to the Agent's actions and the actions of others in connection
with the Offering, the Company will comply with all requirements imposed upon it
by federal and state securities laws.

   4. Duties and Obligations of the Agent.

      (a) The Agent will serve in a "best efforts" capacity in the offering,
sale and distribution of the Shares. The Agent may offer the Shares as an agent,
but all sales shall be made by the Company acting through the Agent as an agent,
and not by the Agent as a principal. The Agent shall have no authority to
appoint any person or other entity as an agent or sub-agent of the Agent or the
Company, except to appoint Soliciting Dealers acceptable to the Company.

      (b) Neither Agent nor any other person is authorized to give any
information or make any representation other than those contained in the
Prospectus, including any supplement thereto, or in any supplemental sales
literature furnished or approved by the Company for use in making solicitations
in connection with the offer and sale of the Shares.

      (c) The Agent will limit the offering of the Shares to persons whom the
Agent has reasonable grounds to believe, and in fact believes, meet the investor
suitability standards set forth in the Prospectus and associated Subscription
Agreement.

      (d) The Agent will provide each prospective investor with a copy of the
Prospectus and any supplements thereto during the course of the Offering and
prior to the sale. The Company may also provide the Agent with certain
supplemental sales material to be used by Agent and the Soliciting Dealers in
connection with the solicitation of purchasers of the Shares. Agent will keep a
written record of all persons to whom Agent and each Soliciting Dealer provide a
copy of the Prospectus, including any supplements thereto, and/or supplemental
sales materials and provide such log to the Company upon its request. In the
event Agent elects to use such supplemental sales material, Agent agrees that
such material shall not be used in connection with the solicitation of
purchasers of the Shares unless accompanied or preceded by the Prospectus, as
then currently in effect, and as it may be amended or supplemented in the
future. Agent agrees that it will not use any sales materials other than those
either provided to Agent by the




Company or approved by the Company for use in the Offering, as set forth in
writing by the Company. The use of any other sales material is expressly
prohibited.

      (e) Prior to making any sale of the Shares, the Agent will inform the
prospective investor and his purchaser representatives, if any, of all pertinent
facts relating to the liquidity and marketability of the Shares during the term
of the investment.

      (f) In recommending the purchase or sale of the Shares, the Agent or any
person associated the Agent shall:

         (1) have reasonable grounds to believe, on the basis of information
obtained from the prospective investor concerning his investment objectives,
other investments, financial situation and needs, and any other information
known by the Agent or an associated person, that:

            (i) the prospective investor meets the investor suitability
      requirements set forth in the Prospectus;

            (ii) the prospective investor has a fair market net worth sufficient
      to sustain the risks inherent in an investment in the Company, including,
      but not limited to a total loss of his investment, lack of liquidity and
      other risks described in the Prospectus; and

            (iii) an investment in the Company is otherwise suitable for the
      prospective investor.

         (2) maintain in the Agent's files, for a period of six (6) years
following the Offering Termination Date, documents disclosing the basis upon
which the above determination of suitability was reached as to each investor.

      (g) The Agent shall not authorize any transaction in which an investor
invests in the Shares in a discretionary account without prior written approval
of the transaction by the investor.

      (h) The Agent will comply in all respects with the subscription procedures
and plan of distribution set forth in the Prospectus.

      (i) All funds received by the Agent for the sale of Shares shall be
deposited in an interest bearing escrow account denominated "ESCROW ACCOUNT FOR
THE BENEFIT OF SUBSCRIBERS FOR COMMON STOCK OF NNN APARTMENT REIT, INC.,"
established by the Company at Wachovia Bank, N.A. (the "Escrow Agent") by 12:00
p.m. (noon) of the next business day following receipt of such funds by the
Agent to be held in accordance with the terms of the Escrow Agreement, dated
________, 2006, between the Company and the Escrow Agent (the "Escrow
Agreement"). The Agent acknowledges receiving a copy of the Escrow Agreement and
agrees to be bound by the terms thereof. Until such time (if any) as the funds
held in escrow are deliverable to the Company pursuant to the Escrow Agreement,
the Agent shall, and shall cause Soliciting Dealers to, instruct subscribers to
make checks for subscriptions payable to the order of "Wachovia Bank, N.A., as
escrow agent for NNN Apartment REIT, Inc." and shall return checks made payable
to another party to the Soliciting Dealer or subscriber who submitted the check.
Thereafter, checks may be made payable to either the Escrow Agent or the
Company.

      (j) The Agent will furnish to the Company upon request a complete list of
all persons who have been offered the Shares and such persons' places of
residence and such other information reasonably requested by the Company.

      (k) The Agent will immediately bring to the attention of the Company any
circumstance or fact which causes the Agent to believe the Prospectus, any
supplements thereto, or any other literature distributed in accordance with the
Prospectus, or any information supplied by prospective investors in their
subscription materials, may be inaccurate or misleading.




      (1) The Agent shall thoroughly review all pertinent organizational
documents of the Company, receipt of which is hereby acknowledged by the Agent.

      (m) When Soliciting Dealers are used in the Offering, the Agent agrees to
use its best efforts to cause such Soliciting Dealers to comply with all the
foregoing obligations.

      (n) The Agent shall be solely responsible and liable for any commissions
or other payments due to any Soliciting Dealers.

      (o) The Agent shall offer and sell Shares only in those jurisdictions
specified in writing by the Company as jurisdictions in which all necessary
approvals have been obtained. No offers or sales shall be made in any other
states or jurisdictions.

      (p) The Agent, each Soliciting Dealer and each salesperson acting on
behalf of the Agent or a Soliciting Dealer shall be duly registered or licensed
in each jurisdiction in which it or he offers or sells the Shares.

   5. Representations and Warranties of the Agent. The Agent represents and
warrants to the Company:

      (a) The Agent has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of California, has all
requisite authority to enter into this Agreement and has all requisite authority
to conduct its business as described in the Prospectus.

      (b) This Agreement, when executed by the Agent, will have been duly
authorized and will be a valid and binding agreement of the Agent, enforceable
in accordance with its terms.

      (c) The consummation of the transactions contemplated herein and those
contemplated by the Prospectus will not result in a breach or violation of any
order, rule or regulation directed to the Agent by any court or any federal or
state regulatory body or administrative agency having jurisdiction over the
Agent or its affiliates.

      (d) The Agent is, and during the term of this Agreement will be, duly
registered as a broker-dealer pursuant to the provisions of the Exchange Act, a
broker-dealer duly registered as such in California, a member in good standing
of the NASD and a broker-dealer duly registered as such in any and all other
states or jurisdictions where offers are made by the Agent. The Agent is a
member of the NASD and will comply with all applicable laws, rules, regulations
and requirements of the Securities Act, the Exchange Act, other federal
securities laws, state securities laws and the Rules of the NASD, specifically
including, but not in any way limited to, NASD Rules 2420, 2730, 2740 and 2750.
Each Soliciting Dealer and each salesperson acting on behalf of the Agent or a
Soliciting Dealer will be registered with the NASD and duly licensed by each
state regulatory authority in each jurisdiction in which it or he will offer and
sell shares.

      (e) The Agent has reasonable grounds to believe, based on information made
available to it by the Company, that the Prospectus discloses all material facts
adequately and accurately and provides an adequate basis for evaluating an
investment in the Shares.

      (f) This Agreement, or any supplement or amendment hereto, may be filed by
the Company with the SEC and the NASD, if such should be required, and may be
filed with, and may be subject to the approval of, any federal or state
securities regulatory agencies if required.

      (g) All engagements of the Soliciting Dealers will be evidenced by written
agreement in substantially the form of Exhibit A hereto.

   6. Compensation. As compensation for services rendered by the Agent under
this Agreement, the Company agrees that it will pay to the Agent selling
commissions in an amount equal to 7.0% of the gross proceeds of the Shares, as
the case may be, sold by the Agent or the Soliciting Dealers; provided, however,
that a "purchaser," as defined below, who purchases more than 50,000 shares at
any one time through Agent or a single Soliciting Dealers will receive a
mandatory discount on the purchase price of the shares




above 50,000. The selling commissions payable to the Agent or such Soliciting
Dealers, as applicable, will be commensurately reduced. The following table
shows the discounted price per share and reduced selling commissions payable for
volume discounts:



                                                                       Price
                                                                    Commission        Per
Shares Purchased in the Transaction                                    Rate          Share
- -----------------------------------                                 ----------       -----
                                                                              
1 to 50,000......................................................      7.0%         $10.00
50,001 to 100,000................................................      6.0%          $9.90
100,001 to 200,000...............................................      5.0%          $9.80
200,001 to 500,000...............................................      4.0%          $9.70
500,001 to 750,000...............................................      3.0%          $9.60
750,001 to 1,000,000.............................................      2.0%          $9.50
1,000,001 and up.................................................      1.0%          $9.40


      For the purposes of such volume discounts, the term "purchaser" includes:

      -  an individual, his or her spouse and their children under the age of 21
         who purchase the shares for his, her or their own accounts;

      -  a corporation, partnership, association, joint-stock company, trust
         fund or any organized group of persons, whether incorporated or not;

      -  an employees' trust, pension, profit sharing or other employee benefit
         plan qualified under the federal income tax laws; and

      -  all commingled trust funds maintained by a given bank.

   The Agent solely will be liable and responsible for all compensation payable
to Soliciting Dealers. Notwithstanding the foregoing, the Company reserves the
right, in its sole discretion, to refuse to accept any or all subscriptions for
the Shares tendered by the Agent or its Soliciting Dealers and/or to terminate
the Offering at any time prior to the Offering Termination Date. In the event
that the Offering is terminated for any reason prior to the Company's acceptance
of subscription proceeds for the Minimum Offering, the Agent will be entitled to
no commission, payments or amounts whatsoever in connection with its offering or
sale of the Shares. No compensation shall be paid or issued with respect to
Shares issued pursuant to the Distribution Reinvestment Plan or the 2006
Incentive Award Plan as described in the Prospectus.

   7. Completed Sale. A sale of a Share shall be deemed to be completed under
Paragraph 6 if and only if (i) the Company has received a properly completed and
executed subscription agreement, together with payment of the full purchase
price of each purchased Share, from or on behalf of an investor who satisfies
the applicable suitability standards and minimum purchase requirements set forth
in the Registration Statement as determined by the Agent in accordance with the
provisions of this Agreement, (ii) the Company has accepted such subscription
and (iii) such investor has been admitted as a Stockholder of the Company.

   8. Expense Allowances and Reimbursements. In addition to the compensation
described in Section 6 above, the Company will pay the Agent an amount equal to
3.0% of the gross proceeds of the Shares sold by the Agent or the Agent's
Soliciting Dealers as a non-accountable marketing allowance (2.5%) to pay
expenses associated with marketing fees, wholesaling fees, expense
reimbursements, sales seminars and volume discounts to be incurred by the Agent
and accountable due diligence expense reimbursements (0.5%) to reimburse for due
diligence costs to be incurred by the Agent. No allowance shall be paid with
respect to Shares issued pursuant to the Distribution Reinvestment Plan or the
2006 Incentive Award Plan, as described in the Prospectus.

   9. Offering. The Offering of the Shares shall be at the offering price and
upon all the terms and conditions set forth in the Prospectus and the exhibits,
appendices and any supplements thereto and proceeds received from subscriptions
to purchase the Shares will be subject to the Escrow Agreement. The Agent and
the Soliciting Dealers will suspend or terminate the Offering upon notice from
the Company at




any time and will resume offering the Shares upon subsequent request of the
Company.

   10. Indemnification.

      (a) The Company will indemnify and hold harmless the Agent, Soliciting
Dealers, their officers and directors and each person, if any, who controls the
Agent or the Soliciting Dealers ("Agent Indemnified Parties") within the meaning
of Section 15 of the Securities Act from and against any losses, claims, damages
or liabilities, joint or several, to which the Agent Indemnified Parties may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (a) any untrue statement or alleged untrue statement of a
material fact contained (i) in any Registration Statement (including the
Prospectus as a part thereof) or any post-effective amendment thereto or in the
Prospectus or any amendment or supplement to the Prospectus or (ii) in any blue
sky application or other document executed by the Company or on its behalf
specifically for the purpose of qualifying any or all of the Shares for sale
under the securities laws of any jurisdiction or based upon written information
furnished by the Company under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or (b) the omission or alleged omission to state in the
Registration Statement (including the Prospectus as a part thereof) or any
post-effective amendment thereof or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (c) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus, if used prior to the effective
date of the Registration Statement, or in the Prospectus or any amendment or
supplement to the Prospectus or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and will reimburse the Agent Indemnified Parties for any
legal or other expenses reasonably incurred by the Agent Indemnified Parties in
connection with investigating or defending such loss, claim, damage, liability
or action; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of,
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company or Agent by or on behalf of the Agent or
any Soliciting Dealer specifically for use with reference to such Agent or such
Soliciting Dealer in the preparation of the Registration Statement or any such
post-effective amendment thereof, any such Blue Sky Application or any such
preliminary prospectus or the Prospectus or any such amendment thereof or
supplement thereto; and provided, further, that the Company will not be liable
in any such case if it is determined that the Agent or Soliciting Dealer was at
fault in connection with the loss, claim, damage, liability or action; and,
provided, further still, that an Agent Indemnified Party shall not be
indemnified by the Company for any losses, liabilities or expenses arising from
or out of an alleged violation of federal or state securities laws by such party
unless one or more of the following conditions are met: (a) there has been a
successful adjudication on the merits of each count involving alleged securities
law violations as to the particular indemnitee; (b) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to the particular indemnitee; or (c) a court of competent jurisdiction approves
a settlement of the claims against a particular indemnitee and finds that
indemnification of the settlement and the related costs should be made, and the
court considering the request for indemnification has been advised of the
position of the Securities and Exchange Commission and of the published position
of any state securities regulatory authority in which securities of the Company
were offered or sold as to indemnification for violations of securities laws.

      (b) The Agent will indemnify and hold harmless the Company and each person
who has signed the Registration Statement and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act (the "Company
Indemnified Parties"), from and against any losses, claims, damages or
liabilities to which any of the aforesaid parties may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (a)
any untrue statement of a material fact contained (i) in the Registration
Statement (including the Prospectus as a part thereof) or any post-effective
amendment thereof or (ii) any Blue Sky Application, or (b) the omission to state
in the Registration Statement (including the Prospectus as a part thereof) or
any post-effective amendment thereof or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (c) any untrue statement or




alleged untrue statement of a material fact contained in any preliminary
prospectus, if used prior to the effective date of the Registration Statement,
or in the Prospectus, or in any amendment or supplement to the Prospectus or the
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein in the light of the
circumstances under which they were made not misleading in each case to the
extent, but only to the extent, that such untrue statement or omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Agent specifically for use with reference to the
Agent in the preparation of the Registration Statement or any such
post-effective amendments thereof or any such Blue Sky Application or any such
preliminary prospectus or the Prospectus or any such amendment thereof or
supplement thereto or (d) any unauthorized use of sales materials or use of
unauthorized verbal representations concerning the Shares or the Offering by the
Agent and will reimburse the Company Indemnified Parties, in connection with
investigating or defending such loss, claim, damage, liability or action. This
indemnity agreement will be in addition to any liability which the Agent may
otherwise have.

      (c) Each Soliciting Dealer severally will indemnify and hold harmless the
Company, Agent and each of their directors, and each of their officers who has
signed any of the Registration Statements and each person, if any, who controls
the Company and the Agent within the meaning of Section 15 of the Securities Act
from and against any losses, claims, damages or liabilities to which the
Company, the Agent, any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (a) any untrue statement or alleged untrue statement of a material fact
contained (i) in the Registration Statement (including the Prospectus as a part
thereof) or any post-effective amendment thereof or (ii) in any Blue Sky
Application, or (b) the omission or alleged omission to state in a Registration
Statement (including the Prospectus as a part thereof) or any post-effective
amendment thereof or in any Blue Sky Application a material fact required to be
stated therein necessary to make the statements therein not misleading, or (c)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus, if used prior to the effective date of the
Registration Statement, or in the Prospectus, or in any amendment or supplement
to the Prospectus or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company or the Agent by or on behalf of such Soliciting Dealer
specifically for use with reference to such Soliciting Dealer in the preparation
of the Registration Statement or any such post-effective amendments thereof or
any such Blue Sky Application or any such preliminary prospectus or the
Prospectus or any such amendment thereof or supplement thereto, or (d) any
unauthorized use of sales materials or use of unauthorized verbal
representations concerning the Shares or the Offering by such Soliciting Dealer
and will reimburse the Company and the Agent and any such directors or officers,
or controlling person, in connection with investigating or defending any such
loss, claim, damage, liability or action. This indemnity agreement will be in
addition to any liability which such Soliciting Dealer may otherwise have.

      (d) Promptly after receipt by an indemnified party under this Section 10
of notice of a commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 10, notify in writing the indemnifying party of the commencement
thereof. The failure to so notify the indemnifying party will relieve it from
any liability under this Section 10 as to the particular item for which
indemnification is then being sought, but not from any other liability which it
may have to any indemnified party. In case any such action is brought against
any indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled, to the extent it may wish,
jointly with any other indemnifying party similarly notified, to participate in
the defense thereof, with separate counsel. Such participation shall not relieve
such indemnifying party of the obligation to reimburse the indemnified party for
reasonable legal and other expenses (subject to Section 10(e)) incurred by such
indemnified party in defending itself, except for such expenses incurred after
the indemnifying party has deposited funds sufficient to effect the settlement,
with prejudice, of the claim in respect of which indemnity is sought. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.




      (e) The indemnifying party shall pay all legal fees and expenses of the
indemnified party in the defense of such claims or actions; provided, however,
that the indemnifying party shall not be obliged to pay legal expenses and fees
to more than one law firm in connection with the defense of similar claims
arising out of the same alleged acts or omissions giving rise to such claims
notwithstanding that such actions or claims are alleged or brought by one or
more parties against more than one indemnified party. If such claims or actions
are alleged or brought against more than one indemnified party, then the
indemnifying party shall only be obliged to reimburse the expenses and fees of
the one law firm that has been selected by a majority of the indemnified parties
against which such action is finally brought; and in the event a majority of
such indemnified parties is unable to agree on which law firm for which expenses
or fees will be reimbursable by the indemnifying party, then payment shall be
made to the first law firm of record representing an indemnified party against
the action or claim. Such law firm shall be paid only to the extent of services
performed by such law firm and no reimbursement shall be payable to such law
firm on account of legal services performed by another law firm.

      (f) The indemnity agreements contained in this Section 10 shall remain
operative and in full force and effect regardless of (a) any investigation made
by or on behalf of any Soliciting Dealer, or any person controlling any
Soliciting Dealer or by or on behalf of the Company, the Agent or any officer or
director thereof, or by or on behalf of the Company or the Agent, (b) delivery
of any Shares and payment therefor and (c) any termination of this Agreement. A
successor of any Soliciting Dealer or of any of the parties to this Agreement,
as the case may be, shall be entitled to the benefits of the indemnity
agreements contained in this Section 10.

   11. Compliance. All actions, direct or indirect, by the Agent, its agents,
employees, Soliciting Dealers and affiliates, shall conform to (i) requirements
applicable to broker/dealers under federal and applicable state securities laws,
rules and regulations and (ii) applicable requirements and rules of the NASD.

   12. Representations and Agreements to Survive Sale and Payment. Except as the
context otherwise requires, all representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements at and as of the Offering Termination Date,
and such representations, warranties and agreements by the Agent or the Company,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Soliciting Dealer, or any person
controlling any Soliciting Dealer or by or on behalf of the Company, the Agent
or any officer or director thereof, or by or on behalf of the Company or the
Agent, and shall survive the sale of, and payment for, the Shares.

   13. Costs of Offering. Except for the compensation payable to the Agent
described in Section 6 and the allowances and reimbursements described in
Section 8, which are the sole obligations of the Company, the Agent will pay all
of its own costs and expenses, including, but not limited to, all expenses
necessary for the Agent to remain in compliance with any applicable federal,
state or NASD laws, rules or regulations in order to participate in the Offering
as a broker-dealer, and the fees and costs of the Agent's counsel. The Company
agrees to pay all other expenses incident to the performance of its obligations
hereunder, including all escrow fees, expenses incident to filings with federal
and state regulatory authorities and to the registration of the Shares under
federal and state securities laws, including fees and disbursements of the
Company's counsel and accountants, and all costs of reproduction and
distribution of the Prospectus and any amendment or supplement thereto.

   14. Termination. This Agreement is terminable by either party at any time
upon written notice to the other. Such termination shall not affect the
indemnification agreement set forth in Section 10.

   15. Construction. This Agreement shall be governed by, subject to and
construed in accordance with, the laws of the State of California without regard
to conflict of law provisions.

   16. Severability. If any portion of this Agreement shall be held invalid or
inoperative, then so far as is reasonable and possible the remainder of this
Agreement shall be considered valid and operative and effect shall be given the
intent manifested by the portion held invalid or inoperative.




   17. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and together shall constitute one and
the same instrument.

   18. Modification or Amendment. This Agreement may not be modified or amended
except by written agreement executed by the parties hereto.

   19. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be sufficiently given or made if sent by United
States mail, first-class, postage prepaid, addressed or sent by facsimile as
follows:

                         IF TO THE AGENT:

                         NNN Capital Corp.
                         1551 N. Tustin Avenue
                         Suite 200
                         Santa Ana, California  92705
                         Facsimile: (714) 667-6843
                         Attn: President

                         IF TO THE COMPANY:

                         NNN Apartment REIT, Inc.
                         1551 N. Tustin Avenue
                         Suite 200
                         Santa Ana, California  92705
                         Facsimile: (714) 667-8252
                         Attn:  President

The notice shall be deemed to be received on the date of its actual receipt by
the party entitled thereto.

   20. Parties. This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto, the controlling persons referred to in Section 10
hereof and their respective successors, legal representative, heirs and assigns,
and no other person shall have or be construed to have any legal or equitable
right, remedy or claim under, in respect of, or by virtue of, this Agreement or
any provision herein contained.

   21. Delay. Except as expressly provided otherwise in this Agreement, neither
the failure nor any delay on the part of any party to this Agreement to exercise
any right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall a waiver of any right remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy, power,
or privilege with respect to any subsequent occurrence.

   22. Recovery of Costs. If any legal action or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the substantially prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
(and any additional proceeding for the enforcement of a judgment) in addition to
any other relief to which it or they may be entitled.

   23. No Partnership. Nothing in this Agreement shall be construed or
interpreted to constitute the Agent as in association with or in partnership
with the Company, and instead, this Agreement only shall constitute the Agent as
a broker-dealer authorized by the Company to sell and to manage the sale by
others of the Shares according to the terms set forth in the Registration
Statement, the Prospectus or this Agreement.

   24. No Third Party Beneficiaries. Except as expressly provided otherwise in
this Agreement, no provision of this Agreement is intended to be for the benefit
of any person or entity not a party to this Agreement, and no third party shall
be deemed to be a beneficiary of any provision of this Agreement.




Further, no third party shall, by virtue of any provision of this Agreement,
have a right of action or an enforceable remedy against either party to this
Agreement.

   25. Entire Agreement. This Agreement contains the entire understanding
between the parties hereto and supersedes any prior understandings or written or
oral agreements between them respecting the subject matter hereof.

   If the foregoing correctly sets forth the understanding between the Agent and
the Company, as issuer, please so indicate in the space provided below for that
purpose, and return one of the signed copies of this Agreement to the Company in
the envelope provided for this purpose, hereupon this Agreement shall constitute
a binding agreement among us.

                                        Very truly yours,

                                        NNN Apartment REIT, INC.,
                                        a Maryland corporation

                                        By:
                                           -------------------------------------
                                           Louis J. Rogers, President




AGREED AND ACCEPTED:

NNN Capital Corp., a California corporation

By:
   ---------------------------------

Name:  Kevin K. Hull

Title:  President and Chief Executive Officer

EX-1.2

                                                                     EXHIBIT 1.2

                     PARTICIPATING BROKER-DEALER AGREEMENT

                               NNN CAPITAL CORP.
                           a California corporation,
                             Santa Ana, California

                     PARTICIPATING BROKER-DEALER AGREEMENT
                     For Shares of Common Stock Offered By
                            NNN APARTMENT REIT, INC.

__________________, 2006

Ladies and Gentlemen:

   The undersigned, NNN Capital Corp., a California corporation (the "Dealer
Manager"), has entered into a Dealer-Manager Agreement dated ______, 2006 (the
"Selling Agreement") with NNN APARTMENT REIT, Inc., a Maryland corporation (the
"Company"), with respect to the offer and sale of up to 100,000,000 shares of
common stock of the Company (the "Shares"). The terms of the offering (the
"Offering") are set forth in the Company's Prospectus dated ________, 2006 (with
all exhibits, appendices, addenda and supplements thereto, collectively the
"Prospectus").

   The Offering will terminate on the first to occur of (i) the sale of an
aggregate of 100,000,000 Shares (excluding any Shares sold pursuant to the
Company's Distribution Reinvestment Plan) and (ii) __________, 2008 (the
"Offering Termination Date"). If subscriptions for at least 300,000 Shares (the
"Minimum Offering") have not been received and accepted by the Company prior to
__________, 2007, none of the Shares will be sold and all funds tendered for the
purchase of Shares will be refunded in full to each subscriber (plus interest
and without deduction for escrow expenses) in accordance with the Prospectus.
Further, the Company may terminate the Offering prior to the Offering
Termination Date at any time in its sole discretion.

   You are invited to become one of the broker-dealers permitted to solicit
subscriptions for the Shares ("Soliciting Dealers"). By your confirmation
hereof, you agree to act in such capacity and to use your best efforts, in
accordance with the following terms and conditions, to sell the Shares.

   1. You hereby confirm that you are (i) a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD"), (ii) qualified and
duly registered to act as a broker-dealer within all states in which you will
sell the Shares, (iii) a broker-dealer duly registered with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and (iv) hereby required and will maintain all such
registrations and qualifications in good standing for the duration of your
involvement in the Offering. Further, you confirm that all persons who undertake
to offer and sell the Shares on your behalf are, and at all applicable times
during the Offering will be, properly registered and/or licensed with the NASD
and all applicable state securities regulators.

   2. (a) You hereby agree to solicit in accordance with the Rules of the NASD,
specifically including, but not in any way limited to, NASD Rules 2420, 2730,
2740 and 2750.

      (b) You hereby agree to solicit, as an independent contractor and not as
the agent of the Dealer Manager or of the Company (or their affiliates), persons
acceptable to the Company to purchase the Shares pursuant to the subscription
agreement in the form attached to the Prospectus (the "Subscription Agreement")
and in accordance with the terms of the Prospectus. You hereby agree to
diligently make inquiries as required by this Agreement, as set forth in the
Prospectus, and as required by all applicable laws of all prospective investors
in order to ascertain whether a purchase of the Shares is suitable for each such
investor. Further, all funds received by you with respect to any Subscription
Agreement shall be transmitted to the Dealer Manager by 12:00 p.m. (noon) on the
next business day following receipt thereof. The Dealer Manager will be
responsible for the prompt deposit of funds for purchase of Shares with Wachovia
Bank, N.A., as escrow agent with such funds held in escrow (the "Escrow
Account") pursuant to an escrow agreement between the Company and Wachovia Bank,
N.A. No Subscription Agreement shall be effective unless and until accepted by
the Company in its sole discretion.





      (c) You understand that the offering of Shares is made on a
"minimum-maximum" basis, as described in the Prospectus. You further understand
and agree that payment of compensation to you for the sale of Shares is
conditioned upon sale of at least 300,000 Shares ("the Minimum Offering") and
acceptance of said sales by the Company in its sole discretion. The failure to
sell at least the Minimum Offering shall relieve the Dealer Manager of any
obligation to pay you for any services rendered by you in connection with the
sale of Shares under this Agreement or otherwise.

      (d) You agree that prior to participating in the Offering you will have
reasonable grounds to believe, based on information made available to you by the
Dealer Manager and/or the Company through the Prospectus, that all material
facts are adequately and accurately disclosed in the Prospectus and provide a
basis for evaluating an investment in the Company and the Shares.

      (e) You agree not to rely upon the efforts of the Dealer Manager, which is
affiliated with the Company, in determining whether the Company has adequately
and accurately disclosed all material facts upon which to provide a basis for
evaluating the Company to the extent required by federal or state laws or the
NASD. You further agree to conduct your own investigation to make that
determination independent of the efforts of the Dealer Manager.

      (f) You agree not to execute any sale of the Shares in an account over
which you have discretionary authority to make investments without prior written
approval of the transaction by the owner of the account.

      (g) You agree to retain in your records and make available to the Dealer
Manager and to the Company for a period of at least six (6) years following the
Offering Termination Date, information establishing that each investor who
purchases the Shares pursuant to a Subscription Agreement solicited by you is
within the permitted class of investors under the requirements of the
jurisdiction in which such purchaser is a resident and the suitability standards
set forth in the Prospectus and the Subscription Agreement.

      (h) All subscriptions solicited by you will be strictly subject to
confirmation by the Dealer Manager and acceptance thereof by the Company in its
sole discretion. The Dealer Manager and the Company reserve the right in their
sole and absolute discretion to reject any such subscription and to accept or
reject subscriptions in the order of their receipt by the Company or otherwise.
Neither you nor any other person is authorized to give any information or make
any representation other than those contained in the Prospectus or in any
supplemental sales literature furnished by the Dealer Manager or the Company for
use in making solicitations in connection with the offer and sale of the Shares.

      (i) Upon release by the Dealer Manager, you may offer the Shares at the
offering price set forth in the Prospectus, subject to the terms and conditions
thereof.

      (j) The Dealer Manager will provide you with such number of copies of the
Prospectus, and such number of copies of amendments and supplements thereto as
you may reasonably request. The Dealer Manager may provide you with certain
supplemental sales material to be used by you in connection with the
solicitation of purchasers of the Shares. You will keep a written record of all
persons to whom you provide a copy of the Prospectus and/or supplemental sales
materials and provide such log to the Company or the Dealer Manager upon
request. In the event you elect to use such supplemental sales material, you
agree that such material shall not be used in connection with the solicitation
of purchasers of the Shares unless accompanied or preceded by the Prospectus, as
then currently in effect, and as it may be amended or supplemented in the
future. You agree that you will not use any sales materials other than those
provided to you by the Company or approved by the Company for use in the
Offering, as set forth in writing by the Company. The use of any other sales
material is expressly prohibited.

      (k) The Dealer Manager shall have full authority to take such action as it
may deem advisable with respect to all matters pertaining to the Offering. The
Dealer Manager shall be under no liability to you except for lack of good faith
and for obligations expressly assumed by it in this Participating Broker-Dealer
Agreement. Nothing contained in this Section is intended to operate as, and the
provisions of this Section shall not constitute, a waiver by you of compliance
with any provision of the Securities Act of 1933, as amended (the "Securities
Act"), the Exchange Act, other applicable federal securities laws, applicable
state securities laws, the rules and regulations promulgated thereunder and the
rules of the NASD.

      (l) Except as provided in the "Plan of Distribution" section of the
Prospectus, and in consideration of your services hereunder, the Dealer Manager
will pay you compensation (collectively, "Compensation") as follows: (i) up to
7.0% of the gross proceeds from the sale of Shares sold by you ("Selling
Commission"), (ii) up to 0.5% of the gross proceeds from the sale of Shares sold
by you as a non-accountable marketing allowance, and (iii) up to 0.5% of the
gross proceeds from the sale of Shares sold by you for reimbursement of
accountable bona fide due diligence expenses; provided, however, that a
"purchaser," as defined below, who



                                       2


purchases more than 50,000 shares at any one time through you will receive a
mandatory discount on the purchase price of the shares above 50,000. The Selling
Commission payable to you will be commensurately reduced. The following table
shows the discounted price per share and reduced selling commissions payable for
volume discounts:



                                                                       Price
                                                                    Commission        Per
Shares Purchased in the Transaction                                    Rate          Share
- -----------------------------------                                 ----------       -----
                                                                              
1 to 50,000......................................................      7.0%         $10.00
50,001 to 100,000................................................      6.0%          $9.90
100,001 to 200,000...............................................      5.0%          $9.80
200,001 to 500,000...............................................      4.0%          $9.70
500,001 to 750,000...............................................      3.0%          $9.60
750,001 to 1,000,000.............................................      2.0%          $9.50
1,000,001 and up.................................................      1.0%          $9.40


For the purposes of such volume discounts, the term "purchaser" includes:

      -  an individual, his or her spouse and their children under the age of 21
         who purchase the shares for his, her or their own accounts;

      -  a corporation, partnership, association, joint-stock company, trust
         fund or any organized group of persons, whether incorporated or not;

      -  an employees' trust, pension, profit sharing or other employee benefit
         plan qualified under the federal income tax laws; and

      -  all commingled trust funds maintained by a given bank.

      No Compensation of any kind shall be paid with respect to Shares issued
pursuant to the Company's Distribution Reinvestment Plan, or the 2006 Incentive
Award Plan, as described in the Prospectus. Payment of the Compensation shall be
subject to the following conditions:

         (i) No Compensation will be payable with respect to any subscriptions
      for Shares which are rejected by the Company or the Dealer Manager, or
      with respect to any subscriptions for Shares received subsequent to the
      termination of the Offering.

         (ii) No Compensation will be payable unless or until the Minimum
      Offering has been sold by the Dealer Manager and the Soliciting Dealers.

         (iii) No Compensation will be payable to you with respect to any sale
      of the Shares by you unless and until such time as the Company has
      received (A) the total proceeds of any such sale from the Escrow Account
      and the Dealer Manager has received from the Company the aggregate amount
      of Compensation to which it is entitled and (B) a completed and executed
      Subscription Agreement from the investor who satisfies the suitability
      standards and minimum purchase requirements set forth in the Prospectus.

   Except as otherwise provided herein, all expenses incurred by you in the
performance of your obligations hereunder, including, but not limited to,
expenses related to the Offering and any attorneys' fees, shall be at your sole
cost and expense, and the foregoing shall apply notwithstanding the fact that
the Offering is not consummated for any reason.

   Once Compensation becomes payable, it will be paid weekly or as otherwise
determined by the Dealer Manager in its sole discretion; provided, however,
Compensation will be paid no less frequently than monthly.

      (m) For the sale of Shares, you will instruct all prospective investors to
make their checks payable to "Wachovia Bank, N.A., as escrow agent for NNN
Apartment REIT, Inc." You agree to be bound by the terms of the Escrow Agreement
dated as of _______, 2006 between the Company and Wachovia Bank, N.A.



                                       3


      (n) You agree that in recommending to a prospective investor the purchase
of the Shares, you will:

         (i) Have reasonable grounds to believe, on the basis of information
      obtained from the prospective investor concerning his investment
      objectives, other investments, financial situation and needs, and any
      other information known by you, that:

            (A) The prospective investor meets the investor suitability
      standards set forth in the Prospectus;

            (B) The prospective investor is or will be in a financial position
      appropriate to enable him to realize to a significant extent the benefits
      described in the Prospectus;

            (C) The prospective investor has a fair market net worth sufficient
      to sustain the risks inherent in the investment, including loss of
      investment and lack of liquidity; and

            (D) The investment is otherwise suitable for the prospective
      investor, and

         (ii) Maintain in your files for six (6) years following the Offering
      Termination Date information describing the basis upon which the
      determination of suitability was reached as to each investor.

      (o) You agree that, prior to accepting a subscription for the Shares, you
will inform the prospective investor of all pertinent facts relating to the
illiquidity and lack of marketability of the Shares, as appropriate, during the
term of the investment.

      (p) You hereby undertake and agree to comply with all obligations
applicable to you under all applicable laws, rules and regulations, including
those set forth by the NASD.

   3. This Agreement may be terminated by the Dealer Manager at any time upon
written notice to you.

   4. In soliciting persons to acquire the Shares, you agree to comply with any
applicable requirements of the Securities Act, the Exchange Act, other
applicable federal securities laws, applicable state securities laws, the rules
and regulations promulgated thereunder and the rules of the NASD and, in
particular, you agree that you will not give any information or make any
representations other than those contained in the Prospectus and in any
supplemental sales literature furnished to you by the Dealer Manager for use in
making such solicitations.

   5. It is understood and agreed that under no circumstances will you engage in
any activities hereunder in any state other than those for which permission has
been granted by the Dealer Manager to you, as evidenced by written
acknowledgment by the Dealer Manager that such state has been cleared for offer
and sale activity.

   6. Nothing contained herein shall constitute the Soliciting Dealers, or any
of them, as an association, partnership, unincorporated business, or other
separate entity. The Dealer Manager shall be under no liability to make any
payment to you except out of the funds received by it from the Company as
hereinabove provided, and the Dealer Manager shall not be under any liability
for, or in respect of the value or validity of the Subscription Agreements, the
Shares, or the performance by any one of any agreement on its part, or for, or
in respect of any matter connected with, this Agreement, except for lack of good
faith by the Dealer Manager, and for obligations expressly assumed by the Dealer
Manager herein. You agree that the Company shall have no liability or obligation
to you for Compensation hereunder and you shall look solely to the Dealer
Manager for Compensation.

   7. Under the Selling Agreement, a copy of which you acknowledge receiving,
the Company has agreed to indemnify the Dealer Manager, the Soliciting Dealers,
and each person, if any, who controls the Dealer Manager or Soliciting Dealers
(within the meaning of the Securities Act and the Exchange Act) against certain
liabilities under the Securities Act, the Exchange Act, other applicable federal
securities laws, applicable state securities laws and the rules and regulations
promulgated thereunder. Each Soliciting Dealer agrees to indemnify the Dealer
Manager, the Company, its officers, directors and certain other persons to the
same extent and in the same manner as the Dealer Manager has agreed to indemnify
the Company, its officers, directors and certain other persons as provided in
Section 10 of the Selling Agreement and to indemnify each other Soliciting
Dealer to the same extent and in the same manner as such Soliciting Dealer
agrees to indemnify the Dealer Manager, the Company, its officers, directors and
certain other persons. In the execution of the Selling Agreement, the Dealer
Manager shall be deemed to have acted as a representative for each of the
Soliciting Dealers, and the Soliciting Dealers shall be deemed to be in privity
of contract with the Company for purposes of this Section 7.

   8. All representations, warranties, covenants and agreements of the Dealer
Manager and each Soliciting Dealer contained herein shall survive the delivery,
execution and closing thereof.


                                       4


   9. This Agreement will be governed by, subject to and construed in accordance
with the laws of the State of California. This Agreement constitutes the entire
understanding between the parties hereto and supersedes any prior understandings
or written or oral agreements between them respecting the subject matter hereof.

   10. Any notice from the Dealer Manager to you as Soliciting Dealer shall be
deemed to have been fully given if mailed or sent to you by facsimile at your
address set forth below.

   11. If any portion of this Agreement shall be held invalid or inoperative,
then so far as is reasonable and possible the remainder of this Agreement shall
be considered valid and operative and effect shall be given the intent
manifested by the portion held invalid or inoperative.


                                       5


   Please confirm this Agreement to solicit persons to acquire the Shares on the
foregoing terms and conditions by signing and returning the form enclosed
herewith.

                                        Very truly yours,

                                        NNN CAPITAL CORP.

                                        By:
                                           -------------------------------------

                                        Name: Kevin K. Hull

                                        Title: President and Chief Executive
                                               Officer



                                       6


NNN CAPITAL CORP.
1551 N. Tustin Avenue, Suite 200
Santa Ana, California  92705

   Re: NNN Apartment REIT Inc. - Offering of Shares of Common Stock

Gentlemen:

   The undersigned confirms its agreement to act as a Soliciting Dealer as
referred to in the foregoing Participating Broker-Dealer Agreement subject to
the terms and conditions of such agreement. The undersigned confirms that it is
a member in good standing of the National Association of Securities Dealers,
Inc., and is qualified under federal law and the laws of the states in which
sales are to be made by the undersigned to act as a broker-dealer.

Dated:              , 2006
      --------------                    ----------------------------------------
                                        (Print Name of Firm)


                                        By:
                                           -------------------------------------
                                                (Authorized Representative)

                                        Address:
                                                --------------------------------
                                                --------------------------------
                                                --------------------------------
                                        Phone:
                                                --------------------------------
                                        Facsimile:
                                                  ------------------------------

                                       7

EX-3.1

                                                                     EXHIBIT 3.1

                            NNN APARTMENT REIT, INC.

                            ARTICLES OF INCORPORATION

THIS IS TO CERTIFY THAT:

          FIRST: The undersigned, Sharon A. Kroupa, whose address is c/o Venable
LLP, Suite 1800, Two Hopkins Plaza, Baltimore, Maryland 21201, being at least 18
years of age, does hereby form a corporation under the general laws of the State
of Maryland.

          SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is:

                            NNN Apartment REIT, Inc.

          THIRD: The Corporation is formed for the purpose of carrying on any
lawful business.

          FOURTH: The address of the principal office of the Corporation in this
State is c/o The Corporation Trust Incorporated, 300 East Lombard Street,
Baltimore, Maryland 21202.

          FIFTH: The name and address of the resident agent of the Corporation
are The Corporation Trust Incorporated, 300 East Lombard Street, Baltimore,
Maryland 21202. The resident agent is a Maryland corporation.

          SIXTH: The total number of shares of stock which the Corporation has
authority to issue is 1,000 shares, $.01 par value per share, of common stock.
The aggregate par value of all authorized shares having a par value is $10.00.
The Board of Directors, with the approval of a majority of the entire Board and
without any action by the stockholders of the Corporation, may amend the charter
from time to time to increase or decrease the aggregate number of shares of
stock or the number of shares of stock of any class or series that the
Corporation has authority to issue.

          SEVENTH: The Corporation shall have a board of seven directors unless
the number is increased or decreased in accordance with the Bylaws of the
Corporation. However, the number of directors shall never be less than the
minimum number required by the Maryland General Corporation Law. The initial
directors are:

                                 Louis J. Rogers
                               Stanley J. Olander

                                STATE OF MARYLAND

I hereby certify that this is a true and complete copy of the 4 page document on
file in this office. DATED: December 21, 2005.

                                      SEAL

                  STATE DEPARTMENT OF ASSESSMENTS AND TAXATION


BY:                      , Custodian.
    ---------------------



                                   Mark Gamble
                               Robert A. Gary, IV
                                 W. Brand Inlow
                                D. Fleet Wallace
                                Glenn W. Bunting

          EIGHTH: (a) The Corporation reserves the right to make any amendment
of the charter, now or hereafter authorized by law, including any amendment
which alters the contract rights, as expressly set forth in the charter, of any
shares of outstanding stock.

               (b) The Board of Directors of the Corporation may authorize the
issuance from time to time of shares of its stock of any class, whether now or
hereafter authorized, or securities convertible into shares of its stock of any
class, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable, subject to such restrictions or limitations, if
any, as may be set forth in the Bylaws of the Corporation.

               (c) The Board of Directors of the Corporation may, by articles
supplementary, classify or reclassify any unissued stock from time to time by
setting or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of the stock.

          NINTH: No holder of shares of stock of any class shall have any
preemptive right to subscribe to or purchase any additional shares of any class,
or any bonds or convertible securities of any nature; provided, however, that
the Board of Directors may, in authorizing the issuance of shares of stock of
any class, confer any preemptive right that the Board of Directors may deem
advisable in connection with such issuance.

          TENTH: To the maximum extent that Maryland law in effect from time to
time permits limitation of the liability of directors and officers, no director
or officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages. Neither the amendment nor repeal of this
Article, nor the adoption or amendment of any other provision of the charter or
Bylaws inconsistent with this Article, shall apply to or affect in any respect
the applicability of the preceding sentence with respect to any act or failure
to act which occurred prior to such amendment, repeal or adoption.

          IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge the same to be my act on this 20th day of December, 2005.


                                        /s/ Sharon A. Kroupa
                                        ----------------------------------------
                                        Sharon A. Kroupa


                                        2

EX-3.2

                                                                     EXHIBIT 3.2

                            NNN APARTMENT REIT, INC.

                        AMENDED ARTICLES OF INCORPORATION

THIS IS TO CERTIFY THAT:

     FIRST: The undersigned, Sharon A. Kroupa, whose address is c/o Venable LLP,
Suite 1800, Two Hopkins Plaza, Baltimore, Maryland 21201, being at least
eighteen (18) years of age, being the sole incorporator of NNN Apartment REIT,
Inc., and acting in that capacity prior to the organization meeting of the Board
of Directors of the corporation, hereby adopts Amended Articles of Incorporation
of NNN Apartment REIT, Inc., a corporation formed under the general laws of the
State of Maryland as follows.

     SECOND:The name of the corporation (which is hereinafter called the
"Corporation") is:

                            NNN Apartment REIT, Inc.

     THIRD: The Corporation is formed for the purpose of carrying on any lawful
business.

     FOURTH:The address of the principal office of the Corporation in this State
is c/o The Corporation Trust Incorporated, 300 East Lombard Street, Baltimore,
Maryland 21202.

     FIFTH: The name and address of the resident agent of the Corporation are
The Corporation Trust Incorporated, 300 East Lombard Street, Baltimore, Maryland
21202. The resident agent is a Maryland corporation.

     SIXTH: The total number of shares of stock which the Corporation has
authority to issue is 100,000 shares, $.01 par value per share, of common stock.
The aggregate par value of all authorized shares having a par value is $1,000.
The Board of Directors, with the approval of a majority of the entire Board and
without any action by the stockholders of the Corporation, may amend the charter
from time to time to increase or decrease the aggregate number of shares of
stock or the number of shares of stock of any class or series that the
Corporation has authority to issue.

     SEVENTH: The Corporation shall have a board of seven directors unless the
number is increased or decreased in accordance with the Bylaws of the
Corporation. However, the number of directors shall never be less than the
minimum number required by the Maryland General Corporation Law. The initial
directors are:


- --------------------------------------------------------------------------------
                                STATE OF MARYLAND

I hereby certify that this is a true and complete copy of the 4 page document on
file in this office. DATED: December 28, 2005.

                                      SEAL
                  STATE DEPARTMENT OF ASSESSMENTS AND TAXATION

BY: /s/ Ann Custis, Custodian.
    --------------------------

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



                                 Louis J. Rogers
                               Stanley J. Olander
                                   Mark Gamble
                               Robert A. Gary, IV
                                 W. Brand Inlow
                                D. Fleet Wallace
                                Glenn W. Bunting

     EIGHTH:(a) The Corporation reserves the right to make any amendment of the
charter, now or hereafter authorized by law, including any amendment which
alters the contract rights, as expressly set forth in the charter, of any shares
of outstanding stock.

          (b) The Board of Directors of the Corporation may authorize the
issuance from time to time of shares of its stock of any class, whether now or
hereafter authorized, or securities convertible into shares of its stock of any
class, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable, subject to such restrictions or limitations, if
any, as may be set forth in the Bylaws of the Corporation.

          (c) The Board of Directors of the Corporation may, by articles
supplementary, classify or reclassify any unissued stock from time to time by
setting or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of the stock.

     NINTH: No holder of shares of stock of any class shall have any preemptive
right to subscribe to or purchase any additional shares of any class, or any
bonds or convertible securities of any nature; provided, however, that the Board
of Directors may, in authorizing the issuance of shares of stock of any class,
confer any preemptive right that the Board of Directors may deem advisable in
connection with such issuance.

     TENTH: To the maximum extent that Maryland law in effect from time to time
permits limitation of the liability of directors and officers, no director or
officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages. Neither the amendment nor repeal of this
Article, nor the adoption or amendment of any other provision of the charter or
Bylaws inconsistent with this Article, shall apply to or affect in any respect
the applicability of the preceding sentence with respect to any act or failure
to act which occurred prior to such amendment, repeal or adoption.

     IN WITNESS WHEREOF, I have signed these Amended Articles of Incorporation
and acknowledge the same to be my act on this 28th day of December, 2005.



                                             /s/ Sharon A. Kroupa
                                             ----------------------------------
                                             Sharon A. Kroupa


                                       2

EX-3.3

                                                                     EXHIBIT 3.3

                            NNN APARTMENT REIT, INC.

                                     BYLAWS

                                    ARTICLE I

                                     OFFICES

          Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
in the State of Maryland shall be located at such place as the Board of
Directors may designate.

          Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices, including a principal executive office, at such places as the Board of
Directors may from time to time determine or the business of the Corporation may
require.

                                   ARTICLE II

                            MEETINGS OF STOCKHOLDERS

          Section 1. PLACE. All meetings of stockholders shall be held at the
principal executive office of the Corporation or at such other place as shall be
set by the Board of Directors and stated in the notice of the meeting.

          Section 2. ANNUAL MEETING. An annual meeting of the stockholders for
the election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of June in each year.

          Section 3. SPECIAL MEETINGS. The chairman of the board, president,
chief executive officer or Board of Directors may call special meetings of the
stockholders. Special meetings of stockholders shall also be called by the
secretary of the Corporation upon the written request of the holders of shares
entitled to cast not less than a majority of all the votes entitled to be cast
at such meeting. Such request shall state the purpose of such meeting and the
matters proposed to be acted on at such meeting. The secretary shall inform such
stockholders of the reasonably estimated cost of preparing and mailing notice of
the meeting and, upon payment to the Corporation by such stockholders of such
costs, the secretary shall give notice to each stockholder entitled to notice of
the meeting.

          Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail, by presenting it to such stockholder personally, by leaving it at the
stockholder's residence or usual



place of business or by any other means permitted by Maryland law. If mailed,
such notice shall be deemed to be given when deposited in the United States mail
addressed to the stockholder at the stockholder's address as it appears on the
records of the Corporation, with postage thereon prepaid.

          Subject to the provisions of these Bylaws, any business of the
Corporation may be transacted at an annual meeting of stockholders without being
specifically designated in the notice, except such business as is required by
any statute to be stated in such notice. No business shall be transacted at a
special meeting of stockholders except as specifically designated in the notice.

          Section 5. ORGANIZATION AND CONDUCT. Every meeting of stockholders
shall be conducted by an individual appointed by the Board of Directors to be
chairman of the meeting or, in the absence of such appointment, by the chairman
of the board or, in the case of a vacancy in the office or absence of the
chairman of the board, by one of the following officers present at the meeting:
the vice chairman of the board, if there be one, the president, the vice
presidents in their order of rank and seniority, or, in the absence of such
officers, a chairman chosen by the stockholders by the vote of a majority of the
votes cast by stockholders present in person or by proxy. The secretary, or, in
the secretary's absence, an assistant secretary, or in the absence of both the
secretary and assistant secretaries, a person appointed by the Board of
Directors or, in the absence of such appointment, a person appointed by the
chairman of the meeting shall act as secretary. In the event that the secretary
presides at a meeting of the stockholders, an assistant secretary, or in the
absence of assistant secretaries, an individual appointed by the Board of
Directors or the chairman of the meeting, shall record the minutes of the
meeting. The order of business and all other matters of procedure at any meeting
of stockholders shall be determined by the chairman of the meeting. The chairman
of the meeting may prescribe such rules, regulations and procedures and take
such action as, in the discretion of such chairman, are appropriate for the
proper conduct of the meeting, including, without limitation, (a) restricting
admission to the time set for the commencement of the meeting; (b) limiting
attendance at the meeting to stockholders of record of the Corporation, their
duly authorized proxies and other such individuals as the chairman of the
meeting may determine; (c) limiting participation at the meeting on any matter
to stockholders of record of the Corporation entitled to vote on such matter,
their duly authorized proxies and other such individuals as the chairman of the
meeting may determine; (d) limiting the time allotted to questions or comments
by participants; (e) determining when the polls should be opened and closed; (f)
maintaining order and security at the meeting; (g) removing any stockholder or
any other individual who refuses to comply with meeting procedures, rules or
guidelines as set forth by the chairman of the meeting; and (h) concluding a
meeting or recessing or adjourning the meeting to a later date and time and at a
place announced at the meeting. Unless otherwise determined by the chairman of
the meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.

          Section 6. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting on any matter shall constitute a quorum; but
this section shall not affect any requirement under any statute or the charter
of the Corporation for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the stockholders,
the


                                       2



chairman of the meeting shall have the power to adjourn the meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at the meeting. At such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally notified.

          The stockholders present either in person or by proxy, at a meeting
which has been duly called and convened, may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.

          Section 7. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called and
at which a quorum is present shall be sufficient to approve any other matter
which may properly come before the meeting, unless more than a majority of the
votes cast is required by statute or by the charter of the Corporation. Unless
otherwise provided by statute or by the charter, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of stockholders. Voting on any question or in any election may
be viva voce unless the chairman of the meeting shall order that voting be by
ballot.

          Section 8. PROXIES. A stockholder may cast the votes entitled to be
cast by the shares of stock owned of record by the stockholder in person or by
proxy executed by the stockholder or by the stockholder's duly authorized agent
in any manner permitted by law. Such proxy or evidence of authorization of such
proxy shall be filed with the secretary of the Corporation before or at the
meeting. No proxy shall be valid more than eleven months after its date unless
otherwise provided in the proxy.

          Section 9. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
Corporation registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee thereof, as the case may be, or a proxy
appointed by any of the foregoing individuals, unless some other person who has
been appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his or her name as such fiduciary, either
in person or by proxy.

          Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding shares
at any given time.


                                       3



          The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.

          Section 10. INSPECTORS. The Board of Directors, in advance of any
meeting, may, but need not, appoint one or more individual inspectors or one or
more entities that designate individuals as inspectors to act at the meeting or
any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the Board of
Directors in advance of the meeting or at the meeting by the chairman of the
meeting. The inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. Each such report
shall be in writing and signed by him or her or by a majority of them if there
is more than one inspector acting at such meeting. If there is more than one
inspector, the report of a majority shall be the report of the inspectors. The
report of the inspector or inspectors on the number of shares represented at the
meeting and the results of the voting shall be prima facie evidence thereof.

          Section 11. TELEPHONE MEETINGS. The Board of Directors or chairman of
the meeting may permit stockholders to participate in meetings of the
stockholders by means of a conference telephone or other communications
equipment by which all persons participating in the meeting can hear each other
at the same time. Participation in a meeting by these means constitutes presence
in person at the meeting.

          Section 12. CONTROL SHARE ACQUISITION ACT. Notwithstanding any other
provision of the charter of the Corporation or these Bylaws, Title 3, Subtitle 7
of the Maryland General Corporation Law (or any successor statute) shall not
apply to any acquisition by any person of shares of stock of the Corporation.
This section may be repealed, in whole or in part, at any time, whether before
or after an acquisition of control shares and, upon such repeal, may, to the
extent provided by any successor bylaw, apply to any prior or subsequent control
share acquisition.


                                       4



                                   ARTICLE III

                                    DIRECTORS

          Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors.

          Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting
or at any special meeting called for that purpose, a majority of the entire
Board of Directors may establish, increase or decrease the number of directors,
provided that the number thereof shall never be less than the minimum number
required by the Maryland General Corporation Law, nor more than 15, and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of directors.

          Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board
of Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. In the
event such meeting is not so held, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors. The Board of Directors may provide,
by resolution, the time and place for the holding of regular meetings of the
Board of Directors without other notice than such resolution.

          Section 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairman of the board, the
president or by a majority of the directors then in office. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place as the place for holding any special meeting of the Board of Directors
called by them. The Board of Directors may provide, by resolution, the time and
place for the holding of special meetings of the Board of Directors without
other notice than such resolution.

          Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, electronic mail,
facsimile transmission, United States mail or courier to each director at his or
her business or residence address. Notice by personal delivery, telephone,
electronic mail or facsimile transmission shall be given at least 24 hours prior
to the meeting. Notice by United States mail shall be given at least three days
prior to the meeting. Notice by courier shall be given at least two days prior
to the meeting. Telephone notice shall be deemed to be given when the director
or his or her agent is personally given such notice in a telephone call to which
the director or his or her agent is a party. Electronic mail notice shall be
deemed to be given upon transmission of the message to the electronic mail
address given to the Corporation by the director. Facsimile transmission notice
shall be deemed to be given upon completion of the transmission of the message
to the number given to the Corporation by the director and receipt of a


                                       5



completed answer-back indicating receipt. Notice by United States mail shall be
deemed to be given when deposited in the United States mail properly addressed,
with postage thereon prepaid. Notice by courier shall be deemed to be given when
deposited with or delivered to a courier properly addressed. Neither the
business to be transacted at, nor the purpose of, any annual, regular or special
meeting of the Board of Directors need be stated in the notice, unless
specifically required by statute or these Bylaws.

          Section 6. QUORUM. A majority of the directors shall constitute a
quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a majority of such directors are present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice, and provided further that if, pursuant to
applicable law, the charter of the Corporation or these Bylaws, the vote of a
majority of a particular group of directors is required for action, a quorum
must also include a majority of such group.

          The directors present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.

          Section 7. VOTING. The action of the majority of the directors present
at a meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable law, the charter or these Bylaws. If enough directors have
withdrawn from a meeting to leave less than a quorum but the meeting is not
adjourned, the action of the majority of that number of directors necessary to
constitute a quorum at such meeting shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable law, the charter or these Bylaws.

          Section 8. ORGANIZATION. At each meeting of the Board of Directors,
the chairman of the board or, in the absence of the chairman, the vice chairman
of the board, if any, shall act as chairman of the meeting. In the absence of
both the chairman and vice chairman of the board, the chief executive officer or
in the absence of the chief executive officer, the president or in the absence
of the president, a director chosen by a majority of the directors present,
shall act as chairman of the meeting. The secretary or, in his or her absence,
an assistant secretary of the Corporation, or in the absence of the secretary
and all assistant secretaries, a person appointed by the Chairman, shall act as
secretary of the meeting.

          Section 9. TELEPHONE MEETINGS. Directors may participate in a meeting
by means of a conference telephone or other communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.

          Section 10. CONSENT BY DIRECTORS WITHOUT A MEETING. Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a


                                       6



meeting, if a consent in writing or by electronic transmission to such action is
given by each director and is filed with the minutes of proceedings of the Board
of Directors.

          Section 11. VACANCIES. If for any reason any or all the directors
cease to be directors, such event shall not terminate the Corporation or affect
these Bylaws or the powers of the remaining directors hereunder (even if fewer
than three directors remain). Any vacancy on the Board of Directors for any
cause other than an increase in the number of directors shall be filled by a
majority of the remaining directors, even if such majority is less than a
quorum. Any vacancy in the number of directors created by an increase in the
number of directors may be filled by a majority vote of the entire Board of
Directors. Any individual so elected as director shall serve until the next
annual meeting of stockholders and until his or her successor is elected and
qualifies.

          Section 12. COMPENSATION. Directors shall not receive any stated
salary for their services as directors but, by resolution of the Board of
Directors, may receive compensation per year and/or per meeting and/or per visit
to real property or other facilities owned or leased by the Corporation and for
any service or activity they performed or engaged in as directors. Directors may
be reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Board of Directors or of any committee thereof and for
their expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as directors; but nothing
herein contained shall be construed to preclude any directors from serving the
Corporation in any other capacity and receiving compensation therefor.

          Section 13. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.

          Section 14. SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his or her duties.

          Section 15. RELIANCE. Each director, officer, employee and agent of
the Corporation shall, in the performance of his or her duties with respect to
the Corporation, be fully justified and protected with regard to any act or
failure to act in reliance in good faith upon the books of account or other
records of the Corporation, upon an opinion of counsel or upon reports made to
the Corporation by any of its officers or employees or by the adviser,
accountants, appraisers or other experts or consultants selected by the Board of
Directors or officers of the Corporation, regardless of whether such counsel or
expert may also be a director.

          Section 16. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time to
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his or her personal capacity or in a capacity as an
affiliate, employee, or agent of any other person, or otherwise, may have
business interests and engage in business activities similar to, in addition to
or in competition with those of or relating to the Corporation.


                                       7



                                   ARTICLE IV

                                   COMMITTEES

          Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors
may appoint from among its members an Executive Committee, an Audit Committee
and other committees, composed of one or more directors, to serve at the
pleasure of the Board of Directors.

          Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.

          Section 3. MEETINGS. Notice of committee meetings shall be given in
the same manner as notice for special meetings of the Board of Directors. A
majority of the members of the committee shall constitute a quorum for the
transaction of business at any meeting of the committee. The act of a majority
of the committee members present at a meeting shall be the act of such
committee. The Board of Directors may designate a chairman of any committee, and
such chairman or, in the absence of a chairman, any two members of any committee
(if there are at least two members of the Committee) may fix the time and place
of its meeting unless the Board shall otherwise provide. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint another director to act in
the place of such absent member. Each committee shall keep minutes of its
proceedings.

          Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
other communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.

          Section 5. CONSENT BY COMMITTEES WITHOUT A MEETING. . Any action
required or permitted to be taken at any meeting of a committee of the Board of
Directors may be taken without a meeting, if a consent in writing or by
electronic transmission to such action is given by each member of the committee
and is filed with the minutes of proceedings of such committee.

          Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.


                                       8



                                    ARTICLE V

                                    OFFICERS

          Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a president, a secretary and a treasurer and may include a chairman of
the board, a vice chairman of the board, a chief executive officer, one or more
vice presidents, a chief operating officer, a chief financial officer, one or
more assistant secretaries and one or more assistant treasurers. In addition,
the Board of Directors may from time to time elect such other officers with such
powers and duties as they shall deem necessary or desirable. The officers of the
Corporation shall be elected annually by the Board of Directors, except that the
chief executive officer or president may from time to time appoint one or more
vice presidents, assistant secretaries and assistant treasurers or other
officers. Each officer shall hold office until his or her successor is elected
and qualifies or until his or her death, or his or her resignation or removal in
the manner hereinafter provided. Any two or more offices except president and
vice president may be held by the same person. Election of an officer or agent
shall not of itself create contract rights between the Corporation and such
officer or agent.

          Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed, with or without cause, by the Board of Directors if
in its judgment the best interests of the Corporation would be served thereby,
but such removal shall be without prejudice to the contract rights, if any, of
the person so removed. Any officer of the Corporation may resign at any time by
giving written notice of his or her resignation to the Board of Directors, the
chairman of the board, the president or the secretary. Any resignation shall
take effect immediately upon its receipt or at such later time specified in the
notice of resignation. The acceptance of a resignation shall not be necessary to
make it effective unless otherwise stated in the resignation. Such resignation
shall be without prejudice to the contract rights, if any, of the Corporation.

          Section 3. VACANCIES. A vacancy in any office may be filled by the
Board of Directors for the balance of the term.

          Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may
designate a chief executive officer. In the absence of such designation, the
chairman of the board shall be the chief executive officer of the Corporation.
The chief executive officer shall have general responsibility for implementation
of the policies of the Corporation, as determined by the Board of Directors, and
for the management of the business and affairs of the Corporation. He or she may
execute any deed, mortgage, bond, contract or other instrument, except in cases
where the execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the Corporation
or shall be required by law to be otherwise executed; and in general shall
perform all duties incident to the office of chief executive officer and such
other duties as may be prescribed by the Board of Directors from time to time.


                                       9



          Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.

          Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may
designate a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.

          Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board. The chairman of the board shall preside over
the meetings of the Board of Directors and of the stockholders at which he shall
be present. The chairman of the board shall perform such other duties as may be
assigned to him or her by the Board of Directors.

          Section 8. PRESIDENT. In the absence of a chief executive officer, the
president shall in general supervise and control all of the business and affairs
of the Corporation. In the absence of a designation of a chief operating officer
by the Board of Directors, the president shall be the chief operating officer.
He or she may execute any deed, mortgage, bond, contract or other instrument,
except in cases where the execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
Corporation or shall be required by law to be otherwise executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.

          Section 9. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to such vice president by the president or by the Board of Directors.
The Board of Directors may designate one or more vice presidents as executive
vice president, senior vice president, or as vice president for particular areas
of responsibility.

          Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Corporation; (d) keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder; (e)
have general charge of the stock transfer books of the Corporation; and (f) in
general perform such other duties as from time to time may be assigned to him by
the chief executive officer, the president or by the Board of Directors.

          Section 11. TREASURER. The treasurer shall have the custody of the
funds and securities of the Corporation and shall keep full and accurate
accounts of receipts and disbursements


                                       10



in books belonging to the Corporation and shall deposit all moneys and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. In the absence of a
designation of a chief financial officer by the Board of Directors, the
treasurer shall be the chief financial officer of the Corporation.

          The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account of all his or her transactions as treasurer and of the financial
condition of the Corporation.

          If required by the Board of Directors, the treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his or her office and for the restoration to the Corporation, in case
of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, moneys and other property of whatever kind in his or
her possession or under his or her control belonging to the Corporation.

          Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president or the Board of Directors. The assistant treasurers shall,
if required by the Board of Directors, give bonds for the faithful performance
of their duties in such sums and with such surety or sureties as shall be
satisfactory to the Board of Directors.

          Section 13. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a director.

                                   ARTICLE VI

                      CONTRACTS, LOANS, CHECKS AND DEPOSITS

          Section 1. CONTRACTS. The Board of Directors, the Executive Committee
or another committee of the Board of Directors within the scope of its delegated
authority may authorize any officer or agent to enter into any contract or to
execute and deliver any instrument in the name of and on behalf of the
Corporation and such authority may be general or confined to specific instances.
Any agreement, deed, mortgage, lease or other document shall be valid and
binding upon the Corporation when duly authorized or ratified by action of the
Board of Directors or the Executive Committee or such other committee and
executed by an authorized person.

          Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation


                                       11



shall be signed by such officer or agent of the Corporation in such manner as
shall from time to time be determined by the Board of Directors.

          Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.

                                   ARTICLE VII

                                      STOCK

          Section 1. CERTIFICATES. Except as otherwise provided in these Bylaws,
this Section shall not be interpreted to limit the authority of the Board of
Directors to issue some or all of the shares of any or all of the Corporation's
classes or series without certificates. Each stockholder, upon written request
to the secretary of the Corporation, shall be entitled to a certificate or
certificates which shall represent and certify the number of shares of each
class of stock held by him in the Corporation. Each certificate shall be signed
by the chairman of the board, the president or a vice president and
countersigned by the secretary or an assistant secretary or the treasurer or an
assistant treasurer and may be sealed with the seal, if any, of the Corporation.
The signatures may be either manual or facsimile. Certificates shall be
consecutively numbered; and if the Corporation shall, from time to time, issue
several classes of stock, each class may have its own number series. A
certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been set and the
authority of the Board of Directors to set the relative rights and preferences
of subsequent series. In lieu of such statement or summary, the certificate may
state that the Corporation will furnish a full statement of such information to
any stockholder upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the certificate shall
contain a full statement of the restriction or state that the Corporation will
furnish information about the restrictions to the stockholder on request and
without charge.

          Section 2. TRANSFERS. Upon surrender to the Corporation or the
transfer agent of the Corporation of a stock certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.


                                       12



          The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.

          Notwithstanding the foregoing, transfers of shares of any class of
stock will be subject in all respects to the charter of the Corporation and all
of the terms and conditions contained therein.

          Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the
Board of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his or her discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or the
owner's legal representative to advertise the same in such manner as he shall
require and/or to give bond, with sufficient surety, to the Corporation to
indemnify it against any loss or claim which may arise as a result of the
issuance of a new certificate.

          Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the record date is
fixed and shall be not more than 90 days and, in the case of a meeting of
stockholders, not less than ten days, before the date on which the meeting or
particular action requiring such determination of stockholders of record is to
be held or taken.

          In lieu of fixing a record date, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not longer
than 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.

          If no record date is fixed and the stock transfer books are not closed
for the determination of stockholders, (a) the record date for the determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of stockholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the directors,
declaring the dividend or allotment of rights, is adopted.

          When a determination of stockholders entitled to vote at any meeting
of stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof,


                                       13



except when (i) the determination has been made through the closing of the
transfer books and the stated period of closing has expired or (ii) the meeting
is adjourned to a date more than 120 days after the record date fixed for the
original meeting, in either of which case a new record date shall be determined
as set forth herein.

          Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.

          Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors
may issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any other
provision of the charter or these Bylaws, the Board of Directors may issue units
consisting of different securities of the Corporation. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Corporation, except that the Board of Directors may provide that for a
specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.

                                  ARTICLE VIII

                                 ACCOUNTING YEAR

          The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation by a duly adopted resolution.

                                   ARTICLE IX

                                  DISTRIBUTIONS

          Section 1. AUTHORIZATION. Dividends and other distributions upon the
stock of the Corporation may be authorized by the Board of Directors, subject to
the provisions of law and the charter of the Corporation. Dividends and other
distributions may be paid in cash, property or stock of the Corporation, subject
to the provisions of law and the charter.

          Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve.


                                       14



                                    ARTICLE X

                                INVESTMENT POLICY

          Subject to the provisions of the charter of the Corporation, the Board
of Directors may from time to time adopt, amend, revise or terminate any policy
or policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.

                                   ARTICLE XI

                                      SEAL

          Section 1. SEAL. The Board of Directors may authorize the adoption of
a seal by the Corporation. The seal shall contain the name of the Corporation
and the year of its incorporation and the words "Incorporated Maryland." The
Board of Directors may authorize one or more duplicate seals and provide for the
custody thereof.

          Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf of the Corporation.

                                   ARTICLE XII

                     INDEMNIFICATION AND ADVANCE OF EXPENSES

          To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made or threatened to be made a party to the proceeding
by reason of his or her service in that capacity or (b) any individual who,
while a director or officer of the Corporation and at the request of the
Corporation, serves or has served as a director, officer, partner or trustee of
such corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made or threatened
to be made a party to the proceeding by reason of his or her service in that
capacity. The Corporation may, with the approval of its Board of Directors or
any duly authorized committee thereof, provide such indemnification and advance
for expenses to a person who served a predecessor of the Corporation in any of
the capacities described in (a) or (b) above and to any employee or agent of the
Corporation or a predecessor of the Corporation. The indemnification and payment
of expenses provided in these Bylaws shall not be deemed exclusive of or limit
in any way other rights to which any person seeking indemnification or payment
of expenses may be or may become entitled under any bylaw, regulation,
insurance, agreement or otherwise.


                                       15



          Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.

                                  ARTICLE XIII

                                WAIVER OF NOTICE

          Whenever any notice is required to be given pursuant to the charter of
the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any meeting need be set forth in the waiver of notice, unless specifically
required by statute. The attendance of any person at any meeting shall
constitute a waiver of notice of such meeting, except where such person attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.

                                   ARTICLE XIV

                               AMENDMENT OF BYLAWS

          The Board of Directors shall have the exclusive power to adopt, alter
or repeal any provision of these Bylaws and to make new Bylaws.


                                       16

EX-3.4

                                                                     EXHIBIT 3.4

                                     FORM OF

                      ARTICLES OF AMENDMENT AND RESTATEMENT
                                       OF
                            NNN APARTMENT REIT, INC.

     FIRST: NNN Apartment REIT, Inc., a Maryland corporation, desires to amend
and restate its Charter as currently in effect and as hereinafter amended.

     SECOND: The following provisions are all the provisions of the Charter
currently in effect and as hereinafter amended:

                                    ARTICLE I
                                      NAME

     The name of the corporation is NNN Apartment REIT, Inc. (the
"Corporation").

                                   ARTICLE II
                               PURPOSES AND POWERS

     The purposes for which the Corporation is formed are to engage in any
lawful act or activity (including, without limitation or obligation, engaging in
business as a real estate investment trust under Sections 856 through 860, or
any successor sections, of the Internal Revenue Code of 1986, as amended (the
"Code")), for which corporations may be organized under the MGCL and the general
laws of the State of Maryland as now or hereafter in force.

                                   ARTICLE III
                       RESIDENT AGENT AND PRINCIPAL OFFICE

     The name and address of the resident agent for service of process of the
Corporation in the State of Maryland is The Corporation Trust Incorporated, 300
East Lombard Street, Baltimore, Maryland 21202. The resident agent is a Maryland
corporation. The address of the Corporation's principal office in the State of
Maryland is 300 East Lombard Street, Baltimore, Maryland 21202. The Corporation
may have such other offices and places of business within or outside the State
of Maryland as the board may from time to time determine.

                                   ARTICLE IV
                                   DEFINITIONS

     As used in the Charter, the following terms shall have the following
meanings unless the context otherwise requires:

     Acquisition Expenses. Any and all expenses related to the selection,
evaluation and acquisition of, and investment in, properties, whether or not
acquired or made, including, but not limited to, legal fees and expenses, travel
and communications expenses, cost of appraisals and surveys, nonrefundable
option payments on property not acquired, accounting fees and expenses, computer
use related expenses, architectural, engineering and other property reports,
environmental and asbestos audits, title insurance and escrow fees, loan fees or
any fee of a similar nature paid to a third party, however, designated, transfer
taxes and personnel and miscellaneous expenses related to the selection,
evaluation and acquisition of properties.



     Acquisition Fees. The total of any and all fees and commissions, exclusive
of Acquisition Expenses, paid by any Person to any other Person (including any
fees or commissions paid by or to any Affiliate of the Corporation or the
Advisor) in connection with the purchase, development or construction of any
Property, including, without limitation, real estate commissions, acquisition
fees, finder's fees, selection fees, non-recurring management fees, consulting
fees, loan fees or points or any fee of a similar nature, however designated.

     Advisor. The Person appointed, employed or contracted with by the
Corporation pursuant to Section 8.1 hereof and responsible for directing or
performing the day-to-day business affairs of the Corporation, including any
Person to whom the Advisor subcontracts all or substantially all of such
functions.

     Advisory Agreement. The agreement between the Corporation and the Advisor
pursuant to which the Advisor will direct or perform the day-to-day business
affairs of the Corporation.

     Affiliate. An Affiliate of another Person includes any of the following:

     (a)  any Person directly or indirectly owning, controlling or holding, with
          the power to vote, 10% or more of the outstanding voting securities of
          such other Person;

     (b)  any Person 10% or more of whose outstanding voting securities are
          directly or indirectly owned, controlled or held, with the power to
          vote, by such other Person;

     (c)  any Person directly or indirectly controlling, controlled by or under
          common control with such other Person;

     (d)  any executive officer, director, trustee or general partner of such
          other Person; and

     (e)  any legal entity for which such Person acts as an executive officer,
          director, trustee or general partner.

     Average Invested Assets. For a specified period, the average of the
aggregate book value of the assets of the Corporation invested, directly or
indirectly in real estate assets or in equity interests in and loans secured by
real estate, before deducting depreciation, bad debts or other non-cash
reserves, computed by taking the average of such values at the end of each month
during such period.

     Capital Stock. All classes or series of stock of the Corporation, including
Common Stock and Preferred Stock.

     Charter. The charter of the Corporation.

     Code. The term shall have the meaning as provided in Article II herein.

     Common Stock. The term shall have the meaning as provided in Section 5.1
herein.

     Common Stockholders. The registered holders of Common Stock.

     Competitive Real Estate Commission. A real estate or brokerage commission
paid for the purchase or sale of a property that is reasonable, customary and
competitive in light of the size, type and location of the property.

     Contract Purchase Price. The amount actually paid or allocated in respect
of the purchase, development, construction or improvement of a property
exclusive of Acquisition Fees and Acquisition Expenses.


                                        2



     Corporation. The term shall have the meaning as provided in Article I
herein.

     Gross Proceeds. The aggregate purchase price of all Shares sold for the
account of the Corporation through an Offering, without deduction for Selling
Commissions, volume discounts, any marketing support and due diligence expense
reimbursement or Organizational and Offering Expenses. For the purpose of
computing Gross Proceeds, the purchase price of any Share for which reduced
Selling Commissions are paid (where net proceeds to the Corporation are not
reduced) shall be deemed to be the full amount of the offering price per Share
pursuant to the Prospectus for such Offering without reduction.

     Independent Directors. The directors of the Corporation who are not
associated and have not been associated within the last two years, directly or
indirectly, with the Sponsor or Advisor of the Corporation.

     (a)  A director shall be deemed to be associated with the Sponsor or
          Advisor if he or she:

          (i)  owns an interest in the Sponsor, Advisor or any of their
               Affiliates;

          (ii) is employed by the Sponsor, Advisor or any of their Affiliates;

          (iii) is an officer or director of the Sponsor, Advisor or any of
               their Affiliates;

          (iv) performs services, other than as a director, for the Corporation;

          (v)  is a director for more than three REITs organized by the Sponsor
               or advised by the Advisor; or

          (vi) has any material business or professional relationship with the
               Sponsor, Advisor or any of their Affiliates.

     (b)  Notwithstanding the foregoing, and consistent with (a)(v) above,
          serving as a director of or owning an interest in a REIT or other real
          estate program organized by the Sponsor or advised or managed by the
          Advisor or its Affiliates shall not, by itself, cause a director to be
          deemed associated with the Sponsor or the Advisor.

     (c)  For purposes of determining whether or not a business or professional
          relationship is material pursuant to (a)(vi) above, the gross revenue
          derived by the director from the Sponsor, Advisor and their Affiliates
          shall be deemed material per se if it exceeds 5% of the director's:

          (i)  annual gross revenue, derived from all sources, during either of
               the last two years; or

          (ii) net worth, on a fair market value basis.

     (d)  An indirect relationship shall include circumstances in which a
          director's spouse, parents, children, siblings, mothers- or
          fathers-in-law, sons- or daughters-in-law or brothers- or
          sisters-in-law are or have been associated with the Sponsor, Advisor,
          any of their Affiliates or the Corporation.

     Independent Expert. A Person or entity with no material current or prior
business or personal relationship with the Advisor or directors and who is
engaged to a substantial extent in the business of rendering opinions regarding
the value of assets of the type held by the Corporation.

     Initial Investment. A contribution of at least $200,000 by the Advisor or
an Affiliate thereof to acquire an equity interest in the Corporation or its
subsidiaries pursuant to Section II.A of the NASAA REIT Guidelines.

     Leverage. The aggregate amount of indebtedness of the Corporation for money
borrowed (including purchase money mortgage loans) outstanding at any time, both
secured and unsecured.


                                        3



     Listing. The listing of the shares of Capital Stock on a national
securities exchange or the quotation of the shares of Capital Stock by The
Nasdaq Stock Market ("Nasdaq"). Upon such Listing, the shares of Capital Stock
shall be deemed Listed.

     MGCL. The Maryland General Corporation Law, as amended from time to time.

     NASAA REIT Guidelines. The Statement of Policy Regarding Real Estate
Investment Trusts published by the North American Securities Administrators
Association.

     Net Assets. The total assets of the Corporation (other than intangibles) at
cost, before deducting depreciation, bad debt or other non-cash reserves, less
total liabilities, calculated quarterly by the Corporation on a basis
consistently applied.

     Net Income. For any period, total revenues applicable to such period less
the total expenses applicable to such period other than additions to or
allowances for reserves for depreciation, amortization or bad debts or other
similar non-cash reserves; provided, however, that Net Income shall exclude the
gain from the sale of the Corporation's assets.

     Organizational and Offering Expenses. All expenses incurred by and to be
paid from the assets of the Corporation in connection with and in preparing the
Corporation for registration of and subsequently offering and distributing its
shares to the public, including, but not limited to, total underwriting and
brokerage discounts and commissions (including fees of the underwriters'
attorneys); expenses for printing, engraving and mailing; salaries of employees
while engaged in sales activity; charges of transfer agents, registrars,
trustees, escrow holders, depositaries and experts; and expenses of
qualification of the sale of the securities under Federal and State laws,
including taxes and fees, accountants', consultants' and attorneys' fees and
expenses.

     Person. An individual, corporation, partnership, estate, trust (including a
trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a
trust permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private foundation within
the meaning of Section 509(a) of the Code, joint stock company or other entity
and also includes a group as that term is used for purposes of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, and a group to which an
Excepted Holder Limit applies.

     Preferred Stock. The term shall have the meaning as provided in Section 5.1
herein.

     Prospectus. The term shall have the meaning as defined in Section 2(10) of
the Securities Act of 1933, as amended (the "Securities Act"), including a
preliminary prospectus, an offering circular as described in Rule 256 of the
General Rules and Regulations under the Securities Act or, in the case of an
intrastate offering, any document by whatever name known utilized for the
purpose of offering and selling securities to the public.

     REIT. A corporation, trust, association or other legal entity (other than a
real estate syndication) that is engaged primarily in investing in equity
interests in real estate (including fee ownership and leasehold interests) or in
loans secured by real estate or both as defined in Sections 856 through 860 of
the Code and any successor or other provisions of the Code relating to REITs
(including provisions as to the attribution of ownership of beneficial interests
therein) and the regulations promulgated thereunder.

     Roll-Up Entity. A partnership, real estate investment trust, corporation,
trust or similar entity that would be created or would survive after the
successful completion of a proposed Roll-Up Transaction.


                                        4



     Roll-Up Transaction. A transaction involving the acquisition, merger,
conversion or consolidation, either directly or indirectly, of the Corporation
and the issuance of securities of a Roll-Up Entity to the stockholders of the
Corporation.

     Such term does not include:

     (a)  a transaction involving securities of the Corporation that have been,
          for at least 12 months, Listed; or

     (b)  a transaction involving the conversion to corporate, trust or
          association form of only the Corporation, if, as a consequence of the
          transaction, there will be no significant adverse change in any of the
          following:

          (i)  the voting rights of Common Stockholders;

          (ii) the term of existence of the Corporation;

          (iii) Sponsor or Advisor compensation; or

          (iv) the Corporation's investment objectives.

     SDAT. The State Department of Assessments and Taxation of Maryland.

     Sponsor. Any Person directly or indirectly instrumental in organizing,
wholly or in part, the Corporation or any Person who will control, manage or
participate in the management of the Corporation and any Affiliate of such
Person. Not included is any Person whose only relationship with the Corporation
is that of an independent property manager of the Corporation's assets and whose
only compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants, consultants and underwriters whose only
compensation is for professional services. A Person may also be deemed a Sponsor
of the Corporation by:

     (a)  taking the initiative, directly or indirectly, in founding or
          organizing the business or enterprise of the Corporation, either alone
          or in conjunction with one or more other Persons;

     (b)  receiving a material participation in the Corporation in connection
          with the founding or organizing of the business of the Corporation, in
          consideration of services or property, or both services and property;

     (c)  having a substantial number of relationships and contacts with the
          Corporation;

     (d)  possessing significant rights to control the Corporation's properties;

     (e)  receiving fees for providing services to the Corporation which are
          paid on a basis that is not customary in the industry; or

     (f)  providing goods or services to the Corporation on a basis which was
          not negotiated at arms length with the Corporation.

     Total Operating Expenses. All expenses paid or incurred by the Corporation,
as determined under generally accepted accounting principles, that are in any
way related to the operation of the Corporation or to the Corporation's
business, including advisory fees, but excluding (a) the expenses of raising
capital such as Organizational and Offering Expenses, legal, audit, accounting,
underwriting, brokerage, listing, registration and other fees, printing and
other such expenses and taxes incurred in connection with the issuance,
distribution, transfer, registration and stock exchange listing of the Capital
Stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as
depreciation, amortization and bad debt reserves; (e) incentive fees paid in
compliance with the NASAA REIT Guidelines; and (f) Acquisition Expenses, real
estate commissions on the resale of any property and other expenses connected
with the acquisition, disposition (whether by sale, exchange or condemnation),
management and ownership of real estate interests, mortgage loans or other
property (including the costs of foreclosure, insurance premiums, legal
services, maintenance, repair and improvement of property).


                                        5



     Unimproved Real Property. The real property of the Corporation that has the
following three characteristics:

     (a)  an equity interest in real property which has not been acquired for
          the purpose of producing rental or other operating income;

     (b)  has no development or construction in process on such land; and

     (c)  no development or construction on such land is planned in good faith
          to commence on such land within one year.

                                    ARTICLE V
                                      STOCK

     Section 5.1. Authorized Shares. The Corporation has authority to issue
300,000,000 shares of common stock, $0.01 par value per share ("Common Stock"),
and 50,000,000 shares of preferred stock, $0.01 par value per share ("Preferred
Stock"). The aggregate par value of all authorized shares of Capital Stock
having par value is $3,500,000. The board of directors, with the approval of a
majority of the directors and without any action by the stockholders of the
Corporation, may amend the Charter from time to time to increase or decrease the
aggregate number of shares of Capital Stock or the number of shares of Capital
Stock of any class or series that the Corporation has authority to issue.

     Section 5.2. Common Stock. Subject to the provisions of Article VI and
except as may otherwise be specified in the terms of any class or series of
Common Stock, each share of Common Stock shall entitle the holder thereof to one
vote on all matters upon which stockholders are entitled to vote pursuant to
Section 11.3 hereof. The board of directors may classify or reclassify any
unissued shares of Common Stock from time to time in one or more classes or
series of Capital Stock.

     (a) In the event of any voluntary or involuntary liquidation, dissolution
or winding up, or any distribution of the assets of the Corporation, the
aggregate assets available for distribution to holders of the shares of Common
Stock shall be determined in accordance with applicable law. Each holder of
shares of Common Stock shall be entitled to receive, ratably with each other
holder of shares of Common Stock, that portion of such aggregate assets
available for distribution as the number of shares of outstanding Common Stock
held by such holder bears to the total number of outstanding shares of Common
Stock then outstanding.

     (b) Except as may be provided otherwise in the Charter, and subject to the
express terms of any series of Preferred Stock, the holders of the shares of
Common Stock shall have the exclusive right to vote on all matters (as to which
a common stockholder shall be entitled to vote pursuant to applicable law) at
all meetings of the stockholders.

     Section 5.3. Preferred Stock. The board of directors may classify any
unissued shares of Preferred Stock and reclassify any previously classified but
unissued shares of Preferred Stock of any series from time to time in one or
more series of Capital Stock.

     Section 5.4. Classified or Reclassified Shares. Prior to the issuance of
classified or reclassified shares of any class or series, the board of directors
by resolution shall: (a) designate that class or series to distinguish it from
all other classes and series of Capital Stock; (b) specify the number of shares
to be included in the class or series; (c) set or change, subject to the
provisions of Article VI and subject to the express terms of any class or series
of Capital Stock outstanding at the time, the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms and conditions of redemption for each
class or series; and (d) cause the Corporation to file


                                        6



articles supplementary with the SDAT. Any of the terms of any class or series of
Capital Stock set or changed pursuant to clause (c) of this Section 5.4 may be
made dependent upon facts or events ascertainable outside the Charter (including
determinations by the board of directors or other facts or events within the
control of the Corporation) and may vary among holders thereof, provided that
the manner in which such facts, events or variations shall operate upon the
terms of such class or series of Capital Stock is clearly and expressly set
forth in the articles supplementary filed with the SDAT.

     Section 5.5. Charter and Bylaws. The rights of all stockholders and the
terms of all Capital Stock are subject to the provisions of the Charter and the
bylaws of the Corporation.

     Section 5.6. No Preemptive Rights. No holder of shares of Capital Stock of
any class shall have any preemptive right to subscribe for or purchase any
additional shares of any class, or any bonds or convertible securities of any
nature; provided, however, that the board of directors may, in authorizing the
issuance of shares of Capital Stock of any class, confer any preemptive right
that the board of directors may deem advisable in connection with such issuance.

     Section 5.7. Issuance of Shares Without Certificates. Until Listing, the
Corporation shall not issue stock certificates. A stockholder's investment shall
be recorded on the books of the Corporation. To transfer his or her shares of
Capital Stock, a Stockholder shall submit an executed form to the Corporation,
which form shall be provided by the Corporation upon request. Such transfer will
also be recorded on the books of the Corporation. Upon issuance or transfer of
shares of Capital Stock, the Corporation will provide the Stockholder with
information concerning his or her rights with regard to such shares of Capital
Stock, as required by the bylaws and the MGCL or other applicable law.

     Section 5.8. Suitability of Stockholders. Until Listing, the following
provisions shall apply:

     (a)  To become a Common Stockholder in the Corporation, an individual or
          fiduciary must represent to the Corporation:

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

          (ii) that such individual (or, in the case of a fiduciary, that the
               beneficiary, fiduciary account, grantor or donor who directly or
               indirectly supplies the funds to purchase the shares) has a net
               worth (excluding home, furnishings and automobiles) of not less
               than $150,000; or

          (iii) such other standards as may be established by individual states.

     (b)  The Sponsor and each Person selling shares on behalf of the Sponsor or
          the Corporation shall make every reasonable effort to determine that
          the purchase of shares is a suitable and appropriate investment for
          each Common Stockholder. In making this determination, the Sponsor or
          each Person selling shares on behalf of the Sponsor or the Corporation
          shall ascertain that the prospective Common Stockholder: (i) meets the
          minimum income and net worth standards established for the
          Corporation; (ii) can reasonably benefit from the Corporation based on
          the prospective stockholder's overall investment objectives and
          portfolio structure; (iii) is able to bear the economic risk of the
          investment based on the prospective stockholder's overall financial
          situation; and (iv) has apparent understanding of (1) the fundamental
          risks of the investment; (2) the risk that the stockholder may lose
          the entire investment; (3) the lack of liquidity of the shares; (4)
          the restrictions on transferability of the shares; (5) the background
          and qualifications of the Sponsor or the Advisor; and (6) the tax
          consequences of the investment. The Sponsor or each Person


                                        7



          selling shares on behalf of the Sponsor or the Corporation shall make
          this determination on the basis of information it has obtained from a
          prospective stockholder. Relevant information for this purpose will
          include at least the age, investment objectives, investment
          experience, income, net worth, financial situation and other
          investments of the prospective stockholder, as well as any other
          pertinent factors. The Sponsor or each Person selling shares on behalf
          of the Sponsor or the Corporation shall maintain records of the
          information used to determine that an investment in shares is suitable
          and appropriate for a Common Stockholder. The Sponsor or each Person
          selling shares on behalf of the Sponsor or the Corporation shall
          maintain these records for at least six years.

     Section 5.9. Dividend Reinvestment Plan. The board may establish, from time
to time, a dividend reinvestment plan. Under any dividend reinvestment plan, (a)
all material information regarding dividends to the Common Stockholders and the
effect of reinvesting such dividends, including the tax consequences thereof,
shall be provided to the Common Stockholders not less often than annually, and
(b) each Common Stockholder participating in such plan shall have a reasonable
opportunity to withdraw from the plan not less often than annually after receipt
of the information required in clause (a) above.

     Section 5.10. Repurchase of Shares. The board of directors may establish,
from time to time, a program or programs by which the Corporation voluntarily
repurchases shares of Capital Stock from its stockholders; provided, however,
that such repurchase does not impair the capital or operations of the
Corporation. The Sponsor, Advisor, members of the board or any Affiliates
thereof may not receive any fees arising out of the repurchase of shares of
Capital Stock by the Corporation.

     Section 5.11. Distributions. Only the board of directors may authorize
payments to stockholders in connection with their stock. The decision to
authorize a distribution, like all other board decisions, shall be made in good
faith, in a manner reasonably believed to be in the best interests of the
Corporation and with the care that an ordinarily prudent person in a like
position would use under similar circumstances. Until the board of directors
determines that it is no longer in the best interests of the Corporation to
qualify as a REIT, the board of directors must authorize dividends to the extent
necessary to preserve the status of the Corporation as a REIT.

     Distributions in kind shall not be permitted, except for distributions of
readily marketable securities, distributions of beneficial interests in a
liquidating trust established for the dissolution of the Corporation and the
liquidation of its assets in accordance with the terms of the Charter or
distributions that meet all of the following conditions: (a) the board of
directors advises each Common Stockholder of the risks associated with direct
ownership of the property, (b) the board of directors offers each Common
Stockholder the election of receiving such in-kind distributions and (c) in-kind
distributions are made only to those Common Stockholders who accept such offer.


                                        8



     Section 5.12. Actions Required if Common Stock Not Listed. If by 2013, the
shares of Common Stock are not Listed, then the board of directors must either
(a) adopt a resolution that sets forth a proposed amendment to the Charter
extending or eliminating this deadline (the "Extension Amendment"), declare that
the Extension Amendment is advisable and direct that the proposed Extension
Amendment be submitted for consideration at either an annual or special meeting
of the stockholders, or (b) adopt a resolution that declares a proposed
liquidation and dissolution is advisable on substantially the terms and
conditions set forth, or referred to, in the resolution (the "Plan of
Liquidation") and direct that the proposed Plan of Liquidation be submitted for
consideration at either an annual or special meeting of the stockholders. If the
board of directors seeks the Extension Amendment as described above and the
stockholders do not approve such amendment, then the board of directors shall
seek the Plan of Liquidation as described above. If the stockholders do not then
approve the Plan of Liquidation, the Corporation shall continue its business. If
the board of directors seeks the Plan of Liquidation as described above and the
stockholders do not approve such resolution, then the board of directors shall
seek the Extension Amendment as described above. If the stockholders do not then
approve the Extension Amendment, the Corporation shall continue its business.

                                   ARTICLE VI
                 RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

     Section 6.1. Definitions. For the purpose of this Article VI, the following
terms shall have the following meanings:

     Aggregate Stock Ownership Limit. 9.9% in value of the aggregate of the
outstanding shares of Capital Stock.

     Beneficial Ownership. Ownership of Capital Stock by a Person, whether the
interest in the shares of Capital Stock is held directly or indirectly
(including by a nominee), and shall include interests that would be treated as
owned through the application of Section 544 of the Code, as modified by Section
856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially Owns,"
"Beneficially Owning" and "Beneficially Owned" shall have the correlative
meanings.

     Benefit Plan Investor. The term shall have the meaning provided in Section
2510.3-101 of the Department of Labor regulations or any successor regulation
thereto.

     Business Day. Any day, other than a Saturday or Sunday, that is neither a
legal holiday nor a day on which banking institutions in New York City are
authorized or required by law, regulation or executive order to close.

     Charitable Beneficiary. One or more beneficiaries of the Trust as
determined pursuant to Section 6.3.6, provided that each such organization must
be described in Section 501(c)(3) of the Code and contributions to each such
organization must be eligible for deduction under each of Sections 170(b)(1)(A),
2055 and 2522 of the Code.

     Common Stock Ownership Limit. 9.9% (in value or in number of shares,
whichever is more restrictive) of the aggregate of the outstanding shares of
Common Stock of the Corporation.

     Constructive Ownership. Ownership of Capital Stock by a Person, whether the
interest in the shares of Capital Stock is held directly or indirectly
(including by a nominee), and shall include interests that would be treated as
owned through the application of Section 318(a) of the Code, as modified by
Section 856(d)(5) of the Code. The terms "Constructive Owner," "Constructively
Owns," "Constructively Owning" and "Constructively Owned" shall have the
correlative meanings.


                                        9



     ERISA Investor. Any holder of shares of Capital Stock that is (i) an
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended, (ii) a plan as defined in Section 4975(e) of
the Code (any such employee benefit plan or "plan" as described in clause (i) or
this clause (ii) being referred to herein as "Plan"), (iii) a trust which was
established pursuant to a Plan, or a nominee for such trust or Plan, or (iv) an
entity whose underlying assets include assets of a Plan by reason of such Plan's
investment in such entity.

     Excepted Holder. A stockholder of the Corporation for whom an Excepted
Holder Limit is created by the Charter or by the board of directors pursuant to
Section 6.2.7.

     Excepted Holder Limit. The percentage limit established by the board of
directors pursuant to Section 6.2.7 provided that the affected Excepted Holder
agrees to comply with the requirements established by the board of directors
pursuant to Section 6.2.7, and subject to adjustment pursuant to Section 6.2.8.

     Initial Date. The date upon which the Charter containing this Article VI is
accepted for record by the SDAT.

     Market Price. With respect to any class or series of outstanding shares of
Capital Stock, the Closing Price for such Capital Stock on such date. The
"Closing Price" on any date shall mean the last sale price for such Capital
Stock, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, for such Capital
Stock, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the
principal national securities exchange on which such Capital Stock is listed or
admitted to trading or, if such Capital Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price, or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotation system that may then be in use or, if
such Capital Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such Capital Stock selected by the board of directors or, in the
event that no trading price is available for such Capital Stock, the fair market
value of the Capital Stock, as determined in good faith by the board of
directors.

     Prohibited Owner. With respect to any purported Transfer, any Person who,
but for the provisions of Section 6.2.1, would Beneficially Own or
Constructively Own shares of Capital Stock and, if appropriate in the context,
shall also mean any Person who would have been the record owner of the shares
that the Prohibited Owner would have so owned.

     Restriction Termination Date. The first day after the Initial Date on which
the Corporation determines pursuant to Section 7.8 of the Charter that it is no
longer in the best interests of the Corporation to attempt to, or continue to,
qualify as a REIT or that compliance with the restrictions and limitations on
Beneficial Ownership, Constructive Ownership and Transfers of shares of Capital
Stock set forth herein is no longer required in order for the Corporation to
qualify as a REIT.

     Transfer. Any issuance, sale, transfer, gift, assignment, devise or other
disposition as well as any other event that causes any Person to acquire
Beneficial Ownership or Constructive Ownership, or any agreement to take any
such actions or cause any such events, of Capital Stock or the right to vote or
receive dividends on Capital Stock, including (a) the granting or exercise of
any option (or any disposition of any option), (b) any disposition of any
securities or rights convertible into or exchangeable for Capital Stock or any
interest in Capital Stock or any exercise of any such conversion or exchange
right


                                       10



and (c) Transfers of interests in other entities that result in changes in
Beneficial Ownership or Constructive Ownership of Capital Stock; in each case,
whether voluntary or involuntary, whether owned of record, Constructively Owned
or Beneficially Owned and whether by operation of law or otherwise. The terms
"Transferring" and "Transferred" shall have the correlative meanings.

     Trust. Any trust provided for in Section 6.3.1.

     Trustee. The Person unaffiliated with the Corporation and a Prohibited
Owner that is appointed by the Corporation to serve as trustee of the Trust.

     Section 6.2. Capital Stock.

          Section 6.2.1. Ownership Limitations. During the period commencing on
the Initial Date and prior to the Restriction Termination Date, but subject to
Section 6.5:

          (a) Basic Restrictions.

               (i) (1) No Person, other than an Excepted Holder, shall
Beneficially Own or Constructively Own shares of Capital Stock in excess of the
Aggregate Stock Ownership Limit, (2) no Person, other than an Excepted Holder,
shall Beneficially Own or Constructively Own shares of Common Stock in excess of
the Common Stock Ownership Limit and (3) no Excepted Holder shall Beneficially
Own or Constructively Own shares of Capital Stock in excess of the Excepted
Holder Limit for such Excepted Holder.

               (ii) No Person shall Beneficially Own or Constructively Own
shares of Capital Stock to the extent that such Beneficial Ownership or
Constructive Ownership of Capital Stock would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code (without regard
to whether the ownership interest is held during the last half of a taxable
year), or otherwise failing to qualify as a REIT (including, but not limited to,
Beneficial Ownership or Constructive Ownership that would result in the
Corporation owning (actually or Constructively) an interest in a tenant that is
described in Section 856(d)(2)(B) of the Code if the income derived by the
Corporation from such tenant would cause the Corporation to fail to satisfy any
of the gross income requirements of Section 856(c) of the Code).

               (iii) Any Transfer of shares of Capital Stock that, if effective,
would result in the Capital Stock being Beneficially Owned by less than 100
Persons (determined under the principles of Section 856(a)(5) of the Code) shall
be void ab initio, and the intended transferee shall acquire no rights in such
shares of Capital Stock; provided, however, that the board of directors may
waive this Section 6.2.1(a)(iii) if, in the opinion of the board of directors,
such Transfer would not adversely affect the Corporation's ability to qualify as
a REIT.

          (b) Transfer in Trust. If any Transfer of shares of Capital Stock
occurs which, if effective, would result in any Person Beneficially Owning or
Constructively Owning shares of Capital Stock in violation of Section
6.2.1(a)(i) or Section 6.2.1(a)(ii),

               (i) then that number of shares of Capital Stock the Beneficial
Ownership or Constructive Ownership of which otherwise would cause such Person
to violate Section 6.2.1(a)(i) or Section 6.2.1(a)(ii) (rounded to the nearest
whole share) shall be automatically transferred to a Trust for the benefit of a
Charitable Beneficiary, as described in Section 6.3, effective as of the close
of business on the Business Day prior to the date of such Transfer and such
Person shall acquire no rights in such shares; provided, however,


                                       11



               (ii) if the transfer to the Trust described in clause (i) of this
sentence would not be effective for any reason to prevent the violation of
Section 6.2.1(a)(i) or Section 6.2.1(a)(ii), then the Transfer of that number of
shares of Capital Stock that otherwise would cause any Person to violate Section
6.2.1(a)(i) or Section 6.2.1(a)(ii) shall be void ab initio and the intended
transferee shall acquire no rights in such shares of Capital Stock.

          Section 6.2.2. Remedies for Breach. If the board of directors or its
designee (including any duly authorized committee of the board) shall at any
time determine in good faith that a Transfer or other event has taken place that
results in a violation of Section 6.2.1(a) or that a Person intends to acquire
or has attempted to acquire Beneficial Ownership or Constructive Ownership of
any shares of Capital Stock in violation of Section 6.2.1(a) (whether or not
such violation is intended), the board of directors or its designeee shall take
such action as it deems advisable to refuse to give effect to or to prevent such
Transfer or other event, including, without limitation, causing the Corporation
to redeem shares, refusing to give effect to such Transfer on the books of the
Corporation or instituting proceedings to enjoin such Transfer or other event;
provided, however, that any Transfers or attempted Transfers or other events in
violation of Section 6.2.1(a) shall automatically result in the transfer to the
Trust described above and, where applicable, such Transfer (or other event)
shall be void ab initio as provided above irrespective of any action (or
non-action) by the board of directors or its designee.

          Section 6.2.3. Notice of Restricted Transfer. Any Person who acquires
or attempts or intends to acquire Beneficial Ownership or Constructive Ownership
of shares of Capital Stock that will or may violate Section 6.2.1(a) or any
Person who would have owned shares of Capital Stock that resulted in a transfer
to the Trust pursuant to the provisions of Section 6.2.1(b) shall immediately
give written notice to the Corporation of such event or, in the case of such a
proposed or attempted transaction, give at least 15 days prior written notice
and shall provide to the Corporation such other information as the Corporation
may request in order to determine the effect, if any, of such Transfer on the
Corporation's status as a REIT.

          Section 6.2.4. Owners Required to Provide Information. From the
Initial Date and prior to the Restriction Termination Date:

          (a) every owner of more than 5% (or such lower percentage as required
by the Code or the Treasury Regulations promulgated thereunder) of the
outstanding shares of Capital Stock, within 30 days after the end of each
taxable year, shall give written notice to the Corporation stating the name and
address of such owner, the number of shares of Capital Stock and other shares of
the Capital Stock Beneficially Owned and a description of the manner in which
such shares are held. Each such owner shall provide to the Corporation such
additional information as the Corporation may request in order to determine the
effect, if any, of such Beneficial Ownership on the Corporation's status as a
REIT and to ensure compliance with the Aggregate Stock Ownership Limit.

          (b) each Person who is a Beneficial Owner or Constructive Owner of
Capital Stock and each Person (including the stockholder of record) who is
holding Capital Stock for a Beneficial Owner or Constructive Owner shall provide
to the Corporation such information as the Corporation may request, in good
faith, in order to determine the Corporation's status as a REIT and to comply
with requirements of any taxing authority or governmental authority or to
determine such compliance.

          Section 6.2.5. Remedies Not Limited. Subject to Section 7.8, nothing
contained in this Section 6.2 shall limit the authority of the board of
directors to take such other action as it deems necessary or advisable to
protect the Corporation and the interests of its stockholders in preserving the
Corporation's status as a REIT.


                                       12



          Section 6.2.6. Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 6.2, Section 6.3 or any
definition contained in Section 6.1, the board of directors shall have the power
to determine the application of the provisions of this Section 6.2 or Section
6.3 with respect to any situation based on the facts known to it. In the event
Section 6.2 or Section 6.3 requires an action by the board of directors and the
Charter fails to provide specific guidance with respect to such action, the
board of directors shall have the power to determine the action to be taken so
long as such action is not contrary to the provisions of Sections 6.1, 6.2 or
6.3. Absent a decision to the contrary by the board of directors (which the
board may make in its sole and absolute discretion), if a Person would have (but
for the remedies set forth in Section 6.2.2) acquired Beneficial or Constructive
Ownership of shares of Capital Stock in violation of Section 6.2.1, such
remedies (as applicable) shall apply first to the shares of Capital Stock which,
but for such remedies, would have been Beneficially Owned or Constructively
Owned (but not actually owned) by such Person, pro rata among the Persons who
actually own such shares of Capital Stock based upon the relative number of the
shares of Capital Stock held by each such Person.

          Section 6.2.7. Exceptions.

          (a) Subject to Section 6.2.1(a)(ii), the board of directors, in its
sole discretion, may exempt a Person (prospectively or retroactively) from the
Aggregate Stock Ownership Limit and the Common Stock Ownership Limit, as the
case may be, and may establish or increase an Excepted Holder Limit for such
Person if:

               (i) the board of directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain that no
Person's Beneficial Ownership or Constructive Ownership of such shares of
Capital Stock will violate Section 6.2.1(a)(ii);

               (ii) such Person does not and represents that it will not own,
actually or Constructively, an interest in a tenant of the Corporation (or a
tenant of any entity owned or controlled by the Corporation) that would cause
the Corporation to own, actually or Constructively, more than a 9.9% interest
(as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the board
of directors obtains such representations and undertakings from such Person as
are reasonably necessary to ascertain this fact (for this purpose, a tenant from
whom the Corporation (or an entity owned or controlled by the Corporation)
derives (and is expected to continue to derive) a sufficiently small amount of
revenue such that, in the opinion of the board of directors, rent from such
tenant would not adversely affect the Corporation's ability to qualify as a REIT
shall not be treated as a tenant of the Corporation); and

               (iii) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action which is
contrary to the restrictions contained in Sections 6.2.1 through 6.2.6) will
result in such shares of Capital Stock being automatically transferred to a
Trust in accordance with Section 6.2.1(b) and Section 6.3.

          (b) Prior to granting any exception pursuant to Section 6.2.7(a), the
board of directors may require a ruling from the Internal Revenue Service or an
opinion of counsel, in either case, in form and substance satisfactory to the
board of directors in its sole discretion, as it may deem necessary or advisable
in order to determine or ensure the Corporation's status as a REIT.
Notwithstanding the receipt of any ruling or opinion, the board of directors may
impose such conditions or restrictions as it deems appropriate in connection
with granting such exception.


                                       13



          (c) Subject to Section 6.2.1(a)(ii), an underwriter which participates
in a public offering or a private placement of Capital Stock (or securities
convertible into or exchangeable for Capital Stock) may Beneficially Own or
Constructively Own shares of Capital Stock (or securities convertible into or
exchangeable for Capital Stock) in excess of the Aggregate Stock Ownership
Limit, the Common Stock Ownership Limit or both such limits, but only to the
extent necessary to facilitate such public offering or private placement.

          (d) The board of directors may only reduce the Excepted Holder Limit
for an Excepted Holder: (i) with the written consent of such Excepted Holder at
any time or (ii) pursuant to the terms and conditions of the agreements and
undertakings entered into with such Excepted Holder in connection with the
establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted
Holder Limit shall be reduced to a percentage that is less than the Common Stock
Ownership Limit.

          Section 6.2.8. Increase in Aggregate Stock Ownership Limit and Common
Stock Ownership Limit. The board of directors may from time to time increase the
Common Stock Ownership Limit and the Aggregate Stock Ownership Limit for one or
more Persons and decrease the Common Stock Ownership Limit and the Aggregate
Stock Ownership Limit for all other Persons; provided, however, that the
decreased Common Stock Ownership Limit and/or Aggregate Stock Ownership Limit
will not be effective for any Person whose percentage ownership in shares of
Capital Stock is in excess of such decreased Common Stock Ownership Limit and/or
Aggregate Stock Ownership Limit until such time as such Person's percentage of
shares of Capital Stock equals or falls below the decreased Common Stock
Ownership Limit and/or Aggregate Stock Ownership Limit, but any further
acquisition of shares of Capital Stock in excess of such percentage ownership of
shares of Capital Stock will be in violation of the Common Stock Ownership Limit
and/or Aggregate Stock Ownership Limit and, provided further, that the new
Common Stock Ownership Limit and/or Aggregate Stock Ownership Limit would not
allow five or fewer Persons to Beneficially Own more than 49.9% in value of the
outstanding shares of Capital Stock.

          Section 6.2.9. Legend. Any certificate representing shares of Capital
Stock shall bear substantially the following legend:

     The shares represented by this certificate are subject to restrictions on
     Beneficial Ownership, Constructive Ownership and Transfer for the purpose,
     among others, of the Corporation's maintenance of its status as a Real
     Estate Investment Trust (a "REIT") under the Internal Revenue Code of 1986,
     as amended (the "Code"), and for certain other purposes under the Code and
     the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
     Subject to certain further restrictions and except as expressly provided in
     the Corporation's Charter, no Person: (a) may Beneficially Own or
     Constructively Own shares of the Corporation's Common Stock in excess of
     9.9% (in value or number of shares) of the outstanding shares of Common
     Stock of the Corporation unless such Person is an Excepted Holder (in which
     case the Excepted Holder Limit for such Excepted Holder shall be
     applicable); (b) may Beneficially Own or Constructively Own shares of
     Capital Stock of the Corporation in excess of 9.9% of the value of the
     total outstanding shares of Capital Stock of the Corporation, unless such
     Person is an Excepted Holder (in which case the Excepted Holder Limit for
     such Excepted Holder shall be applicable); (c) may Beneficially Own or
     Constructively Own Capital Stock that would result in the Corporation being
     "closely held" under Section 856(h) of the Code or otherwise cause the
     Corporation to fail to qualify as a REIT; (d) other than as provided in the
     Corporation's Charter, may Transfer shares of Capital Stock if such
     Transfer would result in the Capital Stock of the Corporation being owned
     by fewer than 100 Persons; or (e) Beneficially Own


                                       14



     shares of Capital Stock of the Corporation that would result in 25% or more
     of any class of Capital Stock of the Corporation being Beneficially Owned
     by one or more ERISA Investors. Any Person who Beneficially Owns or
     Constructively Owns or attempts to Beneficially Own or Constructively Own
     shares of Capital Stock which causes or will cause a Person to Beneficially
     Own or Constructively Own shares of Capital Stock in excess or in violation
     of the above limitations must immediately notify the Corporation. If any of
     the restrictions on Transfer or ownership are violated, the shares of
     Capital Stock represented hereby will be automatically transferred to a
     Trustee of a Trust for the benefit of one or more Charitable Beneficiaries.
     In addition, the Corporation may redeem shares upon the terms and
     conditions specified by the board of directors in its sole discretion if
     the board of directors determines that ownership or a Transfer or other
     event may violate the restrictions described above. Furthermore, upon the
     occurrence of certain events, attempted Transfers in violation of the
     restrictions described above may be void ab initio. All capitalized terms
     in this legend have the meanings defined in the Charter of the Corporation,
     as the same may be amended from time to time, a copy of which, including
     the restrictions on Transfer and ownership, will be furnished to each
     holder of Capital Stock of the Corporation on request and without charge
     directed to the Secretary of the Corporation at its principal office.

     Instead of the foregoing legend, the certificate may state that the
Corporation will furnish a full statement about certain restrictions on
transferability to a stockholder on request and without charge. Such statement
shall also be sent to stockholders who are issued shares without a certificate.

     Section 6.3. Transfer of Capital Stock in Trust.

          Section 6.3.1. Ownership in Trust. Upon any purported Transfer or
other event described in Section 6.2.1(b) that would result in a transfer of
shares of Capital Stock to a Trust, such shares of Capital Stock shall be deemed
to have been transferred to the Trustee as trustee of a Trust for the exclusive
benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee
shall be deemed to be effective as of the close of business on the Business Day
prior to the purported Transfer or other event that results in the transfer to
the Trust pursuant to Section 6.2.1(b). The Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with the Corporation and any
Prohibited Owner. Each Charitable Beneficiary shall be designated by the
Corporation as provided in Section 6.3.6.

          Section 6.3.2. Status of Shares Held by the Trustee. Shares of Capital
Stock held by the Trustee shall continue to be issued and outstanding shares of
Capital Stock of the Corporation. The Prohibited Owner shall have no rights in
the shares held by the Trustee. The Prohibited Owner shall not benefit
economically from ownership of any shares held in trust by the Trustee and shall
have no rights to dividends or other distributions and shall not possess any
rights to vote or other rights attributable to the shares held in the Trust.

          Section 6.3.3. Dividend and Voting Rights. The Trustee shall have all
voting rights and rights to dividends or other distributions with respect to
shares of Capital Stock held in the Trust, which rights shall be exercised for
the exclusive benefit of the Charitable Beneficiary. Any dividend or other
distribution paid prior to the discovery by the Corporation that the shares of
Capital Stock have been transferred to the Trustee shall be paid by the
recipient of such dividend or distribution to the Trustee upon demand, and any
dividend or other distribution authorized but unpaid shall be paid when due to
the Trustee. Any dividend or distribution so paid to the Trustee shall be held
in trust for the Charitable Beneficiary. The Prohibited Owner shall have no
voting rights with respect to shares held in the Trust, and, subject to Maryland
law, effective as of the date that the shares of Capital Stock have been


                                       15



transferred to the Trustee, the Trustee shall have the authority with respect to
the shares held in the Trust (at the Trustee's sole discretion) (a) to rescind
as void any vote cast by a Prohibited Owner prior to the discovery by the
Corporation that the shares of Capital Stock have been transferred to the
Trustee and (b) to recast such vote in accordance with the desires of the
Trustee acting for the benefit of the Charitable Beneficiary; provided, however,
that if the Corporation has already taken irreversible corporate action, then
the Trustee shall not have the authority to rescind and recast such vote.
Notwithstanding the provisions of this Article VI, until the Corporation has
received notification that shares of Capital Stock have been transferred into a
Trust, the Corporation shall be entitled to rely on its share transfer and other
stockholder records for purposes of preparing lists of stockholders entitled to
vote at meetings, determining the validity and authority of proxies and
otherwise conducting votes of stockholders.

          Section 6.3.4. Sale of Shares by Trustee. Within 20 days of receiving
notice from the Corporation that shares of Capital Stock have been transferred
to the Trust, the Trustee of the Trust shall sell the shares held in the Trust
to a person, designated by the Trustee, whose ownership of the shares will not
violate the ownership limitations set forth in Section 6.2.1(a). Upon such sale,
the interest of the Charitable Beneficiary in the shares sold shall terminate
and the Trustee shall distribute the net proceeds of the sale to the Prohibited
Owner and to the Charitable Beneficiary as provided in this Section 6.3.4. The
Prohibited Owner shall receive the lesser of (a) the price paid by the
Prohibited Owner for the shares or, if the Prohibited Owner did not give value
for the shares in connection with the event causing the shares to be held in the
Trust (e.g., in the case of a gift, devise or other such transaction), the
Market Price of the shares on the day of the event causing the shares to be held
in the Trust and (b) the price per share received by the Trustee (net of any
commissions and other expenses of sale) from the sale or other disposition of
the shares held in the Trust. The Trustee may reduce the amount payable to the
Prohibited Owner by the amount of dividends and distributions which have been
paid to the Prohibited Owner and are owed by the Prohibited Owner to the Trustee
pursuant to Section 6.3.3. Any net sale proceeds in excess of the amount payable
to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary.
If, prior to the discovery by the Corporation that shares of Capital Stock have
been transferred to the Trustee, such shares are sold by a Prohibited Owner,
then (i) such shares shall be deemed to have been sold on behalf of the Trust
and (ii) to the extent that the Prohibited Owner received an amount for such
shares that exceeds the amount that such Prohibited Owner was entitled to
receive pursuant to this Section 6.3.4, such excess shall be paid to the Trustee
upon demand.

          Section 6.3.5. Purchase Right in Stock Transferred to the Trustee.
Shares of Capital Stock transferred to the Trustee shall be deemed to have been
offered for sale to the Corporation, or its designee, at a price per share equal
to the lesser of (a) the price per share in the transaction that resulted in
such transfer to the Trust (or, in the case of a devise or gift, the Market
Price at the time of such devise or gift) and (b) the Market Price on the date
the Corporation, or its designee, accepts such offer. The Corporation may reduce
the amount payable to the Prohibited Owner by the amount of dividends and
distributions which have been paid by the Prohibited Owner and are owed by the
Prohibited Owner to the Trustee pursuant to Section 6.3.3. The Corporation may
pay the amount of such reduction to the Trustee for the benefit of the
Charitable Beneficiary. The Corporation shall have the right to accept such
offer until the Trustee has sold the shares held in the Trust pursuant to
Section 6.3.4. Upon such a sale to the Corporation, the interest of the
Charitable Beneficiary in the shares sold shall terminate and the Trustee shall
distribute the net proceeds of the sale to the Prohibited Owner.


                                       16



          Section 6.3.6. Designation of Charitable Beneficiaries. By written
notice to the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust such
that (a) the shares of Capital Stock held in the Trust would not violate the
restrictions set forth in Section 6.2.1(a) in the hands of such Charitable
Beneficiary and (b) each such organization must be described in Section
501(c)(3) of the Code and contributions to each such organization must be
eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the
Code.

     Section 6.4. Restrictions on Ownership and Transfer of Shares of Capital
Stock by Benefit Plans.

          Section 6.4.1. Ownership Limitations Notwithstanding any other
provisions in the Charter, if and to the extent that any class or series of
shares of Capital Stock do not constitute "publicly offered securities," (as
defined in Section 2510.3-101 of the Department of Labor regulations, or any
successor regulation thereto) then Benefit Plan Investors may not, on any date,
hold, individually or in the aggregate, 25% or more of the value of such class
or series of shares of Capital Stock. For purposes of determining whether
Benefit Plan Investors hold, individually or in the aggregate, 25% or more of
the value of such class or series of shares of Capital Stock, the value of
shares of Capital Stock of such class held by any director or officer of the
Corporation, or any other Person who has discretionary authority or control with
respect to the assets of the Corporation, or the Advisor or its affiliates, as
defined in the Plan Asset Regulations, shall be disregarded.

          Section 6.4.2. Remedies for Violations by Benefit Plan Investors. If
the board of directors or its designee (including any duly authorized committee
of the board) shall at any time determine in good faith that (a) a Transfer or
other event has taken place that results in a violation of Section 6.4.1 or will
otherwise result in the underlying assets and property of the Corporation
becoming assets of any ERISA Investor or (b) that a Person intends to acquire or
has attempted to acquire or hold shares of Capital Stock in a manner that will
result in a violation of Section 6.4.1 or will otherwise result in the
underlying assets and property of the Corporation becoming assets of any ERISA
Investor, the board of directors or its designee shall take such action as it
deems advisable to mitigate, prevent or cure the consequences that might result
to the Corporation from such Transfer or other event, including, without
limitation, refusing to give effect to or preventing such Transfer or event
through redemption of such shares of Capital Stock or refusal to give effect to
the Transfer or event on the books of the Corporation or instituting proceedings
to enjoin such Transfer or other event.

          Section 6.4.3. Information on Benefit Plan Status. Any Person who
acquires or attempts or intends to acquire or hold shares of Capital Stock shall
provide to the Corporation such information as the Corporation may request in
order to determine whether such acquisition or holding has resulted or will
result a in violation of Section 6.4.1 or otherwise has resulted or will result
in the underlying assets and property of the Corporation becoming assets of any
ERISA Investor, including the name and address of any Person for whom a nominee
holds shares of Capital Stock and whether the underlying assets of such Person
include assets of any Benefit Plan Investor.

     Section 6.5. Settlement. Nothing in this Article VI shall preclude the
settlement of any transaction entered into through the facilities of any
national securities exchange or automated inter-dealer quotation system. The
fact that the settlement of any transaction is so permitted shall not negate the
effect of any other provision of this Article VI and any transferee in such a
transaction shall be subject to all of the provisions and limitations set forth
in this Article VI.

     Section 6.6. Enforcement. The Corporation is authorized specifically to
seek equitable relief, including injunctive relief, to enforce the provisions of
this Article VI.


                                       17



     Section 6.7. Non-Waiver. No delay or failure on the part of the Corporation
or the board of directors in exercising any right hereunder shall operate as a
waiver of any right of the Corporation or the board of directors, as the case
may be, except to the extent specifically waived in writing.

                                   ARTICLE VII
                        PROVISIONS FOR DEFINING, LIMITING
                      AND REGULATING CERTAIN POWERS OF THE
                CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS

     Section 7.1. Number of Directors. The business and affairs of the
Corporation shall be managed under the direction of the board of directors The
number of directors of the Corporation shall be six (6), which number may be
increased or decreased from time to time pursuant to the bylaws but shall never
be less than three (3). A majority of the board of directors will be Independent
Directors except for a period up to 60 days after the death, removal or
resignation of an Independent Director pending the election of such Independent
Director's successor. No reduction in the number of directors shall cause the
removal of any director from office prior to the expiration of his term, except
as may otherwise be provided in the terms of any Preferred Stock issued by the
Corporation. The names of the directors who shall serve on the board until the
first annual meeting of the stockholders and until their successors are duly
elected and qualify are:

                                 Louis J. Rogers
                             Stanley J. Olander, Jr.
                                Glenn W. Bunting
                               Robert A. Gary, IV
                                 W. Brand Inlow
                                D. Fleet Wallace

     These directors may increase the number of directors and fill any vacancy,
whether resulting from an increase in the number of directors or otherwise, on
the board of directors prior to the first annual meeting of stockholders in the
manner provided in the bylaws.

     The Corporation elects, at such time as it becomes eligible to make the
election provided for under Section 3-802(b) of the MGCL, that, except as may be
provided by the board of directors in setting the terms of any class or series,
any and all vacancies on the board of directors may be filled only by the
affirmative vote of a majority of the remaining directors in office, even if the
remaining directors do not constitute a quorum, and any director elected to fill
a vacancy shall serve for the remainder of the full term of the directorship in
which such vacancy occurred. Notwithstanding the foregoing sentence, Independent
Directors shall nominate replacements for vacancies among the Independent
Directors' positions.

     Section 7.2. Experience. Each director shall have at least three years of
relevant experience demonstrating the knowledge and experience required to
successfully acquire and manage the type of assets being acquired by the
Corporation. At least one of the Independent Directors shall have three years of
relevant real estate experience.

     Section 7.3. Committees. The board may establish such committees as it
deems appropriate, in its discretion, provided that the majority of the members
of each committee are Independent Directors.

     Section 7.4. Term. Except as may otherwise be provided in the terms of any
shares of Preferred Stock issued by the Corporation, each director shall hold
office for one year, until the next annual meeting


                                       18



of stockholders and until his or her successor is duly elected and qualifies.
Directors may be elected to an unlimited number of successive terms.

     Section 7.5. Fiduciary Obligations. The directors serve in a fiduciary
capacity to the Corporation and have a fiduciary duty to its stockholders. The
directors have a fiduciary duty to the stockholders to supervise the
relationship between the Corporation and the Advisor.

     Section 7.6. Rights of Objecting Stockholders. Holders of shares of Capital
Stock shall not be entitled to exercise any rights of an objecting stockholder
provided for under Title 3, Subtitle 2 of the MGCL unless the board, upon the
affirmative vote of a majority of the entire board, shall determine that such
rights shall apply, with respect to all or any classes or series of Capital
Stock, to a particular transaction or all transactions occurring after the date
of such approval in connection with which holders of such shares of Capital
Stock would otherwise be entitled to exercise such rights.

     Section 7.7. Ratification of Charter. Before the initial public offering of
the Common Stock, the board of directors, including a majority of the
Independent Directors, shall have reviewed and ratified the Charter by majority
vote.

     Section 7.8. REIT Qualification. If the Corporation elects to qualify for
federal income tax treatment as a REIT, the board of directors shall use its
reasonable best efforts to take such actions as are necessary or appropriate to
preserve the status of the Corporation as a REIT; however, if the board of
directors determines that it is no longer in the best interests of the
Corporation to continue to be qualified as a REIT, the board of directors may
revoke or otherwise terminate the Corporation's REIT election pursuant to
Section 856(g) of the Code. The board of directors also may determine that
compliance with any restriction or limitation on ownership and transfers of
Capital Stock set forth in Article VI is no longer required for REIT
qualification.

     Section 7.9. Determinations by the Board. The determination as to any of
the following matters, made in good faith by or pursuant to the direction of the
board of directors consistent with the Charter shall be final and conclusive and
shall be binding upon the Corporation and every holder of shares of its Capital
Stock: (a) the amount of the net income of the Corporation for any period and
the amount of assets at any time legally available for the payment of dividends,
redemption of its Capital Stock or the payment of other distributions on its
Capital Stock; (b) the amount of paid-in surplus, net assets, other surplus,
annual or other cash flow, funds from operations, net profit, net assets in
excess of capital, undivided profits or excess of profits over losses on sales
of assets; (c) the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged); (d) any
interpretation of the terms, preferences, conversion or other rights, voting
powers or rights, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of redemption of any class
or series of shares of Capital Stock; (e) the fair value, or any sale, bid or
asked price to be applied in determining the fair value, of any asset owned or
held by the Corporation or any shares of Capital Stock; (f) the number of shares
of class of Capital Stock; (g) any matter relating to the acquisition, holding
and disposition of any assets by the Corporation; or (h) any other matter
relating to the business and affairs of the Corporation or required by the
Charter or bylaws or otherwise to be determined by the board of directors.

     Section 7.10. Removal of Directors. Subject to the rights of holders of one
or more classes or series of shares of Preferred Stock to elect or remove one or
more directors, any director, or the entire board of directors, may be removed
from office at any time, but only by the affirmative vote of at least a majority
of the votes entitled to be cast generally in the election of directors.


                                       19



     Section 7.11. Authorization by Board of Stock Issuance. The board of
directors may authorize the issuance from time to time of shares of Capital
Stock of any class or series, whether now or hereafter authorized, or securities
or rights convertible into shares of Capital Stock of any class or series,
whether now or hereafter authorized, for such consideration as the board of
directors may deem advisable (or without consideration in the case of a stock
split or stock dividend), subject to such restrictions or limitations, if any as
may be set forth in the Charter or bylaws.

                                  ARTICLE VIII
                                     ADVISOR

     Section 8.1. Appointment and Initial Investment of the Advisor. The board
is responsible for setting the general policies of the Corporation and for the
general supervision of its business conducted by officers, agents, employees,
advisors or independent contractors of the Corporation. However, the board is
not required personally to conduct the business of the Corporation, and it may
(but need not) appoint, employ or contract with any Person (including a Person
Affiliated with any director) as an Advisor and may grant or delegate such
authority to the Advisor as the board may, in its sole discretion, deem
necessary or desirable. The term of retention of any Advisor shall not exceed
one year, although there is no limit to the number of times that a particular
Advisor may be retained. Before the initial public offering of the Corporation,
the Advisor shall have made the Initial Investment. The Advisor or any such
Affiliate may not sell the interest in the Corporation acquired with its Initial
Investment while the Advisor remains an Advisor but may transfer the interest in
the Corporation acquired with its Initial Investment to its Affiliates.

     Section 8.2. Supervision of the Advisor. The board of directors shall
evaluate the performance of the Advisor before entering into or renewing an
Advisory Agreement, and the criteria used in such evaluation shall be reflected
in the minutes of the meetings of the board of directors. The board of directors
may exercise broad discretion in allowing the Advisor to administer and regulate
the operations of the Corporation, to act as agent for the Corporation, to
execute documents on behalf of the Corporation and to make executive decisions
that conform to general policies and principles established by the board. The
board of directors, including a majority of the Independent Directors, shall
determine at least annually that the expenses incurred by the Corporation are
reasonable in light of the investment performance of the Corporation, its Net
Assets, its Net Income and the fees and expenses of other comparable
unaffiliated REITs. Each such determination shall be reflected in the minutes of
the meetings of the board. The board of directors, including a majority of the
Independent Directors, shall determine from time to time and at least annually
that the compensation to be paid to the Advisor is reasonable in relation to the
nature and quality of services performed and that such compensation is within
the limits prescribed by the Charter. The board of directors, including a
majority of the Independent Directors, shall also supervise the performance of
the Advisor and the compensation paid to the Advisor by the Corporation to
determine that the provisions of the Advisory Agreement are being met. Each such
determination shall be based on factors such as (a) the amount of the fee paid
to the Advisor in relation to the size, composition and performance of the
Corporation's portfolio; (b) the success of the Advisor in generating
opportunities that meet the investment objectives of the Corporation; (c) rates
charged to other REITs and to investors other than REITs by advisors performing
the same or similar services; (d) additional revenues realized by the Advisor
and its Affiliates through their relationship with the Corporation, including
loan administration, underwriting or broker commissions, servicing, engineering,
inspection and other fees, whether paid by the Corporation or by others with
whom the Corporation does business; (e) the quality and extent of service and
advice furnished by the Advisor; (f) the performance of the Corporation's
portfolio, including income, conservation or appreciation of capital, frequency
of problem investments and competence in dealing with distress situations; and
(g) the quality of the Corporation's portfolio relative to the investments
generated by the Advisor for its own account. The board of directors, including
a majority of the Independent Directors, may also consider all other factors


                                       20



that it deems relevant, and its findings on each of the factors considered shall
be recorded in the minutes of the board of directors. The board shall determine
whether any successor Advisor possesses sufficient qualifications to perform the
advisory function for the Corporation and whether the compensation provided for
in its contract with the Corporation is justified.

     Section 8.3. Fiduciary Obligations. The Advisor shall have a fiduciary
responsibility and duty to the Corporation and its stockholders.

     Section 8.4. Termination. Either a majority of the Independent Directors or
the Advisor may terminate the Advisory Agreement on 60 days' written notice
without cause or penalty, and, in such event, the Advisor will cooperate with
the Corporation and the board of directors in making an orderly transition of
the advisory function.

     Section 8.5. Disposition Fee. Unless otherwise provided in any resolutions
adopted by the board of directors, if the Advisor or its Affiliates or a
director or Sponsor provides a substantial amount of the services in the effort
to sell a property of the Corporation, that Person may receive an amount equal
to the lesser of (a) one-half of the customary Competitive Real Estate
Commission or (b) 3% of the sales price of such property or properties. In
addition, the amount paid when added to all other real estate commissions paid
to unaffiliated parties in connection with such sale shall not exceed an amount
equal to the lesser of the Competitive Real Estate Commission or an amount equal
to 6% of the sales price of such property or properties.

     Section 8.6. Incentive Fees. Unless otherwise provided in any resolutions
adopted by the board of directors, the Corporation may pay the Advisor an
interest in the gain from the sale of properties, for which full consideration
is not paid in cash or property of equivalent value, provided the amount or
percentage of such interest is reasonable. Such an interest in gain from the
sale of properties shall be considered presumptively reasonable if it does not
exceed 15% of the balance of such net proceeds remaining after payment to
stockholders, in the aggregate, of an amount equal to 100% of the Invested
Capital, plus an amount equal to at least six percent of the Invested Capital
per annum cumulative. In the case of multiple Advisors, such Advisor and any of
their Affiliates shall be allowed such fees provided such fees are distributed
by a proportional method reasonably designed to reflect the value added to the
Corporation assets by each respective Advisor or any Affiliate.

     Section 8.7. Organizational and Offering Expenses Limitation. Unless
otherwise provided in any resolutions adopted by the board of directors, the
Corporation shall reimburse the Advisor and its Affiliates for Organizational
and Offering Expenses incurred by the Advisor or its Affiliates; provided,
however, that the total amount of all Organizational and Offering Expenses shall
be reasonable and shall in no event exceed 15% of the Gross Proceeds of the
offering.

     Section 8.8. Real Estate Commissions or Acquisition Fees. Unless otherwise
provided in any resolutions adopted by the board of directors, the total of all
Real Estate Commissions or Acquisition Fees and Acquisition Expenses shall be
reasonable and shall not exceed an amount equal to 6% of the Contract Purchase
Price; provided, however, that the majority of the Independent Directors may
approve fees and expenses in excess of this limit if they determine the
transaction to be commercially competitive, fair and reasonable to the
Corporation.

     Section 8.9. Reimbursement for Total Operating Expenses. Unless otherwise
provided in any resolutions adopted by the board of directors, the Corporation
may reimburse the Advisor, at the end of each fiscal quarter, for Total
Operating Expenses incurred by the Advisor; provided, however, that the
Corporation shall not reimburse the Advisor at the end of any fiscal quarter for
Total Operating Expenses that, in the four consecutive fiscal quarters then
ended, exceed the greater of 2% of Average Invested


                                       21



Assets or 25% of Net Income (the "2%/25% Guidelines") for such years. The
Independent Directors shall have the responsibility of limiting Total Operating
Expenses to amounts that do not exceed the 2%/25% Guidelines unless they have
made a finding that, based on such unusual and non-recurring factors that they
deem sufficient, a higher level of expenses (an "Excess Amount") is justified.
Any such finding and the reasons in support thereof shall be reflected in the
minutes of the meetings. Within 60 days after the end of any fiscal quarter of
the Corporation for which there is an Excess Amount for the 12 months then ended
that the Independent Directors concludes was justified and reimbursable to the
Advisor, there shall be sent to the Common Stockholders a written disclosure of
such fact, together with an explanation of the factors the Independent Directors
considered in determining that such Excess Amount was justified. In the event
that the Independent Directors do not determine that excess expenses are
justified, the Advisor shall reimburse the Corporation at the end of the
12-month period the amount by which the aggregate annual expenses paid or
incurred by the Corporation exceeded the 2%/25% Guidelines.

                                   ARTICLE IX
                      INVESTMENT OBJECTIVES AND LIMITATIONS

     Section 9.1. Investment Objectives. The board of directors shall establish
written policies on investments and borrowing and shall monitor the
administrative procedures, investment operations and performance of the
Corporation and the Advisor to assure that such policies are carried out. The
board of directors shall review the investment policies of the Corporation with
sufficient frequency (not less often than annually) to determine that the
policies being followed by the Corporation are in the best interests of the
Common Stockholders. Each such determination and the basis therefor shall be set
forth in the minutes of the meetings of the board of directors.

     Section 9.2. Certain Permitted Investments. Until such time as the shares
of Capital Stock are Listed, the following investment limitations shall apply.
The Corporation may invest in joint ventures with the Sponsor, Advisor, one or
more directors or any Affiliate, only if a majority of directors (including a
majority of Independent Directors) not otherwise interested in the transaction,
approve such investment as being fair and reasonable to the Corporation and on
substantially the same terms and conditions as those received by the other joint
venturers. Subject to any limitations in Section 9.3, the Corporation may invest
in equity securities only if a majority of directors (including a majority of
Independent Directors) not otherwise interested in the transaction approve such
investment as being fair, competitive and commercially reasonable.

     Section 9.3. Investment Limitations. Until such time as the shares of
Capital Stock are Listed, the following investment limitations shall apply. In
addition to other investment restrictions imposed by the board from time to
time, consistent with the Corporation's objective of qualifying as a REIT, the
following shall apply to the Corporation's investments:

     (a)  Not more than 10% of the Corporation's total assets shall be invested
          in unimproved real property.

     (b)  The Corporation shall not invest in commodities or commodity future
          contracts. This limitation is not intended to apply to futures
          contracts, when used solely for hedging purposes in connection with
          the Corporation's ordinary business of investing in real estate
          assets.


                                       22



     (c)  The Corporation shall not invest in or make any mortgage unless an
          appraisal is obtained concerning the underlying property except for
          those loans insured or guaranteed by a government or government
          agency. In cases in which a majority of Independent Directors so
          determine, and in all cases in which the transaction is with the
          Advisor, Sponsor, directors, or any Affiliates thereof, such appraisal
          of the underlying property must be obtained from an Independent
          Expert. Such appraisal shall be maintained in the Corporation's
          records for at least five years and shall be available for inspection
          and duplication by any stockholder. In addition to the appraisal, a
          mortgagee's or owner's title insurance policy or commitment as to the
          priority of the mortgage or condition of the title must be obtained.

     (d)  The Corporation shall not make or invest in any mortgage on any one
          property if the aggregate amount of all mortgage loans outstanding on
          the property, including the loans of the Corporation, would exceed an
          amount equal to 85% of the appraised value of the property as
          determined by appraisal unless substantial justification exists
          because of the presence of other underwriting criteria. For purposes
          of this subsection, the "aggregate amount of all mortgage loans
          outstanding on the property, including the loans of the Corporation"
          shall include all interest (excluding contingent participation in
          income and/or appreciation in value of the mortgaged property), the
          current payment of which may be deferred pursuant to the terms of such
          loans, to the extent that deferred interest on each loan exceeds five
          percent per annum of the principal balance of the loan.

     (e)  The Corporation shall not invest in indebtedness secured by a mortgage
          on real property which is subordinate to the lien or other
          indebtedness of the Advisor, any director, the Sponsor or any
          Affiliate of the Corporation.

     (f)  The Corporation shall not issue (i) equity securities redeemable
          solely at the option of the holder (except that stockholders may offer
          their shares of Common Stock to the Corporation pursuant to any
          redemption plan adopted by the board on terms outlined in the
          prospectus relating to any offering, as such plan is thereafter
          amended in accordance with its terms); (ii) debt securities unless the
          historical debt service coverage (in the most recently completed
          fiscal year) as adjusted for known changes is sufficient to properly
          service that higher level of debt; (iii) equity securities on a
          deferred payment basis or under similar arrangements; or (iv) options
          or warrants to the Advisor, directors, Sponsor or any Affiliate
          thereof except on the same terms as such options or warrants are sold
          to the general public. Options or warrants may be issued to persons
          other than the Advisor, directors, Sponsor or any Affiliate thereof,
          but not at exercise prices less than the fair market value of the
          underlying securities on the date of grant and not for consideration
          (which may include services) that in the judgment of the Independent
          Directors has a market value less than the value of such option or
          warrant on the date of grant. Options or warrants issuable to the
          Advisor, directors, Sponsor or any Affiliate thereof shall not exceed
          10% of the outstanding shares of Capital Stock on the date of grant.
          The voting rights per share of Capital Stock (other than any publicly
          held share of Capital Stock) sold in a private offering shall not
          exceed the voting rights which bear the same relationship to the
          voting rights of a publicly held share of Capital Stock as the
          consideration paid to the Corporation for each privately offered share
          of Capital Stock bears to the book value of each outstanding publicly
          held share of Capital Stock.

     (g)  A majority of the directors shall authorize the consideration to be
          paid for each property, ordinarily based on the fair market value of
          the property. If a majority of the Independent Directors determine, or
          if the property is acquired from the Advisor, a director, the Sponsor
          or their Affiliates, such fair market value shall be determined by a
          qualified Independent Expert selected by the Independent Directors.


                                       23



     (h)  The aggregate Leverage shall be reasonable in relation to the Net
          Assets and shall be reviewed by the board at least quarterly. The
          maximum amount of such Leverage shall not exceed 300% of the Net
          Assets as of the date of any borrowing. Notwithstanding the foregoing,
          Leverage may exceed such limit if any excess in borrowing over such
          300% level is approved by a majority of the Independent Directors.

     (i)  The Corporation will continually review its investment activity to
          attempt to ensure that it is not classified as an "investment company"
          under the Investment Company Act of 1940, as amended.

     (j)  The Corporation will not make any investment that the Corporation
          believes will be inconsistent with its objectives of qualifying and
          remaining qualified as a REIT unless and until the board determines,
          in its sole discretion, that REIT qualification is not in the best
          interests of the Corporation.

     (k)  The Corporation shall not invest in real estate contracts of sale.

     Section 9.4. Limitations on Roll-Up Transactions. In connection with any
proposed Roll-Up Transaction, an appraisal of all of the Corporation's assets
shall be obtained from a competent Independent Expert. The appraisal shall be
based on the evaluation of all relevant information and shall indicate the value
of the assets as of a date immediately prior to the announcement of the proposed
Roll-Up Transaction. The appraisal shall assume an orderly liquidation of the
assets over a 12-month period. The terms of the engagement of the Independent
Expert shall clearly state that the engagement is for the benefit of the
Corporation and its stockholders. A summary of the appraisal, indicating all
material assumptions underlying the appraisal, shall be included in a report to
stockholders in connection with a proposed Roll-Up Transaction. In connection
with a proposed Roll-Up Transaction, the Person sponsoring the Roll-Up
Transaction shall offer to each Common Stockholder who votes against the
proposed Roll-Up Transaction the choice of:

     (a)  accepting the securities of the Roll-Up Entity offered in the proposed
          Roll-Up Transaction; or

     (b)  one of the following:

          (i)  remaining as a Common Stockholder of the Corporation and
               preserving its interests therein on the same terms and conditions
               as existed previously; or

          (ii) receiving cash in an amount equal to the stockholder's pro rata
               share of the appraised value of the Net Assets of the
               Corporation.

     The Corporation is prohibited from participating in any proposed Roll-Up
     Transaction:

     (a)  that would result in the Common Stockholders having voting rights in a
          Roll-Up Entity that are less than the rights set forth in Article XI
          hereof;

     (b)  that includes provisions that would operate as a material impediment
          to, or frustration of, the accumulation of shares by any purchaser of
          the securities of the Roll-Up Entity (except to the minimum extent
          necessary to preserve the tax status of the Roll-Up Entity), or that
          would limit the ability of an investor to exercise the voting rights
          of its securities of the Roll-Up Entity on the basis of the number of
          shares held by that investor;

     (c)  in which investors' rights of access to the records of the Roll-Up
          Entity will be less than those described in Section 11.5 and Section
          11.6 hereof; or

     (d)  in which any of the costs of the Roll-Up Transaction would be borne by
          the Corporation if the Roll-Up Transaction is not approved by the
          Common Stockholders.


                                       24



                                    ARTICLE X
                              CONFLICTS OF INTEREST

     Section 10.1. Sales and Leases to the Corporation. The Corporation may
purchase or lease a property or properties from the Sponsor, the Advisor, a
director, or any Affiliate thereof upon a finding by a majority of directors
(including a majority of Independent Directors) not otherwise interested in the
transaction that such transaction is fair and reasonable to the Corporation and
at a price to the Corporation no greater than the cost of the property to such
Sponsor, Advisor, director or Affiliate, or, if the price to the Corporation is
in excess of such cost, that substantial justification for such excess exists
and such excess is reasonable. In no event shall the purchase price of any
property to the Corporation exceed its current appraised value.

     Section 10.2. Sales and Leases to the Sponsor, Advisor, Directors or
Affiliates. An Advisor, Sponsor, director or Affiliate thereof may purchase or
lease properties from the Corporation if a majority of directors (including a
majority of Independent Directors) not otherwise interested in the transaction
determine that the transaction is fair and reasonable to the Corporation.

     Section 10.3. Other Transactions.

          (a) No goods or services will be provided by the Advisor or its
Affiliates to the Corporation unless a majority of the directors (including a
majority of the Independent Directors) not otherwise interested in such
transaction approve such transaction as fair and reasonable to the Corporation
and on terms and conditions not less favorable to the Corporation than those
available from unaffiliated third parties.

          (b) The Corporation shall not make loans to the Sponsor, Advisor,
directors or any Affiliates thereof except loans to wholly owned subsidiaries of
the Corporation. The Sponsor, Advisor, directors and any Affiliates thereof
shall not make loans to the Corporation, or to joint ventures in which the
Corporation is a co-venturer, unless approved by a majority of the directors
(including a majority of the Independent Directors) not otherwise interested in
such transaction as fair, competitive and commercially reasonable, and no less
favorable to the Corporation than comparable loans between unaffiliated parties.

     Section 10.4. Right of First Opportunity. The Advisor also is obligated to
provide the Corporation with the first opportunity to purchase any Class A
income-producing apartment communities which satisfy the Corporation's
investment objectives, as determined from time to time by the board of
directors, placed under contract by the Advisor or its Affiliates, provided that
the board of directors votes to make the purchase within seven (7) days of being
offered such property by the Advisor.

                                   ARTICLE XI
                                  STOCKHOLDERS

     Section 11.1 Meetings of Stockholders. There shall be an annual meeting of
the stockholders, to be held at such time and place as shall be determined by or
in the manner prescribed in the bylaws, at which the directors shall be elected
and any other proper business may be conducted. The annual meeting will be held
on a date that is a reasonable period of time following the distribution of the
Corporation's annual report to stockholders. The holders of a majority of shares
of Capital Stock present in person or by proxy, at an annual meeting at which a
quorum is present, may, without the necessity for concurrence by the board, vote
to elect the directors. A quorum shall be 50% of the then outstanding shares of
Common


                                       25



Stock. Special meetings of stockholders may be called in the manner provided in
the bylaws, including by the president or by a majority of the directors or a
majority of the Independent Directors, and shall be called by an officer of the
Corporation upon written request of Common Stockholders holding in the aggregate
not less than 10% of the outstanding shares entitled to be cast on any issue
proposed to be considered at any such special meeting. Notice of any special
meeting of stockholders shall be given as provided in the bylaws and the special
meeting shall be held not less than 15 days nor more than 60 days after the
delivery of such notice. If the meeting is called by written request of
stockholders as described in this Section 11.1, the special meeting shall be
held at the time and place specified in the stockholder request; provided,
however, that if none is so specified, at such time and place convenient to the
stockholders. If there are no directors, the officers of the Corporation shall
promptly call a special meeting of the stockholders entitled to vote for the
election of successor directors. Any meeting may be adjourned and reconvened as
the board may determine or as otherwise provided in the bylaws.

     Section 11.2. Extraordinary Actions. Notwithstanding any provision of law
permitting or requiring any action to be taken or approved by the affirmative
vote of the holders of shares entitled to cast a greater number of votes, any
such action shall be effective and valid if taken or approved by the affirmative
vote of holders of shares entitled to cast a majority of all the votes entitled
to be cast on the matter.

     Section 11.3. Voting Rights of Stockholders. Subject to the provisions of
any class or series of shares of Capital Stock then outstanding and the
mandatory provisions of any applicable laws or regulations, the stockholders
shall be entitled to vote only on the following matters: (a) election or removal
of directors, without the necessity for concurrence by the board, as provided in
Sections 11.1, 7.4 and 7.10 hereof; (b) amendment of the Charter as provided in
this Section 11.3 and Article XIII hereof, without the necessity for concurrence
by the board; (c) liquidation or dissolution of the Corporation, without the
necessity for concurrence by the board; (d) merger, reorganization or
consolidation of the Corporation, or the sale or other disposition of all or
substantially all of the Corporation's assets; and (e) such other matters with
respect to which the board of directors has adopted a resolution declaring that
a proposed action is advisable and directing that the matter be submitted to the
stockholders for approval or ratification. Except with respect to the foregoing
matters, no action taken by the stockholders at any meeting shall in any way
bind the board. Without the approval of a majority of the shares entitled to
vote on the matter, the board may not (a) amend the Charter to materially and
adversely affect the rights, preferences and privileges of the shareholders of
Capital Stock; (b) amend Charter provisions relating to director qualifications,
fiduciary duties, liability and indemnification, conflicts of interest,
investment policies or investment restrictions; (c) liquidate or dissolve the
Corporation other than before the initial investment in property; (d) sell all
or substantially all of the Corporation's assets other than in the ordinary
course of business or as otherwise permitted by law; or (e) cause the merger or
reorganization of the Corporation except as permitted by law.

     Section 11.4. Voting Limitations on Shares Held by the Advisor, Directors
and Affiliates. No shares of Common Stock may be transferred or issued to the
Advisor, a director, or any Affiliate thereof unless such prospective
stockholder agrees that it will not vote or consent on matters submitted to the
stockholders regarding (a) the removal of such Advisor, director or any of its
Affiliates or (b) any transaction between the Corporation and any such Advisor,
director or any of its Affiliates. To the extent permitted by the MGCL, in
determining the requisite percentage in interest of shares necessary to approve
a matter on which the Advisor, a director and any of their Affiliates may not
vote or consent, any shares owned by any of them shall not be included.


                                       26



     Section 11.5. Right of Inspection. Any stockholder and any designated
representative thereof shall be permitted access to the records of the
Corporation to which it is entitled under applicable law at all reasonable times
and may inspect and copy any such records for a reasonable charge. Inspection of
the Corporation's books and records by the office or agency administering the
securities laws of a jurisdiction shall be permitted upon reasonable notice and
during normal business hours.

     Section 11.6. Access to Stockholder List. An alphabetical list of the
names, addresses and telephone numbers of the Common Stockholders, along with
the number of shares of Capital Stock held by each of them (the "Stockholder
List"), shall be maintained as part of the books and records of the Corporation
and shall be available for inspection by any Common Stockholder or the
stockholder's designated agent at the home office of the Corporation upon the
request of the Common Stockholder. The Stockholder List shall be updated at
least quarterly to reflect changes in the information contained therein. A copy
of such list shall be mailed to any Common Stockholder so requesting within 10
days of receipt by the Corporation of the request. The copy of the Stockholder
List shall be printed in alphabetical order, on white paper and in a readily
readable type size (in no event smaller than 10-point type). The Corporation may
impose a reasonable charge for expenses incurred in reproduction pursuant to the
stockholder request. A Common Stockholder may request a copy of the Stockholder
List in connection with matters relating to stockholders' voting rights, the
exercise of stockholder rights under federal proxy laws.

     If the Advisor or the board neglects or refuses to exhibit, produce or mail
a copy of the Stockholder List as requested, the Advisor or the board, as the
case may be, shall be liable to any Common Stockholder requesting the list for
the costs, including reasonable attorneys' fees incurred by that stockholder for
compelling the production of the Stockholder List and for actual damages
suffered by any Common Stockholder by reason of such refusal or neglect. It
shall be a defense that the actual purpose and reason for the request for
inspection or for a copy of the Stockholder List is to secure such list of
stockholders or other information for the purpose of selling such list or copies
thereof or using the same for a commercial purpose other than in the interest of
the applicant as a stockholder relative to the affairs of the Corporation. The
Corporation may require the stockholder requesting the Stockholder List to
represent that the list is not requested for a commercial purpose unrelated to
the stockholder's interest in the Corporation. The remedies provided hereunder
to stockholders requesting copies of the Stockholder List are in addition to and
shall not in any way limit other remedies available to stockholders under
federal law or the laws of any state.

     Section 11.7. Reports. The directors, including the Independent Directors,
shall take reasonable steps to insure that the Corporation shall cause to be
prepared and mailed or delivered to each Common Stockholder as of a record date
after the end of the fiscal year and each holder of other publicly held
securities of the Corporation within 120 days after the end of the fiscal year
to which it relates an annual report for each fiscal year ending after the
initial public offering of its securities that shall include: (a) financial
statements prepared in accordance with generally accepted accounting principles
that are audited and reported on by independent certified public accountants;
(b) the ratio of the costs of raising capital during the period to the capital
raised; (c) the aggregate amount of advisory fees and the aggregate amount of
other fees paid to the Advisor and any Affiliate of the Advisor by the
Corporation, including fees or charges paid to the Advisor and any Affiliate of
the Advisor by third parties doing business with the Corporation; (d) the Total
Operating Expenses of the Corporation, stated as a percentage of Average
Invested Assets and as a percentage of its Net Income; (e) a report from the
Independent Directors that the policies being followed by the Corporation are in
the best interests of its Common Stockholders and the basis for such
determination; and (f) separately stated, full disclosure of all material terms,
factors and circumstances surrounding any and all transactions involving the
Corporation, directors, Advisors, Sponsors and any Affiliate thereof occurring
in the year for which the annual report is made, and the Independent Directors
shall be specifically charged with a duty to examine and comment in the report
on


                                       27



the fairness of such transactions. The board of directors, including the
Independent Directors, shall take reasonable steps to ensure that the
requirements of this Section 11.7 are met. Such report may be delivered by any
reasonable means, including by delivery of a written or electronic notice that
indicates how the report may be accessed on the Corporation's web address.

                                   ARTICLE XII
                    LIABILITY LIMITATION, INDEMNIFICATION AND
                        TRANSACTIONS WITH THE CORPORATION

     Section 12.1. Limitation of Stockholder Liability. No stockholder shall be
liable for any debt, claim, demand, judgment or obligation of any kind of,
against or with respect to the Corporation by reason of his being a stockholder,
nor shall any stockholder be subject to any personal liability whatsoever, in
tort, contract or otherwise, to any Person in connection with the Corporation's
assets or the affairs of the Corporation by reason of his being a stockholder.

     Section 12.2. Limitation of Director and Officer Liability;
Indemnification.

          (a) Subject to any applicable conditions set forth under Maryland law
or in paragraph (b) below, (i) no director or officer of the Corporation shall
be liable to the Corporation or its stockholders for money damages and (ii) the
Corporation shall indemnify and pay or reimburse reasonable expenses in advance
of the final disposition of a proceeding to (A) any individual who is a present
or former director or officer of the Corporation; (B) any individual who, while
a director or officer of the Corporation and at the request of the Corporation,
serves or has served as a director, officer, partner or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise; or (C) the Advisor or any of its Affiliates acting as an agent
of the Corporation and their respective officers, directors, managers and
employees, from and against any claim or liability to which such person may
become subject or which such person may incur by reason of his service in such
capacity. Neither the amendment nor repeal of this paragraph (a) of Section
12.2, nor the adoption or amendment of any other provision of the Charter or
bylaws inconsistent with this paragraph (a) of Section 12.2, shall apply to or
affect in any respect the applicability of the preceding sentences with respect
to any act or failure to act that occurred prior to such amendment, repeal or
adoption.

          (b) Notwithstanding anything to the contrary contained in clause (i)
or (ii) of paragraph (a) above, the Corporation shall not provide for
indemnification of or hold harmless a director, an Advisor or any Affiliate of
an Advisor (the "Indemnitee") for any liability or loss suffered by any of them,
unless all of the following conditions are met:

               (i) the Indemnitee has determined, in good faith, that the course
of conduct that caused the loss or liability was in the best interests of the
Corporation;

               (ii) the Indemnitee was acting on behalf of or performing
services for the Corporation;

               (iii) such liability or loss was not the result of (A) negligence
or misconduct, in the case that the Indemnitee is a director (other than an
Independent Director), an Advisor or an Affiliate of an Advisor or (B) gross
negligence or willful misconduct, in the case that the Indemnitee is an
Independent Director;

               (iv) such indemnification or agreement to hold harmless is
recoverable only out of Net Assets and not from stockholders; and


                                       28



               (v) with respect to losses, liabilities or expenses arising from
or out of an alleged violation of federal or state securities laws, one or more
of the following conditions are met: (A) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the Indemnitee; (B) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction as to the
Indemnitee; or (C) a court of competent jurisdiction approves a settlement of
the claims against the Indemnitee and finds that indemnification of the
settlement and the related costs should be made, and the court considering the
request for indemnification has been advised of the position of the Securities
and Exchange Commission and of the published position of any state securities
regulatory authority in which securities of the Corporation were offered or sold
as to indemnification for violations of securities laws.

     Section 12.3. Payment of Expenses. The Corporation shall pay or reimburse
reasonable legal expenses and other costs incurred by an Indemnitee in advance
of final disposition of a proceeding if all of the following are satisfied: (i)
the proceeding relates to acts or omissions with respect to the performance of
duties or services on behalf of the Corporation, (ii) the Indemnitee provides
the Corporation with written affirmation of the Indemnitee's good faith belief
that the Indemnitee has met the standard of conduct necessary for
indemnification by the Corporation as authorized by Section 12.2 hereof, (iii)
the legal proceeding was initiated by a third party who is not a stockholder or,
if by a stockholder of the Corporation acting in his or her capacity as such, a
court of competent jurisdiction approves such advancement, and (iv) the
Indemnitee provides the Corporation with a written agreement to repay the amount
paid or reimbursed by the Corporation, together with the applicable legal rate
of interest thereon, if it is ultimately determined that the Indemnitee did not
comply with the requisite standard of conduct and is not entitled to
indemnification. Any indemnification payment or reimbursement of expenses will
be furnished in accordance with the procedures in Section 2-418(e) of the MGCL
or any successor statute.

     Section 12.4. Express Exculpatory Clauses in Instruments. Neither the
stockholders nor the directors, officers, employees or agents of the Corporation
shall be liable under any written instrument creating an obligation of the
Corporation by reason of their being stockholders, directors, officers,
employees or agents of the Corporation, and all Persons shall look solely to the
Corporation's assets for the payment of any claim under or for the performance
of that instrument. The omission of the foregoing exculpatory language from any
instrument shall not affect the validity or enforceability of such instrument
and shall not render any stockholder, director, officer, employee or agent
liable thereunder to any third party, nor shall the directors or any officer,
employee or agent of the Corporation be liable to anyone as a result of such
omission.

     Section 12.5. Transactions with Affiliates. The Corporation shall not
engage in transactions with the Advisor, the Sponsor, a director or any of the
Corporation's Affiliates, except to the extent that each such transaction has,
after disclosure of such affiliation, been approved or ratified by the
affirmative vote of a majority of the directors (including a majority of the
Independent Directors) not Affiliated with the Person who is party to the
transaction and:

     (a)  The transaction is fair and reasonable to the Corporation.

     (b)  The terms and conditions of such transaction are not less favorable to
          the Corporation than those available from unaffiliated third parties.

     (c)  If an acquisition is involved, the total consideration is not in
          excess of the appraised value of the Property being acquired, as
          determined by an Independent Appraiser.


                                       29



                                  ARTICLE XIII
                                    AMENDMENT

     The Corporation reserves the right from time to time to make any amendment
to the Charter, now or hereafter authorized by law, including any amendment
altering the terms or contract rights, as expressly set forth in the Charter, of
any outstanding shares of Capital Stock. All rights and powers conferred by the
Charter on stockholders, directors and officers are granted subject to this
reservation. Except for any amendments permitted to be made without stockholder
approval by specific provision in the Charter, any amendment to the Charter
shall be valid only if approved by the affirmative vote of a majority of all
votes entitled to be cast on the matter, including without limitation, (1) any
amendment which would adversely affect the rights, preferences and privileges of
the stockholders and (2) any amendment to Article IX, Article X, Article XII,
Sections 7.2, 7.5 and 7.10 and this Article XIII (or any other amendment of the
Charter that would have the effect of amending such sections).

     THIRD: The amendment and restatement of the Charter of the Corporation as
hereinabove set forth were duly advised by the board of directors and approved
by the sole stockholder of the Corporation as required by law.

     FOURTH: The current address of the principal office of the Corporation is
as set forth in Article III of the foregoing amendment and restatement of the
Charter.

     FIFTH: The name and address of the Corporation's current resident agent are
as set forth in Article III of the foregoing amendment and restatement of the
Charter.

     SIXTH: The number of directors of the Corporation and the names of those
currently in office are as set forth in Section 7.1 of the foregoing amendment
and restatement of the Charter.

     SEVENTH: The total number of shares of stock which the Corporation had
authority to issue immediately prior to this amendment and restatement was
100,000 shares of Common Stock $0.01 par value per share. The aggregate par
value of all shares of stock having par value was $1,000.

     EIGHTH: The total number of shares of stock which the Corporation has
authority to issue pursuant to the foregoing amendment and restatement of the
charter is 350,000,000, consisting of 300,000,000 shares of Common Stock, $0.01
par value per share, and 50,000,000 shares of Preferred Stock, $0.01 par value
per share. The aggregate par value of all authorized shares of stock having par
value is $3,500,000.

     NINTH: The undersigned President acknowledges the foregoing amendment and
restatement of the Charter to be the corporate act of the Corporation and as to
all matters and facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties of perjury.


                                       30



     IN WITNESS WHEREOF, NNN Apartment REIT, Inc. has caused the foregoing
amendment and restatement of the Charter to be signed in its name and on its
behalf by its President and attested to by its Secretary on this __________ day
of _____________, 2006.

ATTEST:                                 NNN APARTMENT REIT, INC.


                                        By:                               (SEAL)
- -------------------------------------       ------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------
Title: Secretary                        Title: President


                                       31

EX-3.5

                                                                     EXHIBIT 3.5

                                     FORM OF
                           AMENDED AND RESTATED BYLAWS
                                       OF
                            NNN APARTMENT REIT, INC.

                                    ARTICLE I
                                     OFFICES

     Section 1.1 Principal Office. The principal office of the Company in the
State of Maryland shall be located at such place as the Board of Directors may
designate.

     Section 1.2 Additional Offices. The Company may have additional offices,
including a principal executive office, at such places as the Board of Directors
may from time to time determine or the business of the Company may require.

                                   ARTICLE II
                                  STOCKHOLDERS

     Section 2.1 Place of Meetings. All meetings of the stockholders shall be
held at the principal executive office of the Company or at such other place as
shall be set by the Board of Directors and stated in the notice of meeting.

     Section 2.2 Annual Meetings. The annual meeting of the stockholders, for
the election of Directors and transaction of any business within the powers of
the Company, shall be held in May of each year, beginning with the year 2007, on
such date as determined by the Board of Directors.



     Section 2.3 Special Meetings. A special meeting of the stockholders for any
purpose or purposes may be called at any time by the president, by a majority of
the Board of Directors, by a majority of the Independent Directors (as defined
in the Company's charter) or by the secretary upon the written request of
stockholders together holding at least 10% of the number of shares of the
Company at the time outstanding and entitled to vote with respect to the
business to be transacted at such meeting. At a special meeting no business
shall be transacted and no corporate action shall be taken other than that
stated in the notice of the meeting. In the event of a stockholders' meeting
requested by the stockholders meeting the requirements set forth in the first
sentence, the secretary of the Company shall, within ten days of his or her
receipt of the written request required above, notify, in the manner set forth
herein, each stockholder entitled to vote at a meeting of the stockholders.
Notwithstanding anything to the contrary herein, such meeting shall be held not
less than 15 days nor more than 60 days after the secretary's delivery of such
notice. Subject to the foregoing sentence, such meeting shall be held at the
time and place specified in the stockholder request; provided, however, that if
none is so specified, at such time and place convenient to the stockholders.
Unless requested by the stockholders entitled to cast a majority of all the
votes entitled to be cast at such meeting, a special meeting need not be called
to consider any matter which is substantially the same as a matter voted on at
any special meeting of the stockholders held during the preceding 12 months.

     Section 2.4 Notice of Meetings. Written or printed notice stating the
place, day and hour of every meeting of the stockholders and, in the case of a
special meeting or as otherwise may be required by the Maryland General
Corporation Law (the "MGCL"), the purpose for which the meeting is called, shall
be provided not less than 10 nor more than 90 days before the date of a meeting
to each stockholder of record entitled to vote at such meeting and each other
stockholder entitled to notice of such meeting. Notice shall be deemed delivered
to a stockholder upon being (a) mailed to the stockholder at his address which
appears in the stock transfer books of the Company, in which case such notice
shall be deemed to be given when deposited in the United States mail with
postage prepaid thereon, (b) personally delivered to the stockholder; (c) left
at the stockholder's residence or usual place of business; or (d) transmitted to
the stockholder by electronic mail to any electronic mail address of the
stockholder or by any other means permitted by Maryland law.

     Section 2.5 Scope of Notice. Any business of the Company may be transacted
at an annual meeting of stockholders without being specifically designated in
the notice required in Section 2.4, except such business as is required by
statute to be stated in such notice. No business shall be transacted at a
special meeting of stockholders except as specifically designated in the notice.

     Section 2.6 Organization and Conduct. Every meeting of stockholders shall
be conducted by an individual appointed by the Board of Directors to be chairman
of the meeting or, in the absence of such appointment, by the Chairman of the
Board or, in the case of a vacancy in the office or absence of the Chairman of
the Board, by one of the following officers present at the meeting: the
president, the vice presidents in their order of rank and seniority, or, in the
absence of such officers, a chairman chosen by the stockholders by the vote of a
majority of the votes cast by stockholders present in person or by proxy. The
secretary, or, in the secretary's absence, an assistant secretary, or in the
absence of both the secretary and assistant secretaries,


                                        2



an individual appointed by the Board of Directors or, in the absence of such
appointment, an individual appointed by the chairman of the meeting shall act as
secretary. In the event that the secretary presides at a meeting of the
stockholders, an assistant secretary shall record the minutes of the meeting.
The order of business and all other matters of procedure at any meeting of
stockholders shall be determined by the chairman of the meeting. The chairman of
the meeting may prescribe such rules, regulations and procedures and take such
action as, in the discretion of such chairman, are appropriate for the proper
conduct of the meeting, including, without limitation, (a) restricting admission
to the time set for the commencement of the meeting; (b) limiting attendance at
the meeting to stockholders of record of the Company, their duly authorized
proxies and other such individuals as the chairman of the meeting may determine;
(c) limiting participation at the meeting on any matter to stockholders of
record of the Company entitled to vote on such matter, their duly authorized
proxies and other such individual as the chairman of the meeting may determine;
(d) limiting the time allotted to questions or comments by participants; (e)
determining when the polls should be opened and closed; (f) maintaining order
and security at the meeting; (g) removing any stockholder or any other
individuals who refuses to comply with meeting procedures, rules or guidelines
as set forth by the chairman of the meeting; and (h) concluding a meeting or
recessing or adjourning the meeting to a later date and time and place announced
at the meeting. Unless otherwise determined by the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with the
rules of parliamentary procedure.

     Section 2.7 Quorum; Adjournment. Any number of stockholders together
holding at least a majority of the outstanding shares of equity stock entitled
to vote with respect to the business to be transacted, who shall be present in
person or represented by proxy at any meeting duly called, shall constitute a
quorum for the transaction of business except as otherwise provided by law, the
Company's charter or these Bylaws. If less than a quorum shall be in attendance
at the time for which a meeting shall have been called, the chairman of the
meeting shall have the power to adjourn the meeting from time to time to a date
not more than 120 days after the original record date without notice other than
by announcement at the meeting. At such adjourned meeting at which a quorum
shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified.

     The stockholders present either in person or by proxy, at a meeting which
has been duly called and convened, may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.


                                        3



     Section 2.8 Voting. The holders of a majority of the outstanding shares of
equity stock entitled to vote present in person or by proxy at an annual meeting
at which a quorum is present may, without the necessity for concurrence by the
Board of Directors, vote to elect a Director. Each share may be voted for as
many individuals as there are Directors to be elected and for whose election the
share is entitled to be voted. Except as otherwise required by law, the charter
or these Bylaws, a majority of the votes cast at a meeting of the stockholders
duly called and at which a quorum is present shall be sufficient to approve any
other matter which may properly come before the meeting. Unless otherwise
provided by law or the charter, each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
the stockholders. Voting on any questions or in any election may be viva voce
unless the chairman of the meeting shall order that voting be by ballot.

     Section 2.9 Proxies. A stockholder may cast the votes entitled to be cast
by the shares of stock owned of record by the stockholder in person or by proxy
executed by the stockholder or by the stockholder's duly authorized agent in any
manner permitted by law. Such proxy or evidence of authorization of such proxy
shall be filed with the secretary of the Company before or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.

     Section 2.10 Voting of Stock by Certain Holders. Stock of the Company
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his or her name as such fiduciary, either
in person or by proxy.

     Shares of stock of the Company directly or indirectly owned by it shall not
be voted at any meeting and shall not be counted in determining the total number
of outstanding shares entitled to be voted at any given time, unless they are
held by it in a fiduciary capacity, in which case they may be voted and shall be
counted in determining the total number of outstanding shares at any given time.


                                        4



     The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Company that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Company; and any other provisions with respect to the procedure which the
Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.

     Section 2.11 Inspectors. The Board of Directors, in advance of any meeting,
may, but need not, appoint one or more individual inspectors or one or more
entities that designate individuals as inspectors to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the Board of Directors in advance
of the meeting or at the meeting by the chairman of the meeting. The inspectors,
if any, shall determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. Each such report shall be in writing and signed by
the inspector or by a majority of the inspectors if there is more than one
inspector acting at such meeting. If there is more than one inspector, the
report of a majority shall be the report of the inspectors. The report of the
inspector or inspectors on the number of shares represented at the meeting and
the results of the voting shall be prima facie evidence thereof.

     Section 2.12 Nominations and Shareholder Business.

     (a) Annual Meetings of Stockholders.

          (1) Nominations of individuals for election to the Board of Directors
and the proposal of other business to be considered by the stockholders may be
made at an annual meeting of stockholders (A) pursuant to the Company's notice
of such meeting; (B) by or at the direction of the Board of Directors; or (C) by
any stockholder of the Company who (i) was a stockholder of record both at the
time of giving of notice by the stockholder as provided for in this Section
2.12(a) and at the time of the annual meeting in question; (ii) is entitled to
vote at such meeting; and (iii) has complied with this Section 2.12(a).


                                        5



          (2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to this paragraph (a)(2) or paragraph
(a)(1) of this Section 2.12, the stockholder must have given timely notice
thereof in writing to the secretary of the Company and such other business must
otherwise be a proper matter for action by the stockholders. To be timely, a
stockholder's notice shall set forth all information required under this Section
2.12 and shall be delivered to the secretary at the principal executive office
of the Company not earlier than the 150th day nor later than 5:00 p.m., Pacific
Time, on the 120th day prior to the first anniversary of the date of mailing of
the notice for the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced or delayed by more
than 30 days from the first anniversary of the date of the preceding year's
annual meeting, notice by the stockholder to be timely must be so delivered not
earlier than the 150th day prior to the date of such annual meeting and not
later than 5:00 p.m., Pacific Time, on the later of the 120th day prior to the
date of such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. In no event shall the
public announcement of a postponement or adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth (A) as to each individual whom
the stockholder proposes to nominate for election or re-election as a director
(i) the name, age, business address, and residence address of such individual;
(ii) the class, series and number of shares of stock of the Company that are
beneficially owned by such individual; (iii) the date such shares were acquired
and the investment intent of such acquisition; and (iv) all other information
relating to such individual that is required to be disclosed in solicitations of
proxies for election of directors in an election contest (even if an election
contest is not involved), or is otherwise required pursuant to Regulation 14A
(or any successor provision) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (including such individual's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (B) as to any other business that the stockholder proposes to bring
before the meeting, (i) a brief description of such business; (ii) the reasons
for proposing such business at the meeting; and (iii) any material interest in
such business of such stockholder and any Stockholder Associated Person (as
defined below), individually or in the aggregate, including any anticipated
benefit to the stockholder and the Stockholder Associated Person therefrom; (C)
as to the stockholder giving the notice and any Stockholder Associated Person,
the class, series and number of all shares of stock of the Company which are
owned by such stockholder and by such Stockholder Associated Person, if any, and
the nominee holder for, and number of, shares owned beneficially but not of
record by such stockholder and by any such Stockholder Associated Person; (D) as
to the stockholder giving the notice and any Stockholder Associated Person
covered by clauses (B) or (C) of this paragraph (2) of this Section 2.12(a), the
name and address of such stockholder, as they appear on the Company's stock
ledger and current name and address, if different, and of such Stockholder
Associated Person; and (E) to the extent known by the stockholder giving the
notice, the name and address of any other stockholder supporting the nominee for
election or reelection as a director or the proposal of other business on the
date of such stockholder's notice.

          (3) Notwithstanding anything in this subsection (a) of this Section
2.12 to the contrary, in the event that the Board of Directors increases or
decreases the maximum or minimum number of Directors in accordance with Article
III, Section 3.2 of these Bylaws and there is no public announcement of such
action at least 130 days prior to the first anniversary of


                                        6



the date of mailing of the notice for the preceding year's annual meeting, a
stockholder's notice required by this Section 2.12(a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the principal executive
office of the Company no later than 5:00 p.m., Pacific Time, on the 10th day
following the day on which such public announcement is first made by the
Company.

          (4) For purposes of this Section 2.12, "Stockholder Associated Person"
of any stockholder shall mean (i) any person controlling, directly or
indirectly, or acting in concert with, such stockholder, (ii) any beneficial
owner of shares of stock of the Company owned of record or beneficially by such
stockholder and (iii) any person controlling, controlled by or under common
control with such Stockholder Associated Person.

     (b) Special Meetings of Stockholders. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the Company's notice of said meeting. Nominations of
individuals for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected (i) pursuant to the
Company's notice of said meeting including the notice contemplated by Section
1.4; (ii) by or at the direction of the Board of Directors; or (iii) provided
the Board of Directors has determined that directors shall be elected at such
special meeting, by any stockholder of the Company who (A) is a stockholder of
record both at the time of giving of notice provided for in this Section 2.12(b)
and at the time of the special meeting; (B) is entitled to vote at the meeting;
and (C) complied with the notice procedures set forth in this Section 2.12(b).
In the event the Company calls a special meeting of stockholders for the purpose
of electing one or more individuals to the Board of Directors, any such
stockholder may nominate an individual or individuals (as the case may be) for
election as a director as specified in the Company's notice of meeting, if the
stockholder's notice required by paragraph (a)(2) of this Section 2.12 shall be
delivered to the secretary at the principal executive office of the Company not
earlier than the 150th day prior to such special meeting and not later than 5:00
p.m., Pacific Time, on the later of the 120th day prior to such special meeting
or the tenth day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of a postponement or adjournment of a special meeting commence a
new time period for the giving of a stockholder's notice as described above.

     (c) General.

          (1) Upon written request by the secretary or the Board of Directors or
any committee thereof, any stockholder proposing a nominee for election as a
director or any proposal for other business at a meeting of stockholders shall
provide, within five Business Days of delivery of such request (or such other
period as may be specified in such request), written verification, satisfactory,
in the discretion of the Board of Directors or any committee thereof or any
authorized officer of the Company, to demonstrate the accuracy of any
information submitted by the stockholder pursuant to this Section 2.12. If a
stockholder fails to provide such written verification within such period, the
information as to which written verification was requested may be deemed not to
have been provided in accordance with this Section 2.12.


                                        7



          (2) Only such individuals who are nominated in accordance with this
Section 2.12 shall be eligible for election by stockholders as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with this Section 2.12. The
chairman of the meeting shall have the power to determine whether a nomination
or any other business proposed to be brought before the meeting was made or
proposed, as the case may be, in accordance with this Section 2.12.

          (3) For purposes of this Section 2.12, (i) the "date of mailing of the
notice" shall mean the date of the proxy statement for the solicitation of
proxies for election of directors and (ii) "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press, Business Wire, PR Newswire or comparable news service or in a document
publicly filed by the Company with the Securities and Exchange Commission
pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

          (4) Notwithstanding the foregoing provisions of this Section 2.12, a
stockholder shall also comply with all applicable requirements of state law and
the Exchange Act and the rules and regulations promulgated thereunder with
respect to the matters set forth in this Section 2.12. Nothing in this Section
2.12 shall be deemed to affect any right of a stockholder to request inclusion
of a proposal in, nor the right of the Company to omit a proposal from, the
Company's proxy statement pursuant to Rule 14a-8 (or any successor provision)
under the Exchange Act.

     Section 2.13 Control Share Acquisition Act. Notwithstanding any other
provision of the charter or these bylaws, Title 3, Subtitle 7 of the MGCL (or
any successor statute) shall not apply to any acquisition by any person of
shares of capital stock of the Company. This section may be repealed, in whole
or in part, at any time, whether before or after an acquisition of control
shares and, upon such repeal, may, to the extent provided by any successor
bylaw, apply to any prior or subsequent control share acquisition.

                                   ARTICLE III
                                    DIRECTORS

     Section 3.1 General Powers. The business and affairs of the Company shall
be managed under the direction of the Board of Directors.

     Section 3.2 Number and Tenure of Directors. At any regular meeting or at
any special meeting called for that purpose, a majority of the members then
serving on the Board of Directors may establish, increase or decrease the number
of Directors, provided that, except as otherwise provided in the charter, the
number thereof shall never be less than the minimum number required by the MGCL
or the charter (whichever is greater), nor more than 15, and further provided
that, except as may be provided in the terms of any preferred stock issued by
the Company, the tenure of office of a Director shall not be affected by any
decrease in the number of Directors.


                                        8



     Section 3.3 Vacancies. If for any reason any or all the Directors cease to
be Directors, such event shall not terminate the Company or affect these Bylaws
or the powers of the remaining Directors hereunder (even if fewer than three
directors remain). Except as may be provided by the Board of Directors in
setting the terms of any class or series of preferred stock, any vacancy on the
Board of Directors may be filled only by a majority of the remaining Directors,
even if the remaining Directors do not constitute a quorum. Any Director elected
to fill a vacancy shall serve for the remainder of the full term of the
directorship in which the vacancy occurred and until a successor is elected and
qualifies.

     Section 3.4 Quorum. A majority of the number of Directors then serving
shall constitute a quorum for the transaction of business, provided that if less
than a majority of such Directors are present at said meeting, a majority of the
Directors present may adjourn the meeting from time to time without further
notice, and provided further that, if pursuant to applicable law, the charter or
these bylaws, the vote of a majority of a particular group of Directors is
required for action, a quorum must also include a majority of such group. Less
than a quorum may adjourn any meeting. The Directors present at a meeting which
has been duly called and convened may continue to transact business until
adjournment, notwithstanding the withdrawal of enough Directors to leave less
than a quorum.

     Section 3.5 Voting. The act of a majority of Directors present at a meeting
at which a quorum is present shall be the act of the Board of Directors, unless
the concurrence of a greater proportion is required for such action by
applicable statute or the charter; provided, however, that any action pertaining
to any transaction in which the Company is purchasing, selling, leasing or
mortgaging any real estate asset, making a joint venture investment or engaging
in any other transaction in which an advisor, director or officer of the
Company, any affiliated lessee or affiliated contract manager of any property of
the Company or any affiliate of the foregoing has any direct or indirect
interest other than as a result of their status as a director, officer or
stockholder of the Company shall be approved by the affirmative vote of a
majority of the Independent Directors, even if the Independent Directors
constitute less than a quorum. If enough Directors have withdrawn from a meeting
to leave less than a quorum but the meeting is not adjourned, the action of the
majority of that number of Directors necessary to constitute a quorum at such
meeting shall be the action of the Board of Directors, unless the concurrence of
a greater proportion is required for such action by the MGCL, the charter or
these Bylaws.

     Section 3.6 Annual and Regular Meetings of Directors. An annual meeting of
the Board of Directors shall be held as soon as practicable after the
adjournment of the annual meeting of stockholders at the same place as the
annual meeting of stockholders, no notice other than this Bylaw being necessary.
In the event such meeting is not so held, the meeting may be held at such time
and place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors. The Board of Directors may provide,
by resolution, the time and place for the holding of regular meetings of the
Board of Directors without other notice than such resolution.


                                        9



     Section 3.7 Special Meetings of Directors. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, the
president or by a majority of the Directors then in office. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place as the place for holding any special meeting of the Board of Directors
called by them. The Board of Directors may provide, by resolution, the time and
place for the holding of special meetings of the Board of Directors without
other notice than such resolution.

     Section 3.8 Notice. Notice of any special meeting of the Board of Directors
shall be delivered personally or by telephone, electronic mail, facsimile
transmission, United States mail or courier to each Director at his or her
business or residence address. Notice by personal delivery, telephone,
electronic mail or facsimile transmission shall be given at least 24 hours prior
to the meeting. Notice by United States mail shall be given at least three days
prior to the meeting. Notice by courier shall be given at least two days prior
to the meeting. Telephone notice shall be deemed to be given when the Director
or his or her agent is personally given such notice in a telephone call to which
the Director or his or her agent is a party. Electronic mail notice shall be
deemed to be given upon transmission of the message to the electronic mail
address given to the Company by the Director. Facsimile transmission notice
shall be deemed to be given upon completion of the transmission of the message
to the number given to the Company by the Director and receipt of a completed
answer-back indicating receipt. Notice by United States mail shall be deemed to
be given when deposited in the United States mail properly addressed, with
postage thereon prepaid. Notice by courier shall be deemed to be given when
deposited with or delivered to a courier properly addressed. Neither the
business to be transacted at, nor the purpose of, any annual, regular or special
meeting of the Board of Directors need be stated in the notice, unless
specifically required by statute or these Bylaws.

     Section 3.9 Organization. At each meeting of the Board of Directors, the
Chairman of the Board or, in the absence of the Chairman, the Vice Chairman of
the Board, if any, shall act as chairman of the meeting. In the absence of both
the Chairman and Vice Chairman of the Board, the president or in the absence of
the president, a Director chosen by a majority of the Directors present, shall
act as chairman of the meeting. The secretary or, in his or her absence, an
assistant secretary of the Company, or in the absence of the secretary and all
assistant secretaries, an individual appointed by the Chairman, shall act as
secretary of the meeting.

     Section 3.10 Consent by Directors Without a Meeting. Any action required or
permitted by the MGCL to be taken at a Board of Directors meeting may be taken
without a meeting if a consent in writing or by electronic transmission to such
action is given by each Director and is filed with the minutes of proceedings of
the Board of Directors.

     Action taken under this Section 3.10 is effective when the last Director
gives the consent unless the consent specifies a different effective date, in
which event the action taken is effective as of the date specified therein,
provided the consent states the date given by each Director.


                                       10



     Section 3.11 Telephone Meetings. Directors may participate in a meeting of
the Board by means of a conference telephone or other communications equipment
if all persons participating in the meeting can hear each other at the same
time. Participation in a meeting by these means shall constitute presence in
person at the meeting.

     Section 3.12 Compensation. Directors shall not receive any stated salary
for their service as Directors but, by resolution of the Board of Directors, may
receive compensation per year and/or per meeting and/or per visit to real
property or other facilities owned or leased by the Company and for any service
or activity they performed or engaged in as Directors. Directors may be
reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Board of Directors or of any committee thereof and for
their expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as Directors; but nothing
herein contained shall be construed to preclude any Directors from serving the
Company in any other capacity and receiving compensation therefor.

     Section 3.13 Loss of Deposits. No Director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.

     Section 3.14 Surety Bonds. Unless required by law, no Director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.

     Section 3.15 Reliance. Each Director, officer, employee and agent of the
Company shall, in the performance of his duties with respect to the Company, be
fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the
Company, upon an opinion of counsel or upon reports made to the Company by any
of its officers or employees or by the adviser, accountants, appraisers or other
experts or consultants selected by the Board of Directors or officers of the
Company, regardless of whether such counsel or expert may also be a Director.

     Section 3.16 Certain Rights of Directors, Officers, Employees and Agents.
The Directors shall have no responsibility to devote their full time to the
affairs of the Company. Any Director, officer, employee or agent of the Company,
in his personal capacity or in a capacity as an affiliate, employee or agent of
any other person, or otherwise, may have business interests and engage in
business activities similar to, in addition to, or in competition with those of
or relating to the Company, subject to the provisions of the charter.

                                   ARTICLE IV
                                   COMMITTEES

     Section 4.1. Number, Tenure and Qualifications. The Board of Directors may
appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees composed of at least one director.


                                       11



     Section 4.2. Composition. Except as provided in the charter, such
committees shall serve at the pleasure of the Board of Directors. The members of
the Audit Committee shall at all times consist solely of Independent Directors,
and the majority of the members of all committees shall be Independent
Directors.

     Section 4.3. Powers. The Board of Directors may delegate to committees
appointed under Section 4.1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.

     Section 4.4. Meetings. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board of Directors. A majority
of the members of the committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The act of a majority of the committee
members present at a meeting shall be the act of such committee. The Board of
Directors may designate a chairman of any committee, and such chairman or, in
the absence of a chairman, any two members of any committee (if there are at
least two members of the committee) may fix the time and place of its meeting
unless the Board of Directors shall otherwise provide. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint another Director to act in
the place of such absent member. Each committee shall keep minutes of its
proceedings.

     Section 4.5. Telephone Meetings. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
other communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.

     Section 4.6. Consent by Committees Without a Meeting. Any action required
or permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing or by electronic
transmission to such action is given by each member of the committee and filed
with the minutes of proceedings of such committee.

     Section 4.7. Vacancies. Subject to the provisions hereof, and the charter,
the Board of Directors shall have the power at any time to change the membership
of any committee, to fill all vacancies, to designate alternate members to
replace any absent or disqualified member or to dissolve any such committee.


                                       12



                                    ARTICLE V
                                    OFFICERS

     Section 5.1 Election of Officers; Terms. The officers of the Company shall
consist of a president, a secretary and a treasurer and may include a Chairman
of the Board, a Vice Chairman of the Board, a chief executive officer, a chief
operating officer, a chief financial officer, one or more Vice Presidents (whose
seniority and titles, including Executive Vice Presidents and Senior Vice
Presidents, may be specified by the Board of Directors), and assistant and
subordinate officers as may from time to time be elected by the Board of
Directors. All officers shall hold office until the next annual meeting of the
Board of Directors and until their successors are elected and qualify or until
their death or their resignation or removal in the manner hereinafter provided.
Any two or more offices except president and vice president may be held by the
same individual. Election of an officer or agent shall not of itself create
contract rights between the Company and such officer or agent.

     Section 5.2 Removal of Officers; Vacancies. Any officer or agent of the
Company may be removed, with or without cause, by the Board of Directors if in
its judgment the best interests of the Company would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Any officer of the Company may resign at any time by giving written
notice of his resignation to the Board of Directors, the chairman of the board,
the president or the secretary. Any resignation shall take effect immediately
upon its receipt or at such later time specified in the notice of resignation.
The acceptance of a resignation shall not be necessary to make it effective
unless otherwise stated in the resignation. Such resignation shall be without
prejudice to the contract rights, if any, of the Company. A vacancy in any
office may be filled by the Board of Directors for the balance of the term.

     Section 5.3 Chief Executive Officer. The Board of Directors may designate a
chief executive officer. In the absence of such designation, the president shall
be the chief executive officer of the Company. The chief executive officer shall
have general responsibility for implementation of the policies of the Company,
as determined by the Board of Directors, and for the management of the business
and affairs of the Company. He may execute any deed, mortgage, bond, contract or
other instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Company or shall be required by law to be otherwise executed; and
in general shall perform all duties incident to the office of chief executive
officer and such other duties as may be prescribed by the Board of Directors
from time to time.

     Section 5.4 Chief Operating Officer. The Board of Directors may designate a
chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.

     Section 5.5 Chief Financial Officer. The Board of Directors may designate a
chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.


                                       13



     Section 5.6 Chairman of the Board. The Board of Directors shall designate a
Chairman of the Board. The Chairman of the Board shall preside over the meetings
of the Board of Directors and of the stockholders at which he shall be present.
The Chairman of the Board shall perform such other duties as may be assigned to
him by the Board of Directors.

     Section 5.7 President. In the absence of a chief executive officer, the
president shall in general supervise and control all of the business and affairs
of the Company. In the absence of a designation of a chief operating officer by
the Board of Directors, the president shall be the chief operating officer. He
may execute any deed, mortgage, bond, contract or other instrument, except in
cases where the execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the Company or
shall be required by law to be otherwise executed; and in general shall perform
all duties incident to the office of president and such other duties as may be
prescribed by the Board of Directors from time to time.

     Section 5.8 Vice Presidents. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or more vice presidents as executive vice president
or as vice president for particular areas of responsibility.

     Section 5.9 Secretary. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Company; (d) keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder; (e) have general
charge of the stock transfer books of the Company; and (f) in general perform
such other duties as from time to time may be assigned to him by the chief
executive officer, the president or by the Board of Directors.


                                       14



     Section 5.10 Treasurer. The treasurer shall have the custody of the funds
and securities of the Company and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Company and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Company in such depositories as may be designated by the Board of Directors. In
the absence of a designation of a chief financial officer by the Board of
Directors, the treasurer shall be the chief financial officer of the Company.
The treasurer shall disburse the funds of the Company as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the president and Board of Directors, at the regular meetings of the
Board of Directors or whenever it may so require, an account of all his
transactions as treasurer and of the financial condition of the Company. If
required by the Board of Directors, the treasurer shall give the Company a bond
in such sum and with such surety or sureties as shall be satisfactory to the
Board of Directors for the faithful performance of the duties of his office and
for the restoration to the Company, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, moneys and
other property of whatever kind in his possession or under his control belonging
to the Company.

     Section 5.11 Assistant Secretaries and Assistant Treasurers. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or treasurer, respectively, or by the
president or the Board of Directors. The assistant treasurers shall, if required
by the Board of Directors, give bonds for the faithful performance of their
duties in such sums and with such surety or sureties as shall be satisfactory to
the Board of Directors.

     Section 5.12 Salaries. The salaries and other compensation of the officers
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary or other compensation by reason of the
fact that he is also a Director.

                                   ARTICLE VI
                      CONTRACTS, LOANS, CHECKS AND DEPOSITS

     Section 6.1 Contracts. The Board of Directors, the Executive Committee or
another committee of the Board of Directors within the scope of its delegated
authority may authorize any officer or agent to enter into any contract or to
execute and deliver any instrument in the name of and on behalf of the Company
and such authority may be general or confined to specific instances. Any
agreement, deed, mortgage, lease or other document shall be valid and binding
upon the Company when duly authorized or ratified by action of the Board of
Directors or the Executive Committee or such other committee and executed by an
authorized person.

     Section 6.2 Checks and Drafts. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Company shall be signed by such officer or agent of the Company in such
manner as shall from time to time be determined by the Board of Directors.


                                       15



     Section 6.3 Deposits. All funds of the Company not otherwise employed shall
be deposited from time to time to the credit of the Company in such banks, trust
companies or other depositories as the Board of Directors may designate.

                                   ARTICLE VII
                                  EQUITY STOCK

     Section 7.1 Certificates. If the Board of Directors authorizes the issuance
of certificates, each certificate shall be signed by the Chairman or Vice
Chairman of the Board, the president, the chief executive officer, the chief
operating officer, the chief financial officer or a vice president and
countersigned by the secretary or an assistant secretary or the treasurer or an
assistant treasurer and may be sealed with the seal, if any, of the Company. The
signatures may be either manual or facsimile. Certificates shall be
consecutively numbered; and if the Company shall, from time to time, issue
several classes of stock, each class may have its own number series. A
certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are preferred or limited as to their dividends, which are restricted as to
their transferability or voting powers or which are limited as to their
allocable portion of the assets upon liquidation or which are redeemable at the
option of the Company, shall have a statement of such restriction, limitation,
preference or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Company has authority to issue stock of more than one class,
the certificate shall contain on the face or back a full statement or summary of
the designations and any preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of each class of stock
and, if the Company is authorized to issue any preferred or special class in
series, the differences in the relative rights and preferences between the
shares of each series to the extent they have been set and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
series. In lieu of such statement or summary, the certificate may state that the
Company will furnish a full statement of such information to any stockholder
upon request and without charge. If any class of stock is restricted by the
Company as to transferability, the certificate shall contain a full statement of
the restriction or state that the Company will furnish information about the
restrictions to the stockholder on request and without charge. Notwithstanding
anything herein to the contrary, nothing in this Article VII shall be
interpreted to limit the authority of the Board of Directors to issue some or
all of the shares of any or all of its classes or series without certificates.


                                       16



     Section 7.2 Lost, Destroyed, and Mutilated Certificates. Any officer
designated by the Board of Directors may direct a new certificate to be issued
in place of any certificate previously issued by the Company alleged to have
been lost, stolen or destroyed upon the making of an affidavit of that fact by
the person claiming the certificate to be lost, stolen or destroyed. When
authorizing the issuance of a new certificate, an officer designated by the
Board of Directors may, in his or her discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or the owner's legal representative to advertise the same in such
manner as he shall require and/or to give bond, with sufficient surety, to the
Company to indemnify it against any loss or claim which may arise as a result of
the issuance of a new certificate.

     Section 7.3 Transfer of Shares. Upon surrender to the Company or the
transfer agent of the Company of a stock certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Company shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.

     The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.

     Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the charter of the Company and all of the
terms and conditions contained therein.

     Section 7.4 Closing of Transfer Books or Fixing of Record Date. The Board
of Directors may (i) set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of stockholders for any other proper purpose (such record date, in
any case, may not be prior to the close of business on the day the record date
is fixed and shall be not more than 90 days before the date on which the meeting
or particular action requiring such determination of stockholders of record is
to be held or taken); or (ii) in lieu of fixing a record date, direct that the
stock transfer books be closed for a period not greater than 20 days. In the
case of a meeting of the stockholders, the record date or the date set for the
closing of the stock transfer books shall be at least ten days before the date
of such meeting.

     If no record date is fixed and stock transfer books are not closed for the
determination of stockholders, (i) the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be the later of (a) the close of business on the day on which the notice of
meeting is mailed or (b) the 30th day before the meeting; and (ii) the record
date for the determination of stockholders entitled to receive payment of a
dividend or an allotment of any other rights shall be the close of business on
the day on which the resolution of the Board of Directors authorizing the
dividend or allotment of rights is adopted.


                                       17



     When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section 7.4, such determination
shall apply to any adjournment thereof, except when (i) the determination has
been made through the closing of the transfer books and the stated period of
closing has expired or (ii) the meeting is adjourned to a date more than 120
days after the record date fixed for the original meeting, in either of which
case a new record date shall be determined as set forth herein.

     Section 7.5 Stock Ledger. The Corporation shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.

     Section 7.6 Fractional Stock; Issuance of Units. The Board of Directors may
issue fractional stock or provide for the issuance of scrip, all on such terms
and under such conditions as they may determine. Notwithstanding any other
provision of the charter or these Bylaws, the Board of Directors may issue units
consisting of different securities of the Company. Any security issued in a unit
shall have the same characteristics as any identical securities issued by the
Company, except that the Board of Directors may provide that for a specified
period securities of the Company issued in such unit may be transferred on the
books of the Company only in such unit.

                                  ARTICLE VIII
                                 ACCOUNTING YEAR

     The Board of Directors shall have the power, from time to time, to fix the
fiscal year of the Company by a duly adopted resolution.

                                   ARTICLE IX
                                  DISTRIBUTIONS

     Section 9.1 Authorization. Dividends and other distributions upon the stock
of the Company may be authorized by the Board of Directors, subject to the
provisions of law and the charter of the Company. Dividends and other
distributions may be paid in cash, property or stock of the Company, subject to
the provisions of law and the charter.

     Section 9.2 Contingencies. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Company available
for dividends or other distributions such sum or sums as the Board of Directors
may from time to time, in its absolute discretion, think proper as a reserve
fund for contingencies, for equalizing dividends or other distributions, for
repairing or maintaining any property of the Company or for such other purpose
as the Board of Directors shall determine to be in the best interest of the
Company, and the Board of Directors may modify or abolish any such reserve.


                                       18



                                    ARTICLE X
                                INVESTMENT POLICY

     Subject to the provisions of the charter, the Board of Directors may from
time to time adopt, amend, revise or terminate any policy or policies with
respect to investments by the Company as it shall deem appropriate in its sole
discretion.

                                   ARTICLE XI
                                      SEAL

     The Board of Directors may authorize the adoption of a seal by the Company.
The seal shall contain the name of the Company and the year of its incorporation
and the words "Incorporated Maryland." The Board of Directors may authorize one
or more duplicate seals and provide for the custody thereof. Whenever the
Company is permitted or required to affix its seal to a document, it shall be
sufficient to meet the requirements of any law, rule or regulation relating to a
seal to place "[SEAL]" adjacent to the signature of the person authorized to
execute the document on behalf of the Company.

                                   ARTICLE XII
                                WAIVER OF NOTICE

     Whenever any notice is required to be given pursuant to the charter of the
Company or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at nor the purpose of any
meeting need be set forth in the waiver of notice, unless specifically required
by statute. The attendance of any person at any meeting shall constitute a
waiver of notice of such meeting, except where such person attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.

                                  ARTICLE XIII
                               AMENDMENT OF BYLAWS

     The Board of Directors shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.

Dated: ________________, 2006


                                       19

EX-4.1

                                                                     Exhibit 4.1

Number *__*                                                  Shares  * _______ *

                                                 SEE REVERSE FOR IMPORTANT
                                                 NOTICE ON TRANSFER RESTRICTIONS
                                                 AND OTHER INFORMATION

                            NNN APARTMENT REIT, INC.
          a Corporation Formed Under the Laws of the State of Maryland

     THIS CERTIFIES THAT **__________________** is the owner of
**___________________ (______)** fully paid and nonassessable shares of Common
Stock, $0.01 par value per share, of NNN Apartment REIT, Inc. (the
"Corporation") transferable on the books of the Corporation by the holder hereof
in person or by its duly authorized attorney, upon surrender of this Certificate
properly endorsed. This Certificate and the shares represented hereby are issued
and shall be held subject to all of the provisions of the charter ("Charter")
and Bylaws of the Corporation and any amendments thereto.

     IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed on its behalf by its duly authorized officers.

DATED
      -------------------------------


                                                                          (SEAL)
- -------------------------------------   ----------------------------------
Andrea R. Biller                        Louis J. Rogers
Secretary                               President and Chairman of the Board



                                IMPORTANT NOTICE

     The Corporation has the authority to issue shares of stock of more than one
class. Upon the request of any stockholder, and without charge, the Corporation
will furnish a full statement of the information required by Section 2-211(b) of
the Maryland General Corporation Law with respect to the designations and any
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, and terms
and conditions of redemption of the shares of each class of stock which the
Corporation has authority to issue, the differences in the relative rights and
preferences between the shares of each series to the extent set, and the
authority of the Board of Directors to set such rights and preferences of
subsequent series. Such requests must be made to the Secretary of the
Corporation at its principal office.

     The charter, including a full statement about certain restrictions on
transferability, will be furnished to each stockholder of the Corporation on
request and without charge.

     The Shares represented by this certificate are subject to restrictions on
Beneficial Ownership, Constructive Ownership and Transfer for the purpose, among
others, of the Corporation's maintenance of its status as a Real Estate
Investment Trust (a "REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"), and for certain other purposes under the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Subject to certain
further restrictions and except as expressly provided in the Corporation's
Charter, no Person: (a) may Beneficially Own or Constructively Own shares of the
Corporation's Common Stock in excess of 9.9% (in value or number of shares) of
the outstanding shares of Common Stock of the Corporation unless such Person is
an Excepted Holder (in which case the Excepted Holder Limit for such Excepted
Holder shall be applicable); (b) may Beneficially Own or Constructively Own
shares of Capital Stock of the Corporation in excess of 9.9% of the value of the
total outstanding shares of Capital Stock of the Corporation, unless such Person
is an Excepted Holder (in which case the Excepted Holder Limit for such Excepted
Holder shall be applicable); (c) may Beneficially Own or Constructively Own
Capital Stock that would result in the Corporation being "closely held" under
Section 856(h) of the Code or otherwise cause the Corporation to fail to qualify
as a REIT; (d) other than as provided in the Corporation's Charter, may Transfer
shares of Capital Stock if such Transfer would result in the Capital Stock of
the Corporation being owned by fewer than 100 Persons; or (e) Beneficially Own
shares of Capital Stock of the Corporation that would result in 25% or more of
any class of Capital Stock of the Corporation being Beneficially Owned by one or
more ERISA Investors. Any Person who Beneficially Owns or Constructively Owns or
attempts to Beneficially Own or Constructively Own shares of Capital Stock which
causes or will cause a Person to Beneficially Own or Constructively Own shares
of Capital Stock in excess or in violation of the above limitations must
immediately notify the Corporation. If any of the restrictions on Transfer or
ownership are violated, the shares of Capital Stock represented hereby will be
automatically transferred to a Trustee of a Trust for the benefit of one or more
Charitable Beneficiaries. In addition, the Corporation may redeem shares upon
the terms and conditions specified by the board of directors in its sole
discretion if the board of directors determines that ownership or a Transfer or
other event may violate the restrictions described above. Furthermore, upon the
occurrence of certain events, attempted Transfers in violation of the
restrictions described above may be void ab initio. All capitalized terms in
this legend have the meanings defined in the Charter of the Corporation, as the
same may be amended from time to time, a copy of which, including the
restrictions on Transfer and ownership, will be furnished to each holder of
Capital Stock of the Corporation on request and without charge directed to the
Secretary of the Corporation at its principal office.

     The Shares have not been registered under the Securities Act of 1933, as
amended, nor under the applicable securities act of any state, but have been
issued in reliance upon exemptions from registration contained in said at and
such state securities laws. No sale, offer to sell or other transfer of the
Shares may be made unless a registration statement under said act is in effect
with respect to the securities, or an exemption from the registration provisions
of such act is then in fact applicable.

          KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN
       OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A
             CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.

                                   ----------

     The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

                                           
     TEN COM - as tenants in common           UNIF GIFT MIN ACT _____________ Custodian _____________
     TEN ENT - as tenants by the entireties                      (Custodian)               (Minor)
     JT TEN  - as joint tenants with right    under Uniform Gifts to Minors Act of __________________
               of survivorship and not as                                              (State)
               tenants in common



     Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, ________________________ HEREBY SELLS, ASSIGNS AND TRANSFERS
UNTO
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE AND SOCIAL
SECURITY OR OTHER IDENTIFYING NUMBER, OF ASSIGNEE) ____________________
(___________) shares of Common Stock of the Corporation represented by this
Certificate and do hereby irrevocably constitute and appoint
________________________________ attorney to transfer the said shares of Common
Stock on the books of the Corporation, with full power of substitution in the
premises.

Dated
      -------------------------------


                                        ----------------------------------------
                                        NOTICE: The signature to this Assignment
                                        must correspond with the name as written
                                        upon the face of the Certificate in
                                        every particular, without alteration or
                                        enlargement or any change whatsoever.

EX-10.4

                                                                    EXHIBIT 10.4

                               ADVISORY AGREEMENT

     ADVISORY AGREEMENT made as of _______, 2006 between NNN Apartment REIT,
Inc., a Maryland corporation (the "Company"), and NNN Apartment REIT Advisor,
LLC, a Virginia limited liability company (the "Advisor").

                                   WITNESSETH:

     WHEREAS, the Company intends to qualify as a real estate investment trust
(a "REIT") as defined in Sections 856 through 860 of the Internal Revenue Code
of 1986, as amended (the "Code"), and to make investments of the type permitted
to qualified REITs under the Code and not inconsistent with the Charter of the
Company (the "Charter"), and the Bylaws of the Company; and

     WHEREAS, the Company desires to avail itself of the experience, sources of
information, advice and assistance of the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, on behalf of
and subject to the supervision of the Board of Directors of the Company (the
"Board of Directors"), as provided herein; and

     WHEREAS, the Advisor is willing to undertake to render such services,
subject to the supervision of the Board of Directors, on the terms and
conditions herein set forth;

     NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the parties hereto agree as follows:

     1.   DEFINITIONS.

     As used herein, the following terms shall have the meanings set forth
below:

          (a) "Acquisition Expenses" shall mean any and all expenses related to
     the Company's selection, evaluation and acquisition of, and investment in
     properties, whether or not acquired or made, including, but not limited to,
     legal fees and expenses, travel and communications expenses, cost of
     appraisals and surveys, nonrefundable option payments on property not
     acquired, accounting fees and expenses, computer use related expenses,
     architectural, engineering and other property reports, environmental and
     asbestos audits, title insurance and escrow fees, loan fees or points or
     any fee of a similar nature paid to a third party, however designated,
     transfer taxes, and personnel and miscellaneous expenses related to the
     selection, evaluation and acquisition of properties.

          (b) "Advisor" shall mean NNN Apartment REIT Advisor, LLC, a Virginia
     limited liability company, any successor advisor to the Company, the
     Partnership or any person or entity to which NNN Apartment REIT Advisor,
     LLC or any successor advisor subcontracts substantially all of its
     functions.



          (c) "Affiliate" shall mean: (i) any Person directly or indirectly
     owning, controlling or holding, with the power to vote 10% or more of the
     outstanding voting securities of such other Person; (ii) any Person 10% or
     more of whose outstanding voting securities are directly or indirectly
     owned, controlled or held, with the power to vote, by such other Person;
     (iii) any Person directly or indirectly controlling, controlled by or under
     common control with such other Person; (iv) any executive officer,
     director, trustee or general partner of such other Person; and (v) any
     legal entity for which such Person acts as an executive officer, director,
     trustee or general partner.

          (d) "Asset Management Fee" shall mean an annual amount equal to the
     percentage of the Company's Average Invested Assets set forth in Section
     9(b).

          (e) "Average Invested Assets" shall mean, for any period, the average
     of the aggregate Book Value of the assets of the Company invested, directly
     or indirectly, in real estate assets or equity interests in and loans
     secured by real estate, before deducting depreciation, bad debts or other
     similar non-cash reserves, computed by taking the average of such values at
     the end of each month during such period.

          (f) "Book Value" of an asset shall mean the value of such asset on the
     books of the Company, before allowance for depreciation or amortization.

          (g) "Common Stock" shall mean the common stock, par value $.01 per
     share, of the Company.

          (h) "Company" shall have the meaning set forth in the preamble of this
     Agreement.

          (i) "Competitive Real Estate Commission" shall mean the real estate or
     brokerage commission paid for the purchase or sale of a property which is
     reasonable, customary and competitive in light of the size, type and
     location of such property.

          (j) "Contract Purchase Price" shall mean the amount actually paid or
     allocated to the purchase or improvement of Real Estate Assets, exclusive
     of Real Estate Commissions and Acquisition Expenses.

          (k) "Contract Sales Price" shall mean the amount actually paid or
     allocated to the Sale of a Property or Properties, exclusive of Disposition
     Fees.

          (l) "Cumulative Return" shall mean a cumulative, non-compounded return
     equal to 8% per annum on Invested Capital commencing upon acceptance by the
     Company of an investor's subscription.

          (m) "Director" shall mean a member of the Board of Directors of the
     Company.

          (n) "Fiscal Year" shall mean any period for which any income tax
     return is submitted by the Company to the Internal Revenue Service and
     which is treated by the Internal Revenue Service as a reporting period.

          (o) "Funds from Operations" shall mean the Company's net income,
     computed in accordance with GAAP, excluding gains (or losses) from sales of
     property, plus depreciation and amortization, and after adjustments for
     unconsolidated partnerships and joint ventures.


                                       2



          (p) "GAAP" means accounting principles generally accepted in the
     United States of America.

          (q) "Gross Offering Proceeds" shall mean the total proceeds from the
     sale of Shares before deductions for Organizational and Offering Expenses.
     For purposes of calculating Gross Offering Proceeds, the purchase price for
     all Shares issued in the Company's initial public offering, including those
     for which volume discounts apply, shall be deemed to be $10.00 per Share.

          (r) "Gross Income From Properties" shall mean all cash receipts
     derived from the operation of the Company's Property, excluding (i) tenant
     security deposits unless and until such deposits are forfeited upon a
     tenant default, and (ii) proceeds from insurance claims, condemnation
     proceedings, sales or refinancings.

          (s) "Incentive Distribution Upon Sales" shall mean an amount equal to
     10% of the net proceeds from the sale of a Property after the Company has
     received and paid to Stockholders the sum of (i) Invested Capital initially
     allocated to that Property, and (ii) any remaining shortfall in the
     recovery of Invested Capital with respect to prior sales of Properties, and
     (iii) any remaining shortfall in the Cumulative Return as described in
     Section 9(e).

          (t) "Independent Directors" shall mean a Director who is not, and
     within the last two (2) years has not been, directly or indirectly
     associated with a Sponsor or the Advisor by virtue of (i) ownership of an
     interest in a Sponsor, the Advisor or their Affiliates, (ii) employment by
     a Sponsor, the Advisor or their Affiliates, (iii) service as an officer or
     director of a Sponsor, the Advisor or their Affiliates, (iv) performance of
     services, other than as a Director, for the Company, (v) service as a
     director or trustee of more than three (3) real estate investment trusts
     organized by a Sponsor or advised by the Advisor, or (vi) maintenance of a
     material business or professional relationship with a Sponsor, the Advisor
     or any of their Affiliates. An indirect relationship shall include
     circumstances in which a Director's spouse, parents, children, siblings,
     mothers- or fathers-in-law, sons- or daughters-in-law or brothers- or
     sisters-in-law is or has been associated with a Sponsor, the Advisor, any
     of their Affiliates or the Company. A business or professional relationship
     is considered material if the gross revenue derived by the Director from a
     Sponsor, the Advisor and Affiliates exceeds five percent (5%) of either the
     Director's annual gross revenue during either of the last two (2) years or
     the Director's net worth on a fair market value basis.

          (u) "Invested Capital" shall mean the total proceeds from the sale of
     Shares. When a Property is sold, Invested Capital shall be reduced by the
     lesser of (i) the net sale proceeds available for distribution from such
     sale or (ii) the sum of (A) the portion of Invested Capital that initially
     was allocated to that Property and (B) any remaining shortfall in the
     recovery of Invested Capital with respect to prior sales of Properties.

          (v) "Joint Venture" shall mean any partnership, limited liability
     company, business trust or other unincorporated organization through or by
     means of which the Company acts jointly with any Person or Affiliate to
     make an investment in Real Estate Assets.


          (w) "Listing" shall mean the listing of the Shares on a national
     securities exchange or quotation on a national market system. Upon such
     Listing, the Shares shall be deemed Listed.

          (x) "Net Income" shall mean, for any period, total revenues applicable
     to such period, less the operating expenses applicable to such period other
     than additions to or allowances


                                       3



     for reserves for depreciation, amortization or bad debts or other similar
     noncash reserves; provided, however, that Net Income shall not include any
     gain from the sale of the Company's assets.

          (y) "Organizational and Offering Expenses" shall mean those expenses
     incurred by and to be paid from the assets of the Company in connection
     with and in preparing the Company for registration and subsequently
     offering and distributing Shares to the public, including, but not limited
     to, total underwriting and brokerage discounts and commissions (including
     fees of the underwriters' attorneys), expenses for printing, engraving and
     mailing, salaries of employees while engaged in sales activities, charges
     of transfer agents, registrars, trustees, escrow holders, depositaries and
     experts, expenses of qualification of the sale of the securities under
     federal and state laws, including taxes and fees, and accountants',
     consultants' and attorneys' fees and expenses.

          (z) "Partnership" shall mean NNN Apartment REIT Holdings, L.P., a
     Virginia limited partnership.

          (aa) "Property" or "Properties" shall mean any, or all, respectively,
     of the real property and improvements thereon owned or to be owned by the
     Company, directly or indirectly.

          (ab) "Property Disposition Fee" shall mean a real estate disposition
     fee, payable (under certain conditions) to the Advisor and its Affiliates
     upon the sale of the Company's Property as described in Section 9(e).

          (ac) "Property Management Fee" shall mean any fee paid to an Affiliate
     or third party as compensation for management of the Company's Properties
     as described in Section 9(c).

          (ad) "Property Manager" shall mean an entity that provides property
     rental, leasing, operation and management services to the Properties owned
     by the Company, directly or indirectly. The Property Manager may be the
     Advisor, an Affiliate or a third-party property management firm.

          (ae) "Person" shall mean any natural person, partnership, corporation,
     association, trust, limited liability company or other legal entity.

          (af) "Prospectus" shall mean the final prospectus of the Company in
     connection with the initial registration of Shares filed with the
     Securities and Exchange Commission on Form S-11, as supplemented and
     amended from time to time.

          (ag) "Real Estate Assets" shall mean any and all investments in: (i)
     Property whether directly or indirectly through owned or controlled
     subsidiaries and including amounts invested in Joint Ventures; and (ii)
     loans, or other evidence of indebtedness secured, directly or indirectly,
     by interests in Property.

          (ah) "Real Estate Commission" shall mean the real estate or brokerage
     commission paid in connection with the purchase of a Property as described
     in Section 9(a).

          (ai) "Return Ratio" shall mean the ratio of the Funds from Operations
     of the Company to the Gross Offering Proceeds of the Company calculated
     quarterly.


                                       4



          (aj) "Sale" or "Sales" shall mean any transaction or series of
     transactions whereby: (A) the Company or the Partnership directly or
     indirectly (except as described in other subsections of this definition)
     sells, grants, transfers, conveys or relinquishes its ownership of any
     Property or portion thereof, including the lease of any Property consisting
     of a building only, and including any event with respect to any Property
     which results in the payment to the Company or the Partnership, directly or
     indirectly, of a significant amount of insurance proceeds or condemnation
     or similar award related to a Property; (B) the Company or the Partnership
     directly or indirectly (except as described in other subsections of this
     definition) sells, grants, transfers, conveys or relinquishes its ownership
     of all or substantially all of the interests of the Company or the
     Partnership in any Joint Venture in which it is a co-venturer or partner;
     (C) any Joint Venture directly or indirectly (except as described in other
     subsections of this definition) in which the Company or the Partnership as
     a co-venturer or partner sells, grants, transfers, conveys or relinquishes
     its ownership of any Property or portion thereof, including any event with
     respect to any Property which results in the payment to the Joint Venture,
     directly or indirectly, of a significant amount of insurance proceeds or
     condemnation or similar award related to a Property; or (D) the Company or
     the Partnership directly or indirectly (except as described in other
     subsections of this definition) sells, grants, conveys or relinquishes its
     interest in any loan or mortgage or any portion thereof (including with
     respect to any mortgage or loan, all payments thereunder or in satisfaction
     thereof other than regularly scheduled interest payments) of amounts owed
     pursuant to such loan or mortgage and any event which gives rise to the
     payment of a significant amount of insurance proceeds or condemnation or
     similar award; or (E) the Company or the Partnership directly or indirectly
     (except as described in other subsections of this definition) sells,
     grants, transfers, conveys or relinquishes its ownership of any other Real
     Estate Asset not previously described in this definition or any portion
     thereof.

          (ak) "Shares" shall mean the shares of Common Stock of the Company.

          (al) "Sponsor" shall mean any Person directly or indirectly
     instrumental in organizing, wholly or in part, the Company or any Person
     who will control, manage or participate in the management of the Company,
     and any Affiliate of such Person. Not included is any Person whose only
     relationship with the Company is that of an independent property manager of
     Company assets, and whose only compensation is as such. Sponsor does not
     include wholly independent third parties such as attorneys, consultants,
     accountants and underwriters whose only compensation is for professional
     services. A Person also may be deemed a Sponsor of the Company by:

               (i) taking the initiative, directly or indirectly, in founding or
          organizing the business or enterprise of the Company, either alone or
          in conjunction with one or more other Persons;

               (ii) receiving a material participation in the Company in
          connection with the founding or organizing of the business of the
          Company, in consideration of services or property, or both services
          and property;

               (iii) having a substantial number of relationships and contacts
          with the Company;

               (iv) possessing significant rights to control Company properties;

               (v) receiving fees for providing services to the Company which
          are paid on a basis that is not customary in the industry; or


                                       5



               (vi) providing goods or services to the Company on a basis which
          was not negotiated at arms length with the Company.

          (am) "Stockholders" shall mean holders of the Shares.

          (an) "Total Development Cost" shall mean, with regard to any Property
     acquired by the Company prior to or during the development or acquisition
     stages, all costs and expenses paid or incurred by the Company that are in
     any way related to the development of such Property, including, but not
     limited to, land and construction costs.

          (ao) "Total Operating Expenses" shall mean the aggregate expenses of
     every character paid or incurred by the Company as determined under
     generally accepted accounting principles, including fees paid to the
     Advisor, but excluding:

               (i) the expenses of raising capital such as Organizational and
          Offering Expenses, legal, audit, accounting, underwriting, brokerage,
          listing, registration and other fees, printing and other such
          expenses, and taxes incurred in connection with the issuance,
          distribution, transfer, registration and Listing of the Shares;

               (ii) interest payments;

               (iii) taxes;

               (iv) non-cash expenditures such as depreciation, amortization and
          bad debt reserves;

               (v) the Incentive Distribution upon Sales; and

               (vi) Acquisition Expenses, real estate commissions on resale of
          property and other expenses connected with the acquisition,
          disposition (whether by sale, exchange or condemnation) and ownership
          of real estate interests, mortgage loans or other property (such as
          the costs of foreclosure, insurance premiums, legal services,
          maintenance, repair and improvement of property).

     2.   DUTIES OF ADVISOR.

     The Advisor shall consult with the Company and shall, at the request of the
Board of Directors or the officers of the Company, furnish advice and
recommendations with respect to all aspects of the business and affairs of the
Company. In general, the Advisor shall inform the Board of Directors of factors
that come to its attention which could influence the policies of the Company.
Subject to the supervision of the Board of Directors and consistent with the
provisions of the Charter, the Advisor undertakes to use its reasonable efforts
to:

          (a) Present to the Company a continuing and suitable investment
     program and opportunities to make investments consistent with the
     investment policies of the Company and the investment program adopted by
     the Board of Directors and in effect at the time and furnish the Company
     with advice with respect to the making, acquisition, holding and
     disposition of investments and commitments therefor. The Advisor is also
     obligated to provide the Company with the first opportunity to purchase any
     Class A income producing multi-family property which satisfies the
     Company's investment objectives placed under contract by the Advisor or its


                                       6



     Affiliates. If the Board of Directors of the Company does not vote to make
     such purchase within seven (7) days of being offered such property, the
     Advisor is free to offer such opportunity to any other Affiliates or
     non-Affiliates, as it so chooses. The Advisor shall use commercially
     reasonable efforts to identify potential investment opportunities
     consistent with the Company's investment objectives and policies including
     but not limited to:

               (i)  locating, analyzing and selecting potential investments in
                    Real Estate Assets;

               (ii) structuring and negotiating the terms and conditions of
                    acquisition and disposition transactions;

               (iii) arranging for financing and refinancing and making other
                    changes in the asset or capital structure of the Company and
                    disposing of and reinvesting the proceeds from the sale of,
                    or otherwise deal with the investments in, Real Estate
                    Assets; and

               (iv) entering into leases and service contracts, on the Company's
                    behalf, for Real Estate Assets and, to the extent necessary,
                    performing all functions necessary to maintain and
                    administer the Company's assets.

          (b) Manage the Company's day-to-day operations to effect the
     investment program adopted by the Board of Directors and perform or
     supervise the performance of such other administrative functions necessary
     in connection with the management of the Company as may be agreed upon by
     the Advisor and the Company;

          (c) Serve as the Company's investment advisor in connection with
     policy decisions to be made by the Board of Directors and, as requested,
     furnish reports to the Board of Directors and provide research, economic
     and statistical data in connection with the Company's investments and
     investment policies;

          (d) On behalf of the Company, investigate, select and conduct
     relations with lenders, consultants, accountants, brokers, property
     managers, attorneys, underwriters, appraisers, insurers, corporate
     fiduciaries, banks, builders and developers, sellers and buyers of
     investments and persons acting in any other capacity specified by the
     Company from time to time, and enter into contracts with, retain and
     supervise services performed by such parties in connection with investments
     which have been or may be acquired or disposed of by the Company;

          (e) Act as property manager or cooperate with a third party or
     affiliated Property Manager in connection with property management services
     and other activities relating to the Company's assets, subject to the
     requirement that the Advisor, its Affiliate or the Property Manager, as the
     case may be, qualifies as an "independent contractor" as the phrase is used
     in connection with applicable laws, rules and regulations affecting REITs
     that own real property;

          (f) Conduct periodic on-site property visits to some or all (as the
     Advisor deems reasonably necessary) of the Properties to inspect the
     physical condition of the Properties and to evaluate the performance of the
     Property Manager;

          (g) Review, analyze and comment on the operating budgets, capital
     budgets and leasing plans prepared and submitted by the Property Manager
     and aggregate these property budgets into the Company's overall budget;

          (h) Review and analyze on-going financial information pertaining to
     each Property and the overall portfolio of Properties;


                                       7



          (i) Upon request of the Company, act, or obtain the services of others
     to act, as attorney-in-fact or agent of the Company in making, acquiring
     and disposing of investments, disbursing and collecting the funds, paying
     the debts and fulfilling the obligations of the Company and handling,
     prosecuting and settling any claims of the Company, including foreclosing
     and otherwise enforcing mortgage and other liens and security interests
     securing investments;

          (j) Assist in negotiations on behalf of the Company with investment
     banking firms and other institutions or investors for public or private
     sales of securities of the Company or for other financing on behalf of the
     Company, but in no event in such a way that the Advisor shall be acting as
     a broker, dealer or underwriter of securities of the Company;

          (k) On behalf of the Company, maintain, with respect to any Real
     Estate Assets and to the extent available, title insurance or other
     assurance of title and customary fire, casualty and public liability
     insurance;

          (l) At the direction of the Board of Directors, invest and reinvest
     any money of the Company;

          (m) Provide the Company with all necessary cash management services;

          (n) Supervise the preparation and filing and distribution of returns
     and reports to governmental agencies and to investors and act on behalf of
     the Company in connection with investor relations;

          (o) Provide office space, equipment and personnel as required for the
     performance of the foregoing services as advisor;

          (p) Advise the Company of the operating results of the Company's
     properties, prepare on a timely basis, and review, for such properties,
     operating budgets, maintenance and improvement schedules, projections of
     operating results and such other reports as may be requested by the Board
     of Directors;

          (q) As requested by the Company, make reports to the Company of its
     performance of the foregoing services and furnish advice and
     recommendations with respect to other aspects of the business of the
     Company;

          (r) Prepare on behalf of the Company, or engage independent
     professionals to prepare, all reports and returns required by the
     Securities and Exchange Commission, Internal Revenue Service and other
     state or federal governmental agencies, provided that the Company shall be
     responsible for the fees of such independent professionals;

          (s) Undertake and perform all services or other activities necessary
     and proper to carry out the investment objectives of the Company;

          (t) Undertake communications with Stockholders in accordance with
     applicable law and the Charter; and


                                       8



          (u) Enter into ancillary agreements with the Sponsor and its
     Affiliates to arrange for the services to be provided by the Advisor
     hereunder in accordance with this Agreement;

provided, however, that Affiliates of the Advisor have no obligations to the
Company other than as expressly stated herein, and the Advisor and its
Affiliates have no obligations to present to the Company any specific investment
opportunity except as described herein and in the Prospectus. Notwithstanding
the foregoing, the Advisor hereby represents and acknowledges that it will have
fiduciary duties to the Stockholders and that the Company is making a statement
to that effect in its registration statement filed with the Securities and
Exchange Commission.

     3.   NO PARTNERSHIP OR JOINT VENTURE.

     The Company and the Advisor are not, and shall not be deemed to be,
partners or joint venturers with each other.

     4.   RECORDS.

     The Advisor shall maintain appropriate books of account and records
relating to services performed hereunder, which shall be accessible for
inspection by the Company at any time during ordinary business hours.

     5.   ACTIONS RELATING TO REIT QUALIFICATION.

     Notwithstanding any other provision of this Agreement to the contrary, the
Advisor shall refrain from any action which, in its reasonable judgment or in
any judgment of the Board of Directors of which the Advisor has written notice,
would adversely affect the qualification of the Company as a REIT under the Code
or which would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over the Company or its securities, or which would
otherwise not be permitted by the Charter. If any such action is ordered by the
Board of Directors, the Advisor shall promptly notify the Board of Directors of
the Advisor's judgment that such action would adversely affect such status or
violate any such law, rule or regulation or the Charter, and shall thereafter
refrain from taking such action pending further clarification or instruction
from the Board of Directors.

     6.   BANK ACCOUNTS.

     At the direction of the Board of Directors, the Advisor may establish and
maintain bank accounts in the name of the Company, and may collect and deposit
into and disburse from such accounts any money on behalf of the Company, under
such terms and conditions as the Board of Directors may approve, provided that
no funds in any such account shall be commingled with funds of the Advisor. The
Advisor shall from time to time, as the Company may require, render appropriate
accountings of such collections, deposits and disbursements to the Board of
Directors and to the auditors of the Company.

     7.   FIDELITY BOND.

     The Advisor shall not be required to obtain or maintain a fidelity bond in
connection with the performance of its services hereunder.


                                       9



     8.   INFORMATION FURNISHED TO THE ADVISOR.

     The Board of Directors will keep the Advisor informed in writing concerning
the investment and financing policies of the Company. The Board of Directors
shall notify the Advisor promptly in writing of its intention to make any
investments or to sell or dispose of any existing investments. The Company shall
furnish the Advisor with a certified copy of all financial statements, a signed
copy of each report prepared by independent certified public accountants, and
such other information with regard to its affairs as the Advisor may reasonably
request.

     9.   COMPENSATION.

     The Advisor and its Affiliates shall be paid for services rendered by the
Advisor under this Agreement as follows:

          (a) The Advisor or its Affiliates shall receive as compensation for
     services rendered in connection with the investigation, selection and
     acquisition of Real Estate Assets (by purchase, investment or exchange) a
     Real Estate Commission payable by the Company. The total Real Estate
     Commissions paid to the Advisor or its Affiliates shall not exceed (i) 3.0%
     of the Contract Purchase Price of Real Estate Assets acquired directly or
     indirectly by the Company, and (ii) 4.0% of the Total Development Cost of
     Properties developed by or on behalf of the Company for services provided
     by the Advisor, its Affiliates or sub-contractors thereof. At the Advisor's
     discretion, a portion of the Real Estate Commission may be paid to
     third-party developers for services rendered. Real Estate Commissions shall
     be payable on the acquisition of a specific Property, on the acquisition of
     a portfolio of Properties through a purchase of assets, controlling
     securities or by Joint Venture, by a merger or similar business combination
     or other comparable transaction, or on the completion of development of a
     Property or Properties for the Company. However, the total of all Real
     Estate Commissions and Acquisition Expenses payable with respect to any
     Real Estate Assets shall not exceed 6% of the Contract Purchase Price or
     the Total Development Cost (as applicable) of such Real Estate Assets
     unless fees in excess of such amount are approved by a majority of the
     Directors not interested in such transaction and by a majority of the
     Independent Directors not interested in such transaction and which
     transaction is determined to be commercially competitive, fair and
     reasonable to the Company.

          (b) The Advisor shall receive as compensation for services rendered in
     connection with the management of the Company's assets the Asset Management
     Fee. The Asset Management Fee shall be payable monthly in arrears by the
     Company in cash or in shares at the option of the Advisor, and may be
     deferred, in whole or in part, from time to time, by the Advisor (without
     interest). The Asset Management Fee shall be equal to:

               (i) 0.75% of Average Invested Assets if the Return Ratio for the
     calculation period is 6% or less;

               (ii) 1.0% of Average Invested Assets if the Return Ratio for the
     calculation period is more than 6%.

     The Asset Management Fee shall be calculated monthly not to exceed
     one-twelfth of the applicable percentage of the Average Invested Assets of
     the Company as the last day of the immediately preceding quarter.

          (c) The Advisor, an Affiliate or an unaffiliated third party shall
     receive a monthly Property Management Fee equal to 4.0% of the monthly
     Gross Income from Properties.


                                       10



          (d) If the Advisor or an Affiliate provides a substantial amount of
     the services in connection with the Sale of one or more Properties the
     Advisor or an Affiliate shall receive a Disposition Fee equal to the lesser
     of (i) one-half of a Competitive Real Estate Commission or (ii) 3% of the
     Contract Sales Price of such Property or Properties. The Disposition Fee
     may be paid in addition to real estate commissions paid to non-Affiliates;
     provided, however, that the total real estate commissions paid to all
     Persons by the Company with respect to the Sale of such Property or
     Properties shall not exceed an amount equal to the lesser of (i) 6% of the
     Contract Sales Price of the Property or Properties or (ii) the Competitive
     Real Estate Commission.

          (e) Upon the Sale of a Property by the Company, the Partnership will
     pay an Incentive Distribution upon Sale equal to 10% of the net proceeds
     from the Sale after the Company has received and paid to the Stockholders
     the sum of (i) the Invested Capital that initially was allocated to that
     property, (ii) any remaining shortfall in the recovery of Invested Capital
     with respect to prior Sales of Properties, and (iii) any remaining
     shortfall in the Cumulative Return. If the Company, and in turn the
     Stockholders, have not received a return of Invested Capital or if there is
     a shortfall in the Cumulative Return after the Sale of the last Property
     and the Advisor previously has received Incentive Distributions, other than
     Incentive Distributions that have been repaid previously, the Advisor will
     repay to the Partnership a portion of those distributions sufficient to
     cause the Company, and in turn the Stockholders, to receive a full return
     of Invested Capital and the full Cumulative Return. In no event will the
     aggregate amount repaid by the Advisor to the Partnership exceed the
     aggregate amount of Incentive Distributions that the Advisor previously
     received.

          (f) To the extent the Advisor or an Affiliate provides a substantial
     amount of services in connection with the construction management of a
     Property, the Advisor or an Affiliate will receive a Construction
     Management Fee equal to 5% of any amount (including professional services)
     up to $25,000, 4% of any amount over $25,000 but less than $50,000 and 3%
     of any amount in excess of $50,000 which is expended in any calendar year
     for construction or repair at any Company Property.

     10.  Expenses.

          (a) In addition to the compensation paid to the Advisor pursuant to
     Section 9 hereof, the Company or the Partnership shall pay directly or
     reimburse the Advisor for all of the expenses paid or incurred by the
     Advisor in connection with the services it provides to the Company and the
     Partnership pursuant to this Agreement, including, but not limited to:

               (i) the Company's Organizational and Offering Expenses; provided,
          however, that within 60 days after the end of the month in which the
          Offering terminates, the Advisor shall reimburse the Company for any
          Organizational and Offering Expenses reimbursement received by the
          Advisor pursuant to this Section 10, to the extent that such
          reimbursement exceeds the maximum amount permitted or, at the option
          of the Company, such excess shall be subtracted from the next
          reimbursement of expenses to be made by the Company pursuant to this
          Section 10. The Advisor shall be responsible for the payment of all
          the Company's Organizational and Offering Expenses in excess of the
          maximum amount permitted;

               (ii) Acquisition Expenses incurred in connection with the
          selection, evaluation and acquisition of Properties;


                                       11



               (iii) the actual cost of goods and services used by the Company
          and obtained from entities not affiliated with the Advisor, other than
          Acquisition Expenses;

               (iv) interest and other costs for borrowed money, including
          discounts, points and other similar fees;

               (v) taxes and assessments on income of the Company or its Real
          Estate Assets;

               (vi) costs associated with insurance required in connection with
          the business of the Company or by the Directors;

               (vii) expenses of managing and operating Properties owned by the
          Company, payable to the Property Manager, whether the Property Manager
          is an Affiliate of the Company or a non-affiliated Person.

               (viii) all compensation and expenses payable to the Independent
          Directors and all expenses payable to the non-Independent Directors in
          connection with their services to the Company and the Stockholders and
          their attendance at meetings of the Directors and Stockholders;

               (ix) expenses associated with a Listing, if applicable, or with
          the issuance and distribution of Shares, such as selling commissions
          and fees, marketing and advertising expenses, taxes, legal and
          accounting fees, Listing and registration fees, and other
          Organizational and Offering Expenses;

               (x) expenses connected with payments of distributions in cash or
          otherwise made or caused to be made by the Company to the
          Stockholders;

               (xi) expenses of amending, converting, liquidating or terminating
          the Company or the Charter;

               (xii) expenses of maintaining communications with Stockholders,
          including the cost of preparation, printing and mailing annual and
          other Stockholder reports, proxy statements and other reports required
          by governmental entities;

               (xiii) administrative services expenses (including personnel
          costs; provided, however, that no reimbursement shall be made for
          costs of personnel to the extent that such personnel perform services
          for which the Advisor receives a separate fee);

               (xiv) transfer agent and registrar's fees and charges paid to
          third parties; and

               (xv) audit, accounting, legal and other professional fees.

          (b) Expenses incurred by the Advisor on behalf of the Company and the
     Partnership and payable pursuant to this Section 10 shall be reimbursed no
     less than monthly to the Advisor. The Advisor shall prepare a statement
     documenting the expenses of the Company and the Partnership and the
     calculation of the Asset Management Fee during each quarter, and shall
     deliver such statement to the Company and the Partnership within 45 days
     after the end of each quarter.


                                       12



     11.  COMPENSATION FOR ADDITIONAL SERVICES, CERTAIN LIMITATIONS.

          (a) If the Company shall request the Advisor or its Affiliates to
     render services for the Company other than those required to be rendered by
     the Advisor hereunder, such additional services, if the Advisor elects to
     perform them, will be compensated separately on terms to be agreed upon
     between such party and the Company from time to time in accordance with
     this Section. The rate of compensation for such services shall be approved
     by a majority of the Board of Directors, including a majority of the
     Independent Directors, and shall not exceed an amount that would be paid to
     nonaffiliated third parties for similar services.

          (b) In extraordinary circumstances fully justified to the official or
     agency administering the state securities laws, the Advisor and its
     Affiliates may provide other goods and services to the Company if all of
     the following criteria are met: (i) the goods or services must be necessary
     to the prudent operation of the Company; or (ii) the compensation, price or
     fee must be equal to the lesser of 90% of the compensation, price or fee
     the Company would be required to pay to independent parties who are
     rendering comparable services or selling or leasing comparable goods on
     competitive terms in the same geographic location, or 90% of the
     compensation, price or fee charged by the Advisor or its Affiliates for
     rendering comparable services or selling or leasing comparable goods on
     competitive terms. In addition, any such payment will be subject to the
     further limitation described in paragraph (c) below. Extraordinary
     circumstances shall be presumed only when there is an emergency situation
     requiring immediate action by the Advisor or its Affiliates and the goods
     or services are not immediately available from unaffiliated parties.
     Services which may be performed in such extraordinary circumstances include
     emergency maintenance of Company Properties, janitorial and other related
     services due to strikes or lock-outs, emergency tenant evictions and repair
     services which require immediate action, as well as operating and
     re-leasing properties with respect to which the leases are in default or
     have been terminated.

          (c) No reimbursement will be permitted to the Advisor or its
     Affiliates under Section 10(a) above for the salaries, fringe benefits,
     travel expenses and other administrative items of any controlling persons
     of the Advisor, its Affiliates or any other supervisory personnel except in
     those instances in which the Company believes it to be in the best interest
     of the Company that the Advisor or its Affiliates operate or otherwise deal
     with, for an interim period, a property with respect to which the lease is
     in default or terminated. Permitted reimbursements, except as set forth
     above, include salaries and related salary expenses for non-supervisory
     services which could be performed directly for the Company by independent
     parties such as legal, accounting, transfer agent, data processing and
     duplication. Controlling persons, for purposes of this Section, include,
     but are not limited to, those entities or individuals holding 5% or more of
     the ownership interests of the Advisor or a person having the power to
     direct or cause the direction of the Advisor, whether through ownership of
     voting securities, by contract or otherwise, and any person, irrespective
     of his or her title, who performs functions for the Advisor similar to
     those of: (a) chairman or member of the board of directors; or (b)
     president or executive vice president.

     Notwithstanding the foregoing, and subject to the approval of the Board of
Directors, the Company may reimburse the Advisor for expenses related to the
activities of controlling persons undertaken in capacities other than those
which cause them to be controlling persons. The Advisor believes that the
employees of the Advisor, its Affiliates and controlling persons who perform
services for the Company for which reimbursement is allowed pursuant to Section
11(b) have the experience and educational background, in their respective fields
of expertise, appropriate for the performance of such services.


                                       13



     The Advisor and its Affiliates may not be reimbursed by the Company for
their overhead, nor can overhead costs or expenses of the Advisor or its
Affiliates be allocated to or paid by the Company. The foregoing reimbursements
of expenses, as limited by this Agreement, will be made regardless of whether
any cash distributions are made to the Stockholders.

     12.  STATEMENTS.

     The Advisor shall furnish to the Company not later than the 30th day
following the end of each Fiscal Year, a statement showing a computation of the
fees or other compensation payable to the Advisor or an Affiliate of the Advisor
with respect to such Fiscal Year under Sections 9 and 11 hereof. The final
settlement of compensation payable under Sections 9 and 11 hereof for each
Fiscal Year shall be subject to adjustments in accordance with, and upon
completion of, the annual audit of the Company's financial statements.

     13.  INTERNALIZATION OF THE ADVISOR.

     The Company shall consider becoming a self-administered REIT once the
Company's assets and income are, in the view of the Board of Directors,
including a majority of the Independent Directors, of sufficient size such that
internalizing the management functions by the Advisor and the Property Manager
is in the best interests of the Stockholders. The compensation payable to the
Advisor upon such internalization shall be agreed upon by the Independent
Directors and the Advisor.

     14.  LISTING OF THE SHARES.

     If this Agreement is terminated in connection with a Listing, the Advisor
will receive, in exchange for terminating this Agreement and the giving up or
waiving of its fees then earned but not paid and all future fees, such
consideration to be determined by the Independent Directors and the Advisor. In
addition, at such time, the Company may cause the Partnership to redeem the
Advisor's "Incentive Limited Partnership Interests" (as defined in the
Partnership's Agreement of Limited Partnership) for cash, or if agreed by both
parties, units of interest in the Partnership or Shares, for the amount the
Advisor would have received if the Partnership immediately sold all of its
assets at fair market value. In the event of such a termination of this
Agreement, the Company shall thereafter be relieved of its obligation to pay the
fees contemplated by this Agreement.


                                       14



     15.  REIMBURSEMENT BY ADVISOR.

     The parties acknowledge that pursuant to the "Statement of Policy Regarding
Real Estate Investment Trusts," as revised and adopted by the North American
Securities Administrators Association on September 29, 1993, Total Operating
Expenses of the Company shall be deemed to be excessive if in any Fiscal Year
they exceed the greater of (a) 2% of the Company's Average Invested Assets for
such Fiscal Year; or (b) 25% of the Net Income for such Fiscal Year. The
Independent Directors shall have the fiduciary responsibility of limiting such
expenses to amounts that do not exceed such limitations. Within 60 days after
the end of any fiscal quarter of the Company for which Total Operating Expenses
(for the 12 months then ended) exceed 2% of Average Invested Assets or 25% of
Net Income, whichever is greater, the Company shall send to the Stockholders
written notice of such fact together with the determination of the Independent
Directors as to whether such higher operating expenses were justified and if so
justified, an explanation of the facts the Independent Director considered in
arriving at that conclusion also shall be included. If the Independent Directors
determine that such excess expenses are not justified, then the Advisor shall
reimburse the Company the amount by which the aggregate expenses incurred by the
Company exceed the limitations described above at the end of the Fiscal Year;
provided, however, that the Company may instead permit such reimbursements to be
effected by a reduction in the amount of the next payments of compensation under
Section 9.

     16.  NAME.

     Triple Net Properties, LLC has a proprietary interest in the name "NNN."
Accordingly, and in recognition of this right, if, at any time the Company or
the Partnership ceases to retain Triple Net Properties, LLC or an Affiliate
thereof to perform the services of Advisor, the Company or the Partnership, as
the case may be, will, promptly after receipt of written request from Triple Net
Properties, LLC, cease to conduct business under or use the name "NNN" or any
derivative thereof and the Company or the Partnership shall use its best efforts
to change the name of the Company to a name that does not contain the name "NNN"
or any other word or words that might, in the sole discretion of the Advisor, be
susceptible of indication of some form of relationship between the Company and
the Advisor or any Affiliate thereof. Consistent with the foregoing, it is
specifically recognized that the Advisor or one or more of its Affiliates has in
the past and may in the future organize, sponsor or otherwise permit to exist
other investment entities (including entities for investment in real estate) and
financial and service organizations having "NNN" as a part of their name, all
without the need for any consent (and without the right to object thereto) by
the Company or its Board of Directors.

     17.  OTHER ACTIVITIES OF THE ADVISOR.

     Subject to the provisions specifically set forth herein, the Advisor and
its Affiliates currently engage, and may engage in the future, in other
businesses or activities including the rendering of services and investment
advice with respect to real estate investment opportunities to other persons or
entities and may manage other investments (including the investments of the
Advisor and its Affiliates), including those in competition with the Company.
The Advisor or its Affiliates may, with respect to any investment in which the
Company is a participant, also render advice and service to each and every other
participant therein. The Advisor shall report to the Board of Directors the
existence of any condition or circumstance, existing or anticipated, of which it
has knowledge, which creates or could create a conflict of interest between the
Advisor's obligations to the Company and its obligations to or its interest in
any other Person. The Advisor or its Affiliates shall promptly disclose to the
Board of Directors knowledge of such condition or circumstance.

     Directors, officers, employees and agents of the Advisor or of Affiliates
of the Advisor may serve as directors, officers, employees or agents of the
Company.


                                       15



     18.  TERM; TERMINATION OF AGREEMENT.

     This Agreement will have an initial term of one year from its date, subject
to successive one year renewals with the written mutual consent of the parties
including approval of a majority of the Independent Directors.

     Notwithstanding any other provision of this Agreement to the contrary,
either the Company or the Advisor may terminate this Agreement, or any extension
hereof, or the parties by mutual consent or a majority of the Independent
Directors may do so, in each case upon 60 days written notice without cause or
penalty. In the event of the termination of this Agreement, the Advisor will
cooperate with the Company and take all reasonable steps requested to assist the
Board of Directors in making an orderly transition of the advisory function.

     If this Agreement is terminated pursuant to this Section, such termination
shall be without any further liability or obligation of either parry to the
other, except as provided in Section 21.

     If this Agreement is terminated for any reason other than the Listing of
the Shares as contemplated in Section 14, all obligations of the Advisor and its
Affiliates to offer property to the Company for purchase, as described in
Section 2(a), also shall terminate.

     19.  ASSIGNMENTS.

     The Company may terminate this Agreement immediately in the event of its
assignment by the Advisor except an assignment to a successor organization which
acquires substantially all of the property and carries on the affairs of the
Advisor, provided that following such assignment the persons who controlled the
operations of the Advisor immediately prior thereto shall control the operations
of the successor organization, including the performance of its duties under
this Agreement; however, if at any time subsequent to such assignment such
persons shall cease to control the operations of the successor organization, the
Company may thereupon immediately terminate this Agreement. This Agreement shall
not be assignable by the Company without the consent of the Advisor, except in
the case of assignment by the Company to a corporation, trust or other
organization which is a successor to the Company. Any assignment of this
Agreement shall bind the assignee hereunder in the same manner as the assignor
is bound hereunder.

     20.  DEFAULT, BANKRUPTCY, ETC.

     At the sole option of the Company, this Agreement shall be terminated
immediately upon written notice of termination from the Board of Directors to
the Advisor if any of the following events occur:

          (a) The Advisor violates any material provisions of this Agreement
     and, after receipt of written notice of violation, such violation is not
     cured within 30 days; or

          (b) A court of competent jurisdiction enters a decree or order for
     relief in respect of the Advisor in any involuntary case under the
     applicable bankruptcy, insolvency or other similar law now or hereafter in
     effect, or appoints a receiver, liquidator, assignee, custodian, trustee,
     sequestrator (or similar official) of the Advisor or for any substantial
     part of its property or orders the winding up or liquidation of the
     Advisor's affairs; or


                                       16



          (c) The Advisor commences a voluntary case under any applicable
     bankruptcy, insolvency or other similar law now or hereafter in effect, or
     consents to the entry of an order for relief in an involuntary case under
     any such law, or consents to the appointment of or taking possession by a
     receiver, liquidator, assignee, custodian, trustee, sequestrator (or
     similar official) of the Advisor or for any substantial part of its
     property, or makes any general assignment for the benefit of creditors, or
     fails generally to pay its debts as they become due.

               The Advisor agrees that if any of the events specified in
     subsections (b) and (c) of this Section 20 occur, it will give written
     notice thereof to the Company within 7 days after the occurrence of such
     event.

     21.  ACTION UPON TERMINATION.

     The Advisor shall not be entitled to compensation after the date of
termination of this Agreement for further services hereunder, but shall be paid
all compensation accruing to the date of termination. Subject to the provisions
of Sections 13 and 14, the Advisor shall forthwith upon a termination caused by
factors other than Listing:

          (a) Pay over to the Company all monies collected and held for the
     account of the Company pursuant to this Agreement, after deducting any
     accrued compensation and reimbursement for its expenses to which it is then
     entitled;

          (b) Deliver to the Board of Directors a full accounting, including a
     statement showing all payments collected by it and a statement of all
     monies held by it, covering the period following the date of the last
     accounting furnished to the Board of Directors;

          (c) Deliver to the Board of Directors all property and documents of
     the Company then in the custody of the Advisor; and

          (d) Cooperate with the Company and take all reasonable steps requested
     by the Company to assist the Board of Directors in making an orderly
     transition of the advisory function.

     22.  AMENDMENTS.

     This Agreement shall not be amended, changed, modified, terminated or
discharged in whole or in part except by an instrument in writing signed by both
parties hereto, or their respective successors or assigns.

     23.  SUCCESSORS AND ASSIGNS.

     This Agreement shall bind any successors or permitted assigns of the
parties hereto as herein provided.

     24.  GOVERNING LAW.

     The provisions of this Agreement shall be governed, construed and
interpreted in accordance with the laws of the Commonwealth of Virginia, without
regard to its conflict of laws provisions.


                                       17



     25.  LIABILITY AND INDEMNIFICATION.

          (a) The Company shall, to the fullest extent permitted by Virginia
     statutory or decisional law, as amended or interpreted, indemnify and pay
     or reimburse reasonable expenses to the Advisor and its Affiliates,
     provided, that: (i) the Advisor or other party seeking indemnification has
     determined, in good faith, that the course of conduct which cased the loss
     or liability was in the best interest of the Company; (ii) the Advisor or
     other person seeking indemnification was acting on behalf of or performing
     services on the part of the Company; (iii) such liability or loss was not
     the result of negligence, misconduct or a knowing violation of the criminal
     law or any federal or state securities laws on the part of the indemnified
     party; and (iv) such indemnification or agreement to be, held harmless is
     recoverable only out of the net assets of the Company and not from the
     Stockholders.

          (b) The Company shall not indemnify the Advisor or its Affiliates for
     losses, liabilities or expenses arising from or out of an alleged violation
     of federal or state securities laws by such party unless one or more of the
     following conditions are met: (i) there has been a successful adjudication
     on the merits of each count involving alleged securities law violations as
     to the particular indemnitee; (ii) such claims have been dismissed with
     prejudice on the merits by a court of competent jurisdiction as to the
     particular indemnitee; or (iii) a court of competent jurisdiction approves
     a settlement of the claims and finds that indemnification of the settlement
     and related costs should be made and the court considering the request has
     been advised of the position of the Securities and Exchange Commission and
     the published opinions of any state securities regulatory authority in
     which securities of the Company were offered and sold as to indemnification
     for securities law violations.

          (c) The Company may advance amounts to persons entitled to
     indemnification hereunder for legal and other expenses and costs incurred
     as a result of any legal action for which indemnification is being sought
     only if all of the following conditions are satisfied: (i) the legal action
     relates to acts or omissions with respect to the performance of duties or
     services by the indemnified party for or on behalf of the Company; (ii) the
     legal action is initiated by a third party and a court of competent
     jurisdiction specifically approves such advancement; and (iii) the
     indemnified party receiving such advances undertakes to repay the advanced
     funds to the Company, together with the applicable legal rate of interest
     thereon, in which such party would not be entitled to indemnification.

     26.  NOTICES.

     Any notice, report or other communication required or permitted to be given
hereunder shall be in writing unless some other method of giving such notice,
report or other communication is accepted by the party to whom it is given and
shall be given by being delivered at the following addresses of the parties
hereto:

          THE COMPANY AND/OR THE BOARD OF DIRECTORS:

          NNN Apartment REIT, Inc.
          Suite 200
          1551 N. Tustin Avenue
          Santa Ana, CA 92705


                                       18



          THE ADVISOR:

          NNN Apartment REIT Advisor, LLC
          Suite 200
          1551 N. Tustin Avenue
          Santa Ana, CA 92705

     Either party may at any time give notice in writing to the other party of a
change of its address for the purpose of this Section 24.

     25.  HEADINGS.

     The section headings hereof have been inserted for convenience of reference
only and shall not be construed to affect the meaning, construction or effect of
this Agreement.


                                       19



     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.

COMPANY:

NNN Apartment REIT, Inc., a Maryland
corporation


By:
    ---------------------------------
Title:
       ------------------------------


ADVISOR:

NNN Apartment REIT Advisor, LLC, a
Virginia limited liability company


By: Triple Net Properties, LLC, a
    Virginia limited liability
    company, its Manager


By:
    ---------------------------------
Title:
       ------------------------------


                                       20

EX-23.3

EXHIBIT 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

      We consent to the use in this Registration Statement on Form S-11 of our report dated January 10, 2006 relating to the consolidated balance sheet of NNN Apartment REIT, Inc. as of January 10, 2006 (date of inception) appearing the Prospectus, which is part of this Registration Statement, and to the reference to us under the heading “Experts” in such Prospectus.

/s/ DELOITTE & TOUCHE LLP

Los Angeles, California

January 10, 2006