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<SEC-DOCUMENT>0000950134-05-019610.txt : 20051024
<SEC-HEADER>0000950134-05-019610.hdr.sgml : 20051024
<ACCEPTANCE-DATETIME>20051024164123
ACCESSION NUMBER:		0000950134-05-019610
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20051122
FILED AS OF DATE:		20051024
DATE AS OF CHANGE:		20051024
EFFECTIVENESS DATE:		20051024

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN REALTY INVESTORS INC
		CENTRAL INDEX KEY:			0001102238
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS [6510]
		IRS NUMBER:				752847135
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-15663
		FILM NUMBER:		051152425

	BUSINESS ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		4695224200

	MAIL ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>d29537def14a.htm
<DESCRIPTION>DEFINITIVE PROXY STATEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>def14a</TITLE>
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<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>


<DIV align="center" style="font-size: 18pt; margin-top: 18pt"><B>SCHEDULE 14A</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>Proxy Statement Pursuant to Section&nbsp;14(a) of the<BR>
Securities Exchange of 1934 (Amendment No. ___)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Filed by
the Registrant <FONT face="Wingdings">&#254;</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Filed by a Party other than the Registrant <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check the appropriate box:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT>
Preliminary Proxy Statement.</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)).</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#254;</FONT> Definitive Proxy Statement.</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> Definitive Additional Materials.</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> Soliciting Material Pursuant to Section&nbsp;140.14A-11(c) or Section&nbsp;240.14a-12.
</DIV>
<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B><FONT style="border-bottom: 1px solid #000000">AMERICAN REALTY INVESTORS, INC.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Name of Registrant as Specified In Its Charter)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">(Name of Person(s) Filing Proxy Statement if other than the Registrant)</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payment of Filing Fee (Check the appropriate box):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#254;</FONT> No fee required.<BR>
<FONT face="Wingdings">&#111;</FONT> Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1) Title of each class of securities to which transaction applies:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2) Aggregate number of securities to which transaction applies:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule&nbsp;0-11 (Set forth the amount on which the filing fee is calculated and state
how it was determined):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4) Proposed maximum aggregate value of transaction:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5) Total fee paid:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 10%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD> Fee paid previously with preliminary materials.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1) Amount Previously Paid:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2) Form, Schedule or Registration Statement No.:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3) Filing Party:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4) Date Filed:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>












<P align="center" style="font-size: 10pt">
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMERICAN REALTY INVESTORS, INC.<BR>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS<BR>
TO BE HELD ON NOVEMBER 22, 2005</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;American Realty Investors, Inc. will hold its Annual Meeting of Stockholders on Tuesday,
November&nbsp;22, 2005, at 12:30&nbsp;p.m., local Dallas, Texas time, at 1800 Valley View Lane, Suite&nbsp;300,
Dallas, Texas 75234. The purpose of the meeting is to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> Elect a Board of five directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly-elected and qualified.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> Ratify the appointment of Farmer, Fuqua &#038; Huff, P.C. as the independent
registered public accounting firm.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> Act upon such other matters as may properly be presented at the Annual
Meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only Stockholders of record at the close of business on October&nbsp;21, 2005 will be entitled to
vote at the meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your vote is important. Whether or not you plan to attend the meeting, please complete, sign,
date and return the enclosed proxy card in the accompanying envelope provided. Your completed
proxy will not prevent you from attending the meeting and voting in person should you choose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated: October&nbsp;21, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">By order of the Board of Directors,

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 50%">/s/
Louis J. Corna<BR><BR>Louis J. Corna<BR>
Executive Vice President, General Counsel,<BR>
Tax Counsel and Secretary

</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMERICAN REALTY INVESTORS, INC.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROXY STATEMENT</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FOR THE ANNUAL MEETING OF STOCKHOLDERS</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TO BE HELD NOVEMBER 22, 2005</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of American Realty Investors, Inc. (the &#147;Company,&#148; or &#147;we&#148; or &#147;us&#148;) is
soliciting proxies to be used at the 2005 Annual Meeting of Stockholders (the &#147;Annual Meeting&#148;).
Distribution of this Proxy Statement and a Proxy Form is scheduled to begin on October&nbsp;27, 2005.
The mailing address of the Company&#146;s principal executive offices is 1800 Valley View Lane, Suite
300, Dallas, Texas 75234.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>About the Meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Who Can Vote</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Record holders of Common Stock of the Company at the close of business on October&nbsp;21, 2005
(the &#147;Record Date&#148;) may vote at the Annual Meeting. On that date, 10,895,972 shares of Common
Stock were outstanding. Each share is entitled to cast one vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>How Can You Vote</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you return your signed proxy before the Annual Meeting, we will vote your shares as you
direct. You can specify whether your shares should be voted for all, some or none of the nominees
for director. You can also specify whether you approve, disapprove or abstain from the other
proposal to ratify the selection of auditors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a proxy is executed and returned but no instructions are given, the shares will be voted
according to the recommendations of the Board of Directors. The Board of Directors recommends a
vote <B>FOR </B>Proposals 1 and 2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revocation of Proxies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may revoke your proxy at any time before it is exercised by (a)&nbsp;delivering a written
notice of revocation to the Corporate Secretary, (b)&nbsp;delivering another proxy that is dated later
than the original proxy, or (c)&nbsp;casting your vote in person at the Annual Meeting. Your last vote
will be the vote that is counted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Vote Required</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of a majority of the shares entitled to vote who are either present in
person or represented by a proxy at the Annual Meeting will constitute a quorum for the transaction
of business at the Annual Meeting. As of October&nbsp;21, 2005, there were 10,895,972 shares of Common
Stock issued and outstanding. The presence, in person or by proxy, of stockholders entitled to
cast at least 5,447,986 votes constitutes a quorum for adopting the proposals at the Annual
Meeting. If you have properly
</DIV>

<P align="center" style="font-size: 10pt">1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">signed and returned your proxy card by mail, you will be considered
part of the quorum, and the persons named on the proxy card will vote your shares as you have
instructed. If the broker holding your shares in &#147;street&#148; name indicates to us on a proxy card that the broker lacks discretionary authority to vote your shares, we will not
consider your shares as present or entitled to vote for any purpose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A plurality of the votes cast is required for the election of directors. This means that the
director nominee with the most votes for a particular slot is elected to that slot. A proxy that
has properly withheld authority with respect to the election of one or more directors will not be
voted with respect to the director or directors indicated, although it will be counted for purposes
of determining whether there is a quorum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the other proposal, the affirmative vote of the holders of a majority of the shares
represented in person or by proxy entitled to vote on the proposal will be required for approval.
An abstention with respect to such proposal will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect
of a negative vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the Record Date, affiliates held 9,149,277 shares representing approximately 84% of the
shares outstanding. These affiliates have advised the Company that they currently intend to vote
all of their shares in favor of the approval of both proposals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you received multiple proxy cards, this indicates that your shares are held in more than
one account, such as two brokerage accounts, and are registered in different names. You should
vote each of the proxy cards to ensure that all your shares are voted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Matters to be Acted Upon at the Annual Meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not know of any other matters to be validly presented or acted upon at the Annual
Meeting. Under our Bylaws, no business besides that stated in the Annual Meeting Notice may be
transacted at any meeting of stockholders. If any other matter is presented at the Annual Meeting
on which a vote may be properly taken, the shares represented by proxies will be voted in
accordance with the judgment of the person or persons voting those shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Expenses of Solicitation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is making this solicitation and will pay the entire cost of preparing, assembling,
printing, mailing and distributing these proxy materials and soliciting votes. Some of our
directors, officers and employees may solicit proxies personally, without any additional
compensation, by telephone or mail. Proxy materials will also be furnished without cost to brokers
and other nominees to forward to the beneficial owners of shares held in their names.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Available Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
internet website address is <I><U>www.amrealtytrust.com</U>. </I>We make available free of
charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Forms 10-Q,
Current Reports on Form 8-K, reports filed pursuant to Section&nbsp;16 and amendments to those reports
as soon as reasonably practicable after we electronically file or furnish such materials to the
Securities and Exchange Commission. In addition, we have posted the Charters of our Audit
Committee, Compensation Committee, and our Governance and Nominating Committee, as well as our Code
of
</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Business Conduct and Ethics, Corporate Governance Guidelines and Director Independence
Standards, all under separate headings. These charters and principles are not incorporated in this
instrument by reference. We will also provide a copy of these documents free of charge to
stockholders upon written request. The Company issues Annual Reports containing audited financial
statements to its common stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Questions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may call our Investor Relations Department at 800-400-6407 if you have any questions.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLEASE VOTE &#151; YOUR VOTE IS IMPORTANT</B>
</DIV>



<P align="center" style="font-size: 10pt">3
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Corporate Governance and Board Matters</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The affairs of the Company are managed by the Board of Directors. The Directors are elected
at the annual meeting of stockholders each year or appointed by the incumbent Board of Directors
and serve until the next annual meeting of stockholders or until a successor has been elected or
approved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After December&nbsp;31, 2003, a number of changes occurred in the composition of the Board of
Directors of the Company, the creation of certain Board Committees, the adoption of Committee
charters, the adoption of a Code of Ethics for Senior Financial Officers and the adoption of
Guidelines for Director Independence. The composition of the members of the Board of Directors
changed with the resignation of Earl D. Cecil (February&nbsp;29, 2004), as well as the election of
independent Directors Sharon Hunt and Ted R. Munselle effective on February&nbsp;20, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Current Members of the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The members of the Board of Directors (all of whom were elected by the stockholders at the
last annual meeting held on September&nbsp;15, 2004) on the date of this proxy statement, and the
committees of the Board on which they serve, are identified below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Governance</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>and</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Audit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Nominating</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Director</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Committee</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Henry A. Butler</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sharon Hunt
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chair
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ted R. Munselle
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chair
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chair</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ted P. Stokley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Martin L. White
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Role of the Board&#146;s Committees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has standing Audit, Compensation and Governance and Nominating
Committees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Audit Committee</I></B>. The functions of the Audit Committee are described below under the
heading &#147;<I>Report of the Audit Committee.</I>&#148; The charter of the Audit Committee was adopted February
19, 2004, and is available on the Company&#146;s Investor Relations
website (<I><U>www.amrealtytrust.com</U>).</I>
The Audit Committee was formed on February&nbsp;19, 2004, and the Board selected the current members of
the Audit Committee for the coming year, as shown above. All of the members of the Audit Committee
are independent within the meaning of SEC regulations, the listing standards of the New York Stock
Exchange and the Company&#146;s <I>Corporate Governance</I>
</DIV>

<P align="center" style="font-size: 10pt">4
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Guidelines</I>. Mr.&nbsp;Munselle, a member and Chair of the
Committee, is qualified as an audit committee financial expert within the meaning of SEC
regulations and the Board has determined that he has accounting and related financial management
expertise within the meaning of the listing standards of the New York Stock Exchange. All of the
members of the Audit Committee meet the independence and experience requirements of the listing
standards of the New York Stock Exchange. The Audit Committee met twelve times during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Governance and Nominating Committee</I></B>. The Governance and Nominating Committee is responsible
for developing and implementing policies and practices relating to corporate governance, including
reviewing and monitoring implementation of the Company&#146;s <I>Corporate Governance Guidelines</I>. In
addition, the Committee develops and reviews background information on candidates for the Board and
makes recommendations to the Board regarding such candidates. The Committee also prepares and
supervises the Board&#146;s annual review of director independence and the Board&#146;s performance
self-evaluation. The charter of the Governance and Nominating Committee was adopted on March&nbsp;22,
2004, and is available on the Company&#146;s Investor Relations website (www.amrealtytrust.com). On
March&nbsp;22, 2004, the Board selected the members of the Governance and Nominating Committee for the
coming year, as shown above. All of the members of the Committee are independent within the meaning
of the listing standards of the New York Stock Exchange and the Company&#146;s <I>Corporate Governance
Guidelines. </I>The Governance and Nominating Committee met one time during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Compensation Committee</I></B>. The Compensation Committee is responsible for overseeing the policies
of the Company relating to compensation to be paid by the Company to the Company&#146;s principal
executive officer and any other officers designated by the Board and make recommendations to the
Board with respect to such policies, produce necessary reports on executive compensation for
inclusion in the Company&#146;s proxy statement in accordance with applicable rules and regulations and
to monitor the development and implementation of succession plans for the principal executive
officer and other key executives and make recommendations to the Board with respect to such plans.
The charter of the Compensation Committee was adopted on March&nbsp;22, 2004, and is available on the
Company&#146;s Investor Relations website
(<I><U>www.amrealtytrust.com</U>). </I>On March&nbsp;22, 2004, the Board
selected the members of the Compensation Committee for the coming year as shown above. All of the
members of the Committee are independent within the meaning of the listing standards of the New
York Stock Exchange and the Company&#146;s <I>Corporate Governance Guidelines</I>. The Compensation Committee
is to be comprised of at least two directors who are independent of management and the Company.
The Compensation Committee met one time during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Presiding Director</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2004, the Board created a new position of presiding director, whose primary
responsibility is to preside over periodic executive sessions of the Board in which management
directors and other members of management do not participate. The presiding director also advises
the Chairman of the Board and, as appropriate, Committee chairs with respect to agendas and
information needs relating to Board and Committee meetings, provides advice with respect to the
selection of Committee chairs and performs other duties that the Board may from time to time
delegate to assist the Board in the fulfillment of its responsibilities.
</DIV>

<P align="center" style="font-size: 10pt">5
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Director Martin L. White has served in such position since March&nbsp;2004. In March&nbsp;2005, the
non-management members of the Board designated him to serve in this position until the Company&#146;s
2005 annual meeting of stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Selection of nominees for the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Governance and Nominating Committee will consider candidates for Board membership
suggested by its members and other Board members, as well as management and stockholders. The
Committee may also retain a third-party executive search firm to identify candidates upon request
of the Committee from time to time. A stockholder who wishes to recommend a prospective nominee for
the Board should notify the Company&#146;s Corporate Secretary or any member of the Governance and
Nominating Committee in writing with whatever supporting material the stockholder considers
appropriate. The Governance and Nominating Committee will also consider whether to nominate any
person nominated by a stockholder pursuant to the provisions of the Company&#146;s bylaws relating to
stockholder nominations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once the Governance and Nominating Committee has identified a prospective nominee, the
Committee will make an initial determination as to whether to conduct a full evaluation of the
candidate. This initial determination will be based on whatever information is provided to the
Committee with the recommendation of the prospective candidate, as well as the Committee&#146;s own
knowledge of the prospective candidate, which may be supplemented by inquiries to the person making
the recommendation or others. The preliminary determination will be based primarily on the need for
additional Board members to fill vacancies or expand the size of the Board and the likelihood that
the prospective nominee can satisfy the evaluation factors described below. If the Committee
determines, in consultation with the Chairman of the Board and other Board members as appropriate,
that additional consideration is warranted, it may request the third-party search firm to gather
additional information about the prospective nominee&#146;s background and experience and to report its
findings to the Committee. The Committee will then evaluate the prospective nominee against the
standards and qualifications set out in the Company&#146;s <I>Corporate Governance Guidelines, </I>including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of the prospective nominee to represent the interests of
the stockholders of the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the prospective nominee&#146;s standards of integrity, commitment and
independence of thought and judgment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the prospective nominee&#146;s ability to dedicate sufficient time, energy,
and attention to the diligent performance of his or her duties, including the
prospective nominee&#146;s service on other public company boards, as specifically
set out in the Company&#146;s <I>Corporate Governance Guidelines</I>;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent to which the prospective nominee contributes to the range of
talent, skill and expertise appropriate for the Board;</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">6
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent to which the prospective nominee helps the Board reflect the
diversity of the Company&#146;s stockholders, employees, customers, guests and
communities; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the willingness of the prospective nominee to meet any minimum equity
interest holding guideline.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Committee also considers such other relevant factors as it deems appropriate, including the
current composition of the Board, the balance of management and independent directors, the need for
Audit Committee expertise and the evaluations of other prospective nominees. In connection with
this evaluation, the Committee determines whether to interview the prospective nominee, and if
warranted, one or more members of the Committee, and others as appropriate, interview prospective
nominees in person or by telephone. After completing this evaluation and interview, the Committee
makes a recommendation to the full Board as to the persons who should be nominated by the Board,
and the Board determines the nominees after considering the recommendation and report of the
Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bylaws of the Company provide that any stockholder entitled to vote at the Annual Meeting
in the election of directors may nominate one or more persons for election as directors at a
meeting only if written notice of such stockholders&#146; intention to make such nomination has been
delivered personally to, or has been mailed to and received by the Secretary at the principal
office of the Company not later than 60 nor more than 90&nbsp;days prior to the first anniversary date
of the preceding year&#146;s annual meeting. If a stockholder has a suggestion for candidates for
election, the stockholder should follow this procedure. Each notice from a stockholder must set
forth (i)&nbsp;the name and address of the stockholder who intends to make the nomination and the name
of the person to be nominated, (ii)&nbsp;the class and number of shares of stock held of record, owned
beneficially and represented by proxy by such stockholder as of the record date for the meeting and
as of the date of such notice, (iii)&nbsp;a representation that the stockholder intends to appear in
person or by proxy at the meeting to nominate the person specified in the notice, (iv)&nbsp;a
description of all arrangements or understandings between such stockholder and each nominee and any
other person (naming those persons) pursuant to which the nomination is to be made by such
stockholder, (v)&nbsp;such other information regarding each nominee proposed by such stockholder as
would be required to be included in a proxy statement filed pursuant to the proxy rules, and (vi)
the consent of each nominee to serve as a director of the Company if so elected. The chairman of
the Annual Meeting may refuse to acknowledge the nomination of any person not made in compliance
with this procedure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Determinations of director independence</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2004, the Board enhanced its <I>Corporate Governance Guidelines. </I>The <I>Guidelines</I>
adopted by the Board meet or exceed the new listing standards adopted by the New York Stock
Exchange. The full text of the <I>Guidelines </I>can be found in the Investor Relations section of the
Company&#146;s website (<I><U>www.amrealtytrust.com</U>). </I>A copy may also be obtained upon request from the
Company&#146;s Corporate Secretary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the <I>Guidelines, </I>the Board undertook its annual review of director
independence in March&nbsp;2005. During this review, the Board considered transactions and relationships
between
</DIV>

<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">each director or any member of his or her immediate family and the Company and its
subsidiaries and affiliates, including those reported under <I>&#147;Certain Relationships and Related Transactions&#148; </I>below. The Board also
examined transactions and relationships between directors or their affiliates and members of the
Company&#146;s senior management or their affiliates. As provided in the <I>Guidelines</I>, the purpose of this
review was to determine whether any such relationships or transactions were inconsistent with a
determination that the director is independent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of this review, the Board affirmatively determined that directors Ted R. Munselle,
Martin L. White and Sharon Hunt are each independent of the Company and its management under the
standards set forth in the <I>Corporate Governance Guidelines</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Board meetings during fiscal 2004</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board met 15 times during fiscal 2004. No incumbent director attended fewer than 75% of
the meetings of the Board, and each director attended all of the meetings of the Committees on
which he or she served. Under the Company&#146;s <I>Corporate Governance Guidelines</I>, each Director is
expected to dedicate sufficient time, energy and attention to ensure the diligent performance of
his or her duties, including by attending meetings of the stockholders of the Company, the Board
and Committees of which he or she is a member. In addition, the independent directors met in
executive session one time during fiscal 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Directors&#146; compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each non-employee director receives an annual retainer of $45,000 plus reimbursement for
expenses. The Chairman of the Board receives an additional fee of $4,500 per year. Each director
who serves as a member of the Audit Committee receives a fee of $300 for each Committee meeting
attended. The Chairman of the Audit Committee also receives an annual fee of $500. In addition,
each independent director receives an additional fee of $1,000 per day for any special services
rendered by him to the Company outside of his or her ordinary duties as a director, plus
reimbursement of expenses. The Company also reimburses directors for travel expenses incurred in
connection with attending Board, committee and stockholder meetings and for other Company-business
related expenses. Directors who are also employees of the Company or its Advisor receive no
additional compensation for service as a director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, $208,000 was paid to the non-employee directors in total directors&#146; fees for all
services, including the annual fee for service during the period from January&nbsp;1, 2004 through
December&nbsp;31, 2004. Those fees received by directors were Earl D. Cecil, a director who resigned on
February&nbsp;29, 2004 ($23,000), Sharon Hunt ($42,000), Ted R. Munselle ($42,000), Ted P. Stokely
($50,000) and Martin L. White ($51,000).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;1999, the stockholders of a predecessor of the Company approved the
Directors Stock Option Plan which was assumed by the Company in 2000 (the &#147;Directors Plan&#148;) which
provides for the availability of options to purchase up to 40,000 shares of Common Stock. The
Directors Plan provides for automatic annual grants of options to directors of the Company who, at
the time of grant of an option are not, and have not been for at least one year, either an employee
or officer of the Company or any of its affiliates. Options granted pursuant to the Directors Plan
are
</DIV>

<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">immediately exercisable and expire on the earlier of the first anniversary of the date on which
a director ceases to be a director or ten years from the
date of grant. Each non-employee director was granted an option to purchase 1,000 shares at
an exercise price of $17.71 per share on January&nbsp;11, 1999, the date stockholders approved the
Directors Plan. On January&nbsp;1, 2000, 2001, 2002, 2003, 2004 and 2005, each qualifying director was
granted an option to purchase 1,000 shares at an exercise price of $18.53, $13.625, $9.87, $8.09,
$9.13 and $9.70 per share, respectively. Each qualifying director will be awarded an option to
purchase an additional 1,000 shares on January 1 of each year. At January&nbsp;1, 2005, options
covering 1,000 shares were exercisable at $9.87 per share, options covering 2,000 shares were
exercisable at $8.09, options covering 3,000 shares were exercisable at $9.13 per share and options
covering 4,000 shares were exercisable at $9.70 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;1998, stockholders of a predecessor of the Company approved the 1997 Stock Option
Plan (the &#147;Option Plan&#148;) which provides for options to purchase up to 300,000 shares of Common
Stock. The Option Plan was assumed by the Company in August&nbsp;2000. The Option Plan is intended
principally as an incentive for and as a means of encouraging ownership of the Company&#146;s Common
Stock by eligible persons, including directors and officers of the Company. Options may be granted
either as an incentive stock option (which qualifies for certain favorable tax treatment) or as a
non-qualified stock option. Incentive stock options cannot be granted to, among others, persons
who are not employees of the Company or any parent or subsidiary of the Company, or to persons who
fail to satisfy certain criteria concerning ownership of less than 10% of the shares of Common
Stock of the Company. The Option Plan is administered by the Stock Option Committee, which
currently consists of three independent directors of the Company, Messrs.&nbsp;Munselle and White and
Ms.&nbsp;Hunt. The exercise price per share of an option will not be less than 100% of the fair market
value per share on the date of grant. The Company receives no consideration for the grant of an
option. At December&nbsp;31, 2004, options covering 70,750 shares were outstanding under the Option
Plan, of which options covering 68,250 are exercisable at $16.35 per share and of which options
covering 2,500 are exercisable at $18.53 per share. No options were granted under the Option Plan
in 2004. None of the executive officers (Messrs.&nbsp;Abney, Branigan or Corna) nor any of the
directors of the Company hold any options under the Option Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stockholders communication with the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders and other parties interested in communicating directly with the presiding
director or with the non-Management directors as a group may do so by writing to Ted R. Munselle,
Director, Post Office Box 830163, Richardson, Texas 75083-0163. Effective March&nbsp;22, 2004, the
Governance and Nominating Committee of the Board also approved a process for handling letters
addressed to members of the Board but received at the Company. Under that process, the Corporate
Secretary of the Company reviews all such correspondence and regularly forwards to the Board a
summary of all such correspondence and copies of all correspondence that, in the opinion of the
Corporate Secretary, deals with the functions of the Board or committees thereof or that he
otherwise determines requires their attention. Directors may at any time review a log of all
correspondence received by the Company that is addressed to members of the Board and received by
the Company and request copies of any such correspondence. Concerns relating to accounting,
internal controls or auditing matters are immediately brought to the attention of the Chairman of
the Audit Committee and handled in accordance with procedures established by the Audit Committee
with respect to such matters.
</DIV>

<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Code of Ethics</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has adopted a Code of Business Conduct and Ethics, which applies to all directors,
officers and employees (including those of the Contractual Advisor). In addition, the Company has
adopted a code of ethics entitled &#147;Code of Ethics for Senior Financial Officers&#148; that applies to
the principal executive officer, president, principal financial officer, chief financial officer,
principal accounting officer and controller. The text of both documents is available on the
Company&#146;s Investor Relations website
(<I><U>www.amrealtytrust.com</U>). </I>The Company intends to post
amendments to or waivers from its Code of Ethics for Senior Financial Officers (to the extent
applicable to the Company&#146;s chief executive officer, principal financial officer or principal
accounting officer) at this location on its website.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compliance With Section&nbsp;16(a) of Reporting Requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16(a) under the Securities Exchange Act of 1934 requires the Company&#146;s directors,
executive officers and any persons holding 10% or more of the Company&#146;s shares of Common Stock are
required to report their ownership of the Company&#146;s shares of Common Stock and any changes in that
ownership to the Securities and Exchange Commission (the &#147;Commission&#148;) on specified report forms.
Specific due dates for these reports have been established, and the Company is required to report
any failure to file by these dates during each fiscal year. All of these filing requirements were
satisfied by the Company&#146;s directors and executive officers and holders of more than 10% of the
Company&#146;s Common Stock during the fiscal year ended December&nbsp;31, 2004. In making these statements,
the Company has relied upon the written representations of its directors and executive officers and
the holders of 10% or more of the Company&#146;s Common Stock and copies of the reports that each has
filed with the Commission.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Security Ownership of Certain Beneficial Owners and Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Security Ownership of Certain Beneficial Owners</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the ownership of the Company&#146;s Common Stock, both beneficially
and of record, both individually and in the aggregate, for those persons or entities known by the
Company to be the beneficial owners of more than 5% of its outstanding Common Stock as of the close
of business on October&nbsp;21, 2005.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Approximate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Percent of Class**</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic
Capital Management, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6,703,045(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">61.52%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1800 Valley View Lane, Suite&nbsp;300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prime Income Asset Management, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1,437,208(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">13.19%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1800 Valley View Lane, Suite&nbsp;300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Approximate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Percent of Class**</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Realty Advisors, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">8,140,253(a)(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">74.71%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1800 Valley View Lane, Suite&nbsp;300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ryan T. Phillips</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">8,167,855(a)(b)(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">74.96%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1800 Valley View Lane, Suite&nbsp;300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transcontinental Realty Investors, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">746,972(c)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6.86%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1800 Valley View Lane, Suite&nbsp;300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Includes 6,703,045 shares owned by Basic Capital Management, Inc. (&#147;BCM&#148;), over which each
of the directors of BCM, Ryan T. Phillips and Mickey Ned Phillips, may be deemed to be beneficial
owners by virtue of their positions as directors of BCM. The directors of BCM disclaim beneficial
ownership of such shares.</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Includes 1,437,208 shares owned by Prime Income Asset Management, Inc. (&#147;PIAMI&#148;), over
which each of the directors of PIAMI, Ryan T. Phillips and Mickey Ned Phillips, may be deemed to be
beneficial owners by virtue of their positions as directors of PIAMI. The directors of PIAMI
disclaim beneficial ownership of such shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Each of the directors of Transcontinental Realty Investors, Inc. (&#147;TCI&#148;), Henry A. Butler,
Sharon Hunt, Ted R. Munselle, Ted P. Stokely and Martin L. White may be deemed to be the beneficial
owners by virtue of their positions as directors of TCI. The current directors of TCI disclaim
such beneficial ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Includes 27,602 shares owned by the Gene E. Phillips&#146; Children&#146;s Trust of which Ryan T.
Phillips is a beneficiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Security Ownership of Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the ownership of the Company&#146;s Common Stock, both beneficially
and of record, both individually and in the aggregate for the directors and executive officers of
the Company as of the close of business on October&nbsp;21, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of Beneficial</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Approximate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B>Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Percent of Class*</B>*</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Steven A. Abney</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">8,887,225(3)(4)(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">81.56%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark W. Branigan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">8,887,225(3)(4)(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">81.56%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Henry A. Butler</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">749,972(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6.86%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of Beneficial</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Approximate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B>Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Percent of Class*</B>*</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Louis J. Corna</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">8,887,225(3)(4)(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">81.56%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sharon Hunt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">747,972(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6.86%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Jakuszewski</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">-0-</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ted R. Munselle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">747,972(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6.86%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ted P. Stokely</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">749,972(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6.88%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Martin L. White</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">748,972(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6.87%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All directors and
executive officers as
a group (nine people)</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="center" valign="top">8,897,225(1)(2)(3)<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)(5)(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">81.63%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;* &#147;Beneficial Ownership&#148; means the sole or shared power to vote, or to direct the voting of,
a security or investment power with respect to a security, or any combination thereof.</DIV>



<DIV align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</DIV>



<DIV align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;** Percentages are based upon 10,895,972 shares of Common Stock outstanding at October&nbsp;21,
2005.</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;Each of Messrs.&nbsp;Butler, Munselle, Stokely, White and Ms.&nbsp;Hunt have options to purchase
shares of Common Stock of ARI which are exercisable within 60&nbsp;days of October&nbsp;21, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;Includes 746,972 shares owned by TCI, over which the members of the Board of Directors of
ARI may be deemed to be the beneficial owners by virtue of their positions as members of the Board
of Directors of TCI. The current members of the Board of Directors of ARI disclaim beneficial
ownership of such shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;Includes 746,972 shares owned by TCI, over which the executive officers of ARI may be
deemed to be the beneficial owners by virtue of their positions as executive officers of TCI. The
executive officers of ARI disclaim beneficial ownership of such shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;Includes 6,703,045 shares owned by BCM, over which the executive officers of ARI may be
deemed to be the beneficial owners by virtue of their positions as executive officers of BCM. The
executive officers of ARI disclaim beneficial ownership of such shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp;Includes 1,437,208 shares owned by PIAMI, over which the executive officers of ARI may be
deemed to be the beneficial owners by virtue of their positions as executive officers of PIAMI.
The executive officers of ARI disclaim beneficial ownership of such shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)&nbsp;Includes 10,000 shares which may be acquired by the current directors of ARI pursuant to
stock options.
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL 1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTION OF DIRECTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Five directors are to be elected at the Annual Meeting. Each director elected will hold
office until the 2006 Annual Meeting. Four of the nominees for director are now serving as
directors of the Company. Mr.&nbsp;Jakuszewski is the only nominee who is not currently a director of
the Company. Each of the nominees has consented to being named in this proxy statement as a
nominee and has agreed to serve as a director if elected. The persons named on the proxy card will
vote for all of the nominees for director listed unless you withhold authority to vote for one or
more of the nominees. The nominees receiving a plurality of votes cast at the Annual Meeting will
be elected as directors. Abstentions and broker non-votes will not be treated as a vote for or
against any particular nominee and will not affect the outcome of the election of directors.
Cumulative voting for the election of directors is not permitted. If any director is unable to
stand for re-election, the Board will designate a substitute. If a substitute nominee is named,
the persons named on the proxy card will vote for the election of the substitute director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The nominees for directors are listed below, together with their ages, terms of service, all
positions and offices with the Company or the Company&#146;s advisor, other principal occupations,
business experience and directorships with other companies during the last five years or more. The
designation &#147;affiliated&#148; when used below with respect to a director means that the director is an
officer, director or employee of the Company or the advisor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Henry A. Butler, 54 (Affiliated)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker &#150; Land Sales (since July&nbsp;2003) for Prime Income Asset Management, LLC and (1992 to June
2003) for Basic Capital Management, Inc. (&#147;BCM&#148;); Director (since July&nbsp;2003) of the Company and
(since December&nbsp;2001) TCI and Director (December&nbsp;2001 to July&nbsp;1, 2003) of Income Opportunity
Realty Investors, Inc. (&#147;IOT&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Sharon Hunt, 62</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Licensed Realtor with Virginia Cook Realtors; President and Owner (until sold in 1997) of
Sharon&#146;s Pretzels, Inc. (a Texas food products entity); Director (1991-2000) of a 501(c)(3)
non-profit corporation (involved in acquisition, renovation and operation of real estate); Director
(since February&nbsp;2004) of the Company and TCI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ted. R. Munselle, 49</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice President and Chief Financial Officer (since October&nbsp;1998) of Landmark Nurseries, Inc.;
Director (since February&nbsp;2004) of the Company and TCI; Certified Public Accountant employed in the
accounting industry until 1998 when he entered his current employment.
</DIV>

<P align="center" style="font-size: 10pt">13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ted P. Stokely, 71 (Affiliated)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General Manager (since January&nbsp;1995) of ECF Senior Housing Corporation, a non-profit
corporation; General Manager (since January&nbsp;1993) of Housing Assistance Foundation, Inc., a
non-profit corporation; part-time unpaid Consultant (since January&nbsp;1993) of Eldercare Housing
Foundation, a non-profit corporation; General Manager (since April&nbsp;2002) of Unified Housing
Foundation, Inc., a non-profit corporation; Director and Chairman of the Board of the Company
(since November&nbsp;2002); and Director (since April&nbsp;1990) and Chairman of the Board (since January
1995) of TCI and IOT.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Robert A. Jakuszewski, 42</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice President &#151; Sales and Marketing (since September&nbsp;1998) of New Horizons Communications,
Inc. Mr.&nbsp;Jakuszewski was a Consultant (January&nbsp;1998 &#151; September&nbsp;1998) for New Horizon
Communications, Inc.; Regional Sales Manager (1996-1998) of Continental Funding; Territory Manager
(1992-1996) of Sigvaris, Inc.; Senior Sales Representative (1988-1992) of Mead Johnson Nutritional
Division, USPNG; Sales Representative (1986-1987) of Muro Pharmaceutical, Inc. Mr.&nbsp;Jakuszewski has
been a director of IOT since March&nbsp;16, 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Board of Directors unanimous recommends a vote FOR<BR>
the election of all of the Nominees named above.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Martin L. White, 65</B>, a director of the Company since July&nbsp;2003 and of TCI since January&nbsp;1995,
is not standing for re-election and is not a nominee for election. He is Chief Executive Officer
(since 1995) of Builders Emporium, Inc.; Chairman and Chief Executive Officer (since 1993) of North
American Trading Company Ltd.; President and Chief Operating Officer (since 1992) of Community
Based Developers, Inc.; and was a Director (1995 to March&nbsp;15, 2004) of IOT.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL 2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RATIFICATION OF APPOINTMENT OF INDEPENDENT<BR>
REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has appointed Farmer, Fuqua &#038; Huff, P.C. as the independent registered
public accounting firm of American Realty Investors, Inc. for the 2005 fiscal year and to conduct
quarterly reviews through September&nbsp;30, 2005. The Company&#146;s Bylaws do not require that
stockholders ratify the appointment of Farmer, Fuqua &#038; Huff, P.C. as the Company&#146;s independent
registered public accounting firm. The Audit Committee will consider the outcome of this vote in
its decision to appoint an independent registered public accounting firm next year; however, it is
not bound by the stockholders&#146; decision. Even if the selection is ratified, the Audit Committee,
in its sole discretion, may change the appointment at any time during the year if it determines
that such a change would be in the best interest of the Company and its stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A representative of Farmer, Fuqua &#038; Huff, P.C. will attend the Annual Meeting. The
representative will have an opportunity to make a statement if he or she desires to do so and will
be available to respond to appropriate questions from the stockholders.
</DIV>


<P align="center" style="font-size: 10pt">14
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Board of Directors recommends a vote FOR the ratification<BR>
of the appointment of Farmer, Fuqua &#038; Huff, P.C.<BR>
as the Company&#146;s independent registered public accounting firm.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Change in the Company&#146;s Certifying Accountant</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective June&nbsp;1, 2004, the Board of Directors of the Company engaged the Plano, Texas firm of
Farmer, Fuqua &#038; Huff, P.C. as the independent accountant to audit the Company&#146;s financial
statements for the fiscal year ending December&nbsp;31, 2004. During the Company&#146;s two fiscal
years ended December&nbsp;31, 2003, and any subsequent interim period, the Company did not consult with
Farmer, Fuqua &#038; Huff, P.C. or any of its members about the application of accounting principles to
any specified transaction or any other matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The engagement effective June&nbsp;1, 2004 of Farmer, Fuqua &#038; Huff, P.C. as a new, independent
accountant for the Company, necessarily resulted in the termination or dismissal of the principal
accountant which had audited the Company&#146;s financial statements for the past two fiscal years
and at December&nbsp;31, 2002 and 2003, BDO Seidman, LLP. BDO Seidman, LLP&#146;s anticipated fee
proposal estimate to the Company for the balance of 2004 after the first quarter ended was expected
to be greater than the fee proposal of Farmer, Fuqua &#038; Huff, P.C. for the same work. During the
Company&#146;s two most recent fiscal years and any subsequent interim period, BDO Seidman,
LLP&#146;s report on the Company&#146;s financial statements for those two most recent fiscal
years and the subsequent interim period through June&nbsp;1, 2004, there were no disagreements between
the Company and BDO Seidman, LLP concerning any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved
to BDO Seidman, LLP&#146;s satisfaction would have caused them to make reference to the subject
matter of the disagreement in connection with their report; there were no reportable events as
described in Item&nbsp;304(a)(1)(v) of Regulation&nbsp;S-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BDO Seidman, LLP&#146;s reports dated April&nbsp;11, 2003 and April&nbsp;15, 2004 on the
Company&#146;s financial statements for the years ended December&nbsp;31, 2002 and 2003 did not contain
any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. Each report did contain an
&#147;emphasis&#148; paragraph highlighting that management had indicated its intent to sell
income-producing properties and refinance or extend debt secured by real estate to meet its
liquidity needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The decision to change was approved by the Audit Committee of the Board of Directors of the
Company, consisting of Ted R. Munselle (Chairman), Martin L. White and Sharon Hunt.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Fiscal Years 2003 and 2004 Audit Firm Fee Summary</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the aggregate fees for professional services rendered to the
Company for the years 2004 and 2003 by the Company&#146;s then principal accounting firm, BDO
Seidman, LLP and Farmer, Fuqua &#038; Huff, P.C.:
</DIV>

<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Type of Fees</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">310,908</TD>
    <TD nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">376,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit-Related Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">169,412</TD>
    <TD nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,329</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All Other Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total Fees:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">480,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">539,565</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>The amount of audit fees paid to BDO Seidman, LLP for January to May&nbsp;2004 was $208,442;
the amount of audit fees paid to Farmer, Fuqua &#038; Huff, P.C. for June to December&nbsp;2004 was $102,466;
tax fees paid to BDO Seidman, LLP were $169,412, and to Farmer, Fuqua &#038; Huff, P.C. were $0.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>All other fees for 2003 are related to the Company&#146;s Form 8-K ($750), the
Company&#146;s cash tender offer for shares of common stock of TCI and IOT ($3,735) and for
training ($9,120) which were paid to BDO Seidman, LLP.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All services rendered by the principal auditors are permissible under applicable laws and
regulations and were pre-approved by either the Board of Directors or the Audit Committee, as
required by law. The fees paid the principal auditors for services as described in the above table
fall under the categories listed below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Fees</I>. These are fees for professional services performed by the
principal auditor for the audit of the Company&#146;s annual financial statements
and review of financial statements included in the Company&#146;s 10-Q filings and
services that are normally provided in connection with statutory and regulatory
filing or engagements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit-Related Fees</I>. These are fees for assurance and related services
performed by the principal auditor that are reasonably related to the performance of
the audit or review of the Company&#146;s financial statements. These services
include attestations by the principal auditor that are not required by statute or
regulation and consulting on financial accounting/reporting standards.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Fees</I>. These are fees for professional services performed by the principal
auditor with respect to tax compliance, tax planning, tax consultation, returns
preparation and review of returns. The review of tax returns includes the Company
and its consolidated subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>All Other Fees</I>. These are fees for other permissible work performed by the
principal auditor that do not meet the above category descriptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These services are actively monitored (as to both spending level and work content) by the
Audit Committee to maintain the appropriate objectivity and independence in the principal
auditor&#146;s core work, which is the audit of the Company&#146;s consolidated financial
statements.
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Report of the Audit Committee<BR>
Of the Board of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee of the Board is composed of three directors, each of whom meets the
independence and experience requirements of the New York Stock Exchange. The Audit Committee
oversees the Company&#146;s auditing, accounting and financial reporting processes on behalf of
the Board. The Audit Committee also recommends to the Board of Directors the selection of the
Company&#146;s independent accountants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee&#146;s job is one of oversight as set forth in its charter. It is not a
duty of the Audit Committee to prepare the Company&#146;s financial statements, to plan or conduct
audits or to determine that the Company&#146;s financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. Management of the Company is
responsible for preparing the Company&#146;s financial statements and for maintaining internal
controls. The independent auditors are responsible for auditing the financial statements and for
expressing an opinion as to whether those audited financial statements fairly present the financial
position, results of operations and cash flows of the Company in conformity with generally accepted
accounting principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has reviewed and discussed the audited consolidated financial statements
of the Company for the 2004 fiscal year with management, and has discussed with the independent
accountants the matters required to be discussed by Statement on Auditing Standards No.&nbsp;61
(Codification of Statements on Auditing Standards, AU SEC. 380) which includes, among other things,
matters related to the conduct of the audit of the Company&#146;s financial statements. The Audit
Committee has received the written disclosures and the letter from the independent accountants
required by Independence Standards Board Standard No.&nbsp;1 (Independence Discussions with Audit
Committees), and the Audit Committee has discussed with representatives of the independent
accountants their independence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon the review and discussions described above, the Audit Committee recommended to the
Board of Directors, and the Board has approved, that the audited consolidated financial statements
be included in the Company&#146;s Annual Report on Form 10-K for the year ended December&nbsp;31, 2004,
filed with the Securities and Exchange Commission. The Audit Committee and the Board have also
selected Farmer, Fuqua &#038; Huff, P.C. as the Company&#146;s independent auditors for fiscal year
2005.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">AUDIT COMMITTEE
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Sharon Hunt
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Ted R. Munselle
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Martin L. White</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Approval Policy for Audit and Non-Audit Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Sarbanes-Oxley Act of 2002 (the &#147;SO Act&#148;), and the rules of the
Securities and Exchange Commission (the &#147;SEC&#148;), the Audit Committee of the Board of
Directors is responsible for the appointment, compensation and oversight of the work of the
independent auditor. The purpose of the provisions of the SO Act and the SEC rules for the Audit
Committee role in retaining
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the independent auditor is two-fold. First, the authority and responsibility for the appointment,
compensation and oversight of the auditors should be with directors who are independent of
management. Second, any non-audit work performed by the auditors should be reviewed and approved
by these same independent directors to ensure that any non-audit services performed by the auditor
do not impair the independence of the independent auditor. To implement the provisions of the SO
Act, the SEC issued rules specifying the types of services that an independent auditor may not
provide to its audit client, and governing the Audit Committee&#146;s administration of the
engagement of the independent auditor. As part of this responsibility, the Audit Committee is
required to pre-approve the audit and non-audit services performed by the independent auditor in
order to assure that they do not impair the auditor&#146;s independence. Accordingly, the Audit
Committee has adopted a written pre-approval policy for audit and non-audit services (the
&#147;Policy&#148;), which sets forth the procedures and conditions pursuant to which services to
be performed by the independent auditor are to be pre-approved. Consistent with the SEC rules
establishing two different approaches to approving non-prohibited services, the policy of the Audit
Committee covers pre-approval of audit services, audit-related services, international
administration tax services, non-U.S. income tax compliance services, pension and benefit plan
consulting and compliance services, and U.S. tax compliance and planning. At the beginning of each
fiscal year, the Audit Committee will evaluate other known potential engagements of the independent
auditor, including the scope of work proposed to be performed and the proposed fees, and approve or
reject each service, taking into account whether services are permissible under applicable law and
the possible impact of each non-audit service on the independent auditor&#146;s independence from
management. Typically, in addition to the generally pre-approved services, other services would
include due diligence for an acquisition that may or may not have been known at the beginning of
the year. The Audit Committee has also delegated to any member of the Audit Committee designated
by the Board or the financial expert member of the Audit Committee responsibilities to pre-approve
services to be performed by the independent auditor not exceeding $25,000 in value or cost per
engagement of audit and non-audit services, and such authority may only be exercised when the Audit
Committee is not in session.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Compensation Committee Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has no employees, payroll or benefit plans and pays no compensation to its
executive officers. The executive officers of the Company who are also officers or employees of
Prime Income Asset Management, LLC (&#147;Prime&#148;) are compensated by Prime. Such executive
officers perform a variety of services for Prime, and the amount of their compensation is
determined solely by Prime. Prime does not allocate the cash compensation of its officers among
the various entities for which it may serve as advisor or sub-advisor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The only remuneration paid by the Company is to the directors who are not officers or
directors of Prime. These independent directors (i)&nbsp;review the business plan of the Company to
determine that it is in the best interest of the stockholders, (ii)&nbsp;review the advisory contract,
(iii)&nbsp;supervise the performance of the Company&#146;s advisor and review the reasonableness of the
compensation paid to the advisor in terms of the nature and quality of services performed, (iv)
review the reasonableness of the total fees and expenses of the Company, and (v)&nbsp;select, when
necessary, a qualified independent real estate appraiser to appraise properties acquired. See
&#147;Directors&#146; Compensation&#148; for a description of the compensation paid.
</DIV>

<P align="center" style="font-size: 10pt">18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee is responsible for overseeing the policies of the Company relating
to compensation to be paid by the Company, if any, to certain designated officers and to make
recommendations to the Board with respect to compensation policies, produce necessary reports and
executive compensation for inclusion in the proxy statement, and to monitor the development and
implementation of succession plans. The charter of the Compensation Committee was adopted on March
22, 2004, and the members of the Compensation Committee, all of whom are independent within the
meaning of the listing standards of the New York Stock Exchange and the Company&#146;s corporate
governance guidelines, are listed below. Since its formation on March&nbsp;22, 2004, the Compensation
Committee has not performed any task to report other than to review its existing charter.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">COMPENSATION COMMITTEE
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Sharon Hunt
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Ted R. Munselle
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Martin L. White</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Committee Interlocks and Insider Participation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Compensation Committee is made up of non-employee directors who have never
served as officers of, or been employed by, the Company. None of the Company&#146;s executive
officers serve on a board of directors of any entity that has a director or officer serving on this
Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive officers of the Company are Mark W. Branigan, Executive Vice President <FONT style="font-family: WP TypographicSymbols">&#066;</FONT>
Multi-Family Construction; Louis J. Corna, Executive Vice President <FONT style="font-family: WP TypographicSymbols">&#066;</FONT> Tax, General
Counsel/Tax Counsel and Secretary; and Steven A. Abney, Executive Vice President and Chief
Financial Officer, all of whom are employed by Prime. None of the executive officers receive any
direct remuneration from the Company nor do any hold any options granted by the Company. Their
positions with the Company are not subject to a vote of stockholders. The ages, terms of service
and all positions and offices with the Company, Prime, BCM, other affiliated entities, other
principal occupations, business experience and directorships with other publicly-held companies
during the last five years or more are set forth below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Steven A. Abney, 50</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President and Chief Financial Officer (since September&nbsp;2005) of the Company and
TCI. Mr.&nbsp;Abney was Vice President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Finance and Chief Accounting Officer/Principal Financial
Officer (from November&nbsp;2001 to February&nbsp;2005) of and employed (from November&nbsp;2001 to August&nbsp;2005)
by CRT Properties, Inc. (f/k/a Koger Equity, Inc.), a Boca Raton, Florida-based real estate
enterprise which had securities listed on the New York Stock Exchange until September&nbsp;27, 2005.
For more than four years prior thereto, Mr.&nbsp;Abney was Executive Vice President and Chief Financial
Officer of Konover and Associates, Inc., a privately-held real estate developer based in
Farmington, Connecticut. Mr.&nbsp;Abney was been a Certified Public Accountant since 1980.
</DIV>

<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mark W. Branigan, 50</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Multi-Family Construction (since September&nbsp;2004); Executive
Vice President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Residential (June&nbsp;2001 to September&nbsp;2004), Executive Vice President and Chief
Financial Officer (August&nbsp;2000 to June&nbsp;2001), Vice President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Director of Construction (August
1999 to August&nbsp;2000) of the Company, IOT, TCI and BCM; Director (September&nbsp;2000 to June&nbsp;2001) of
the Company, IOT and TCI; Executive Vice President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Residential (since July&nbsp;2003) of Prime and
PIAMI; Executive Vice President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Residential Asset Management (January&nbsp;1992 to October&nbsp;1997)
of American Realty Trust, Inc. (&#147;ART&#148;); and Real Estate Consultant (November&nbsp;1997 to
July&nbsp;1999).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Louis J. Corna, 57</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President, General Counsel/Tax Counsel and Secretary (since February&nbsp;2004),
Executive Vice President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Tax (October&nbsp;2001 to February&nbsp;2004), Executive Vice
President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Tax and Chief Financial Officer (June&nbsp;2001 to October&nbsp;2001) and Senior Vice
President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Tax (December&nbsp;2000 to June&nbsp;2001) of the Company, TCI, IOT and BCM; Executive Vice
President, General Counsel/Tax Counsel and Secretary (since February&nbsp;2004), Executive Vice
President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Tax (July&nbsp;2003 to February&nbsp;2004) of Prime and PIAMI; Private Attorney (January&nbsp;2000
to December&nbsp;2000); Vice President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Taxes and Assistant Treasurer (March&nbsp;1998 to January&nbsp;2000)
of IMC Global, Inc.; Vice President<FONT style="font-family: WP TypographicSymbols">&#066;</FONT>Taxes (July&nbsp;1991 to February&nbsp;1998) of Whitman
Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the foregoing executive officers, the Company has several vice presidents and
assistant secretaries who are not listed herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Advisor</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the Board of Directors is directly responsible for managing the affairs of the
Company and for setting the policies which guide it, day-to-day operations are performed by a
contractual advisor under the supervision of the Board of Directors. The duties of the advisor
include, among other things, locating, investigating, evaluating and recommending real estate and
mortgage note investment and sales opportunities, as well as financing and refinancing sources.
The advisor also serves as a consultant to the Board of Directors in connection with the business
plan and investment decisions made by the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to July&nbsp;1, 2003, BCM served as the advisor to the Company since August&nbsp;3, 2000. On July
1, 2003, PIAMI became the advisor to the Company until October&nbsp;1, 2003, when it was replaced by
Prime. PIAMI is the sole member of Prime. PIAMI is owned by Syntek West, Inc. (20%) and Realty
Advisors, Inc. (80%). Syntek West, Inc. (&#147;SWI&#148;) is a Nevada corporation owned by Gene
E. Phillips. Realty Advisors, Inc. (&#147;RAI&#148;) is a Nevada corporation owned by a Trust
for the benefit of the children of Gene E. Phillips. Mr.&nbsp;Phillips is not an officer or director of
Prime, but serves as a representative of the owners of Prime and is involved in daily consultation
with the officers of Prime and has significant influence over the conduct of Prime&#146;s
business, including the rendering of advisory services and the making of investment decisions for
itself and the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Advisory Agreement, Prime is required to annually formulate and submit for
Board approval a budget and business plan containing a twelve-month forecast of operations and
</DIV>

<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">cash flow, a general plan for asset sales and purchases, borrowing activity and other
investments. Prime is required to report quarterly to the Board on the Company&#146;s performance
against the business plan. In addition, all transactions require prior Board approval, unless they
are explicitly provided for in the approved plan or are made pursuant to authority expressly
delegated to Prime by the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement also requires prior approval of the Board for the retention of all
consultants and third party professionals, other than legal counsel. The Advisory Agreement
provides that Prime shall be deemed to be in a fiduciary relationship to the stockholders; contains
a broad standard governing Prime&#146;s liability for losses by the Company; and contains
guidelines for Prime&#146;s allocation of investment opportunities as among itself, the Company
and other entities it advises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement provides for the advisor to receive monthly base compensation at the
rate of 0.0625% per month (0.75% on an annualized basis) of Average Invested Assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to base compensation, Prime, an affiliate of Prime, or a related party receives
the following forms of additional compensation:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) an acquisition fee for locating, leasing or purchasing real estate for the
Company in an amount equal to the lesser of (a)&nbsp;the amount of compensation
customarily charged in similar arm&#146;s-length transactions, or (b)&nbsp;up to 6% of
the costs of acquisition, inclusive of commissions, if any, paid to non-affiliated
brokers;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) a disposition fee for the sale of each equity investment in real estate in
an amount equal to the lesser of (a)&nbsp;the amount of compensation customarily charged
in similar arm&#146;s-length transactions, or (b)&nbsp;3% of the sales price of each
property, exclusive of fees, if any, paid to non-affiliated brokers;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) a loan arrangement fee in an amount equal to 1% of the principal amount of
any loan made to the Company arranged by Prime;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) an incentive fee equal to 10% of net income for the year in excess of a 10%
return on stockholders&#146; equity, and 10% of the excess of net capital gains
over net capital losses, if any, realized from sales of assets;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) a mortgage placement fee, on mortgage loans originated or purchased, equal
to 50%, measured on a cumulative basis, of the total amount of mortgage origination
and placement fees on mortgage loans advanced by the Company for the fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement further provides that Prime shall bear the cost of certain
expenses of its employees, excluding fees paid to the Company&#146;s directors; rent and other
office expenses of both Prime and the Company (unless the Company maintains office space separate
from that of Prime); costs not directly identifiable to the Company&#146;s assets, liabilities,
operations, business or
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">financial affairs; and miscellaneous administrative expenses relating to
the performance by Prime of its duties under the Advisory Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If and to the extent that the Company shall request of Prime, or any director, officer,
partner or employee of Prime, to render services to the Company other than those required to be
rendered by Prime under the Advisory Agreement, such additional services, if performed, will be
compensated separately on terms agreed upon between such party and the Company from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement automatically renews from year to year unless terminated in accordance
with its terms. Management believes that the terms of the Advisory Agreement are at least as fair
as could be obtained from unaffiliated third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Situations may develop in which the interests of the Company are in conflict with those of one
or more directors or officers in their individual capacities or of Prime, or of their respective
affiliates. In addition to services performed for the Company, Prime actively provides similar
services as agent for, and advisor to, other real estate enterprises, including persons and
entities involved in real estate developing and financing, including IOT and TCI. The Advisory
Agreement provides that Prime may also serve as advisor to those entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As advisor, Prime is a fiduciary of the Company&#146;s public investors. In determining to
which entity a particular investment opportunity will be allocated, Prime will consider the
respective investment objectives of each entity and the appropriateness of a particular investment
in light of each such entity&#146;s existing mortgage note and real estate portfolios and business
plan. To the extent any particular investment opportunity is appropriate to more than one such
entity, such investment opportunity will be allocated to the entity that has had funds available
for investment for the longest period of time, or, if appropriate, the investment may be shared
among various entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The managers and principal officers of Prime are set forth below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Office(s)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mickey N. Phillips
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manager</TD>
</TR>


<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ryan T. Phillips
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manager</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Steven A. Abney
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief Financial Officer</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark W. Branigan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President &#151; Residential</TD>
</TR>


<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Louis J. Corna
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President &#151; Tax, General
Counsel/Tax Counsel and Secretary</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Micky N. Phillips is the brother of Gene E. Phillips, and Ryan T. Phillips is the son of Gene
E. Phillips.
</DIV>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Property Management and Real Estate Brokerage</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Affiliates of Prime provide property management services to the Company. Currently, Triad
Realty Services, Ltd. (&#147;Triad&#148;) and Carmel Realty, Inc. (&#147;Carmel&#148;) provide
property management services to the Company&#146;s properties for a fee of 6% or less of the
monthly gross rents collected on the residential properties under its management and 3% or less of
the monthly gross rents collected on the commercial properties under its management. Triad and
Carmel subcontract with other entities for the provision of property-level management services at
various rates. The general partner of Triad is Prime. The limited partner of Triad is Highland
Realty Services, Inc. (&#147;Highland&#148;), a related party. Triad subcontracts the
property-level management and leasing of 30 of the Company&#146;s commercial properties (shopping
centers, office buildings and individual warehouses) to Regis Realty I, LLC (&#147;Regis
I&#148;), which is entitled to receive property and construction management fees and leasing
commissions in accordance with the terms of its property-level management agreement with Triad.
Regis I is owned by Highland. Since January&nbsp;1, 2003, Regis Hotel I, LLC has managed eleven of the
Company&#146;s hotels. The sole member of Regis I and Regis Hotel I, LLC is Highland. Carmel is
a company previously owned by First Equity Properties, Inc., which is a company affiliated with
Prime. On May&nbsp;1, 2004, Regis I acquired the ownership of Carmel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regis I, a related party, provides real estate brokerage services to the Company and receives
brokerage commissions in accordance with the Advisory Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Certain Relationships and Related Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Policies with Respect to Certain Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;ELEVENTH of the Company&#146;s Articles of Incorporation provides that the Company
shall not, directly or indirectly, contract or engage in any transaction with (1)&nbsp;any director,
officer or employee of the Company, (2)&nbsp;any director, officer or employee of the advisor, (3)&nbsp;the
advisor, or (4)&nbsp;any affiliate or associate (as such terms are defined in Rule&nbsp;12b-2 under the
Securities Exchange Act of 1934, as amended) of any of the aforementioned persons, unless (a)&nbsp;the
material facts as to the relationship among or financial interest of the relevant individuals or
persons and as to the contract or transaction are disclosed to or are known by the Company&#146;s
Board of Directors or the appropriate committee thereof, and (b)&nbsp;the Company&#146;s Board of
Directors or appropriate committee thereof determines that such contract or transaction is fair to
the Company and simultaneously authorizes or ratifies such contract or transaction by the
affirmative vote of a majority of independent directors of the Company entitled to vote thereon.
Article&nbsp;ELEVENTH defines an &#147;Independent Director&#148; (for purposes of that Article) as
one who is neither an officer or employee of the Company, nor a director, officer or employee of
the Company&#146;s advisor. This definition predates the Company&#146;s director independence
guidelines adopted in February&nbsp;2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s policy is to have such contracts or transactions approved or
ratified by a majority of the disinterested directors with full knowledge of the character of such
transactions, as being fair and reasonable to the stockholders at the time of such approval or
ratification under the circumstances then prevailing. Such directors also consider the fairness of
such transactions to the Company. Management believes that, to date, such transactions have
represented the best investments available at the time and that they were at least as advantageous
to the Company as other
</DIV>

<P align="center" style="font-size: 10pt">23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">investments that could have been obtained. The Company may enter into future transactions
with entities the officers, directors or stockholders of which are also officers, directors or
stockholders of the Company, if such transactions would be beneficial to the operations of the
Company and consistent with the Company&#146;s then-current investment objectives and policies,
subject to approval by a majority of disinterested directors as discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not prohibit its officers, directors, stockholders or related parties from
engaging in business activities of the types conducted by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Certain Business Relationships</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective July&nbsp;1, 2003, PIAMI became the advisor to the Company and TCI. PIAMI is owned by
Realty Advisors (80%) and Syntek West, Inc. (20%). On October&nbsp;1, 2003, Prime, which is 100% owned
by PIAMI, replaced PIAMI as the advisor to the Company and TCI. Prime is a company for which
Messrs.&nbsp;Abney, Branigan and Corna serve as executive officers. The executive officers of the
Company also serve as executive officers of TCI and Messrs.&nbsp;Corna and Branigan also serve as
executive officers of IOT, and owe fiduciary duties to each of those entities as well as to Prime
under applicable law. TCI has the same relationship with Prime as does the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company contracts with affiliates of BCM for property management services. Currently,
Triad, an affiliate, and Carmel provide such property management services. The general partner of
Triad is Prime. The limited partner of Triad is Highland, a related party. Triad subcontracts the
property-level management of 12 of the Company&#146;s commercial properties (office buildings,
shopping centers and a merchandise mart) to Regis I, a related party, which is a company also owned
by Highland. Regis I also provides real estate brokerage services to the Company and receives
brokerage commissions in accordance with the Advisory Agreement. Regis Hotel I, LLC manages
ARI&#146;s seven hotels. Carmel is a company previously owned by First Equity Properties, Inc.,
which is a company affiliated with BCM. On May&nbsp;1, 2004, Regis I acquired the ownership of Carmel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company owns an equity interest in each of IOT and TCI. At December&nbsp;31, 2004, the
Company, through two wholly-owned subsidiaries, owned approximately 82% of TCI&#146;s outstanding
common stock and TCI owned approximately 24% of IOT&#146;s outstanding common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the Company, TCI, IOT, BCM and Prime have each engaged in, and may continue to
engage in, business transactions, including real estate partnerships, with related parties.
Management believes that all of the related party transactions represented the best investments
available at the time and were at least as advantageous to the Company as could have been obtained
from unrelated parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Relationships</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2003, the Company entered into a lease with Prime for space at the One
Hickory Centre Office Building, construction of which was completed in December&nbsp;1998. The lease is
for 59,115 square feet (approximately 59% of the building), has a term of three years, and provides
for
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">annual base rent of $1.3&nbsp;million, or $21.50 per square foot. Effective May&nbsp;1, 2004, the lease
was amended to 54,404 square feet (approximately 56% of the building), with an annual base rent of
$1.2&nbsp;million, or $21.50 per square foot.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company received rents in 2004 of $69,000 from BCM for BCM&#146;s lease at Addison
Hangar. BCM owns a corporate jet that is housed at the hangar, and the Company has available space
at the hangar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, the Company paid Prime, its affiliates and a related party $8.4&nbsp;million in advisory
fees, $1.9&nbsp;million in net income fees, $1.9&nbsp;million in loan arrangement fees, $578,000 in property
acquisition fees, $8.4&nbsp;million in real estate brokerage commissions and $6.7&nbsp;million in property
and construction management fees and leasing commissions, net of property management fees paid to
subcontractors, other than affiliates of Prime. In addition, as provided in the Advisory
Agreement, in 2004, Prime as advisor received cost reimbursements of $4.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Partnership Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BCM has entered into put agreements with certain holders of Class&nbsp;A limited partnership units
of Ocean Beach Partners, L.P. The Class&nbsp;A units are convertible into Series&nbsp;D Cumulative Preferred
Stock of the Company. The put price of the Series&nbsp;D Cumulative Preferred Stock is $20 per share
plus accrued but unpaid dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BCM has entered into put agreements with the holders of the Class&nbsp;A units of ART Palm, L.P.
Such Class&nbsp;A units are convertible into Series&nbsp;C Cumulative Preferred Stock of the Company. The
put price for the Class&nbsp;A units is $1 per unit, and the put price for either the Series&nbsp;C
Cumulative Preferred Stock or the Company&#146;s Common Stock is 90% of the average daily closing
price of the Company&#146;s Common Stock for the prior 20 trading days. The put agreement, as
amended June&nbsp;18, 2004, calls for the Company to repurchase the outstanding Class&nbsp;A units on
December&nbsp;31, 2004 (750,000 units) &#091;which was completed&#093;, December&nbsp;31, 2005 (875,000 units), and
December&nbsp;31, 2006 (5,938,750 units).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Advances and Loans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, the Company and its affiliates have made advances to each other, which have
not had specific repayment terms, did not bear interest until July&nbsp;1, 2005, are unsecured and have
been reflected in the Company&#146;s financial statements as other assets or other liabilities.
At December&nbsp;31, 2004, after accounting for affiliate purchases and sales, amounts still owed by the
Company were $260,000 and $1.2&nbsp;million to IOT and Regis I, respectively. Also, at December&nbsp;31,
2004, the Company was owed $13.6&nbsp;million and $1.4&nbsp;million by Prime and Regis Hotel I LLC,
respectively. Effective July&nbsp;1, 2005, such advances bear interest at 1% above the prime rate
(currently 7.75%) per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;1999, the Company funded a $4.7&nbsp;million loan to Realty Advisors, Inc., an
affiliate. The loan, to provide funds for acquisitions or working capital needs, was secured by
all of the outstanding shares of common stock of American Reserve Life Insurance Company. The loan
bore interest at 10.25% per annum, and matured in November&nbsp;2001. In January&nbsp;2000, $100,000 was
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">collected. In November&nbsp;2001, the maturity date was extended to November&nbsp;2004. The collateral
was changed to a pledge of 850,000 shares of the Company&#146;s Common Stock owned by BCM. The
interest rate was changed to 2% over the prime rate (currently 8.75% per annum), and the accrued
but unpaid interest of $984,000 was added to the principal. The new principal balance is $5.6
million. In September&nbsp;2003, $673,000 in accrued interest was collected. In August&nbsp;2004, $342,000
in accrued interest was collected. In November&nbsp;2004, the maturity date was extended to November
2006. All principal and accrued interest are due at maturity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2000, a loan with a remaining principal balance of $2.6&nbsp;million to Lordstown, L.P.
matured. The loan, to provide funds to purchase for resale various parcels of land, was secured by
a second lien on land in Ohio and Florida, by 100% of the general and limited partner interest in
Partners Capital, Ltd., the limited partner of Lordstown, L.P., and a profits interest in
subsequent land sales. A corporation controlled by Richard D. Morgan is the general partner of
Lordstown, L.P. Mr.&nbsp;Morgan served as a director of the Company until October&nbsp;2001. In December
2003, the note was exchanged with Regis I, a related party, for three notes receivable (i) $1.4
million from Unified Housing of Harvest Hill, LLC (&#147;Harvest Hill&#148;); (ii) $1.4&nbsp;million
from Unified Housing of Harvest Hill I, LLC (&#147;Harvest Hill I&#148;); and (iii) $2.1&nbsp;million
from Unified Housing of Harvest Hill III, LLC (&#147;Harvest Hill III&#148;), related parties.
All three notes bear interest at 12%, mature in October&nbsp;2013, and require monthly payments of
interest, to the extent surplus cash is available, beginning in November&nbsp;2003. No payments have
been received to date. Ted P. Stokely, Chairman of the Board and a director of the Company, is the
general manager of Unified Housing Foundation, Inc. (&#147;Unified&#148;), a related party, which
is the sole member of each of Harvest Hill, Harvest Hill I and Harvest Hill III.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2000, a loan with a principal balance of $1.6&nbsp;million to Bordeaux Investments Two,
LLC (&#147;Bordeaux&#148;) matured. The loan, to provide funds to purchase and renovate a
shopping center property in Oklahoma City, Oklahoma, was secured by (a)&nbsp;a 100% interest in
Bordeaux, which owns a shopping center in Oklahoma City, Oklahoma; (b)&nbsp;100% of the stock of
Bordeaux Investments One, Inc., which owns 6.5 acres of undeveloped land in Oklahoma City,
Oklahoma; and (c)&nbsp;the personal guarantees of the Bordeaux members. Richard D. Morgan, a Bordeaux
member until July&nbsp;2003, served as a director of the Company until October&nbsp;2001. In July&nbsp;2003, the
members of Bordeaux assigned 100% of the membership interest in Bordeaux to the Company in payment
of the note. The Company recorded real estate assets of $8.8&nbsp;million and assumed $7.2&nbsp;million of
mortgage debt and other liabilities on the shopping center and the undeveloped land. No gain or
loss was recorded on this transaction. In December&nbsp;2003, the shopping center was exchanged with
Regis I, a related party, for three notes receivable, (i) $1.4&nbsp;million from Harvest Hill; (ii) $1.4
million from Harvest Hill I; and (iii) $2.1&nbsp;million from Harvest Hill III, related parties. All
three notes bear interest at 12%, mature in October&nbsp;2013, and require monthly payments of interest,
to the extent surplus cash is available, beginning in November&nbsp;2003. No payments have been
received to date. Ted P. Stokely, Chairman of the Board and a director of the Company, is the
general manager of Unified, a related party, which is the sole member of each of Harvest Hill,
Harvest Hill I and Harvest Hill III.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2001, the Company funded $13.6&nbsp;million of a $15&nbsp;million unsecured line of
credit to One Realco Corporation (&#147;One Realco&#148;). A wholly-owned subsidiary of One
Realco owns approximately 2.15% of the outstanding shares of the Company&#146;s Common Stock. One
Realco
</DIV>

<P align="center" style="font-size: 10pt">26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">periodically borrows money to meet its cash obligations. The line of credit bore interest at 12% per
annum. All principal and interest were due at maturity in February&nbsp;2002. The line of credit
is guaranteed by BCM. In June&nbsp;2001, $394,000 in principal and $416,000 in interest was collected.
In December&nbsp;2001, $21,000 in principal and $804,000 in interest was collected. In February&nbsp;2002,
the line of credit was increased to $18&nbsp;million, accrued but unpaid interest of $217,000 was added
to the principal and the maturity date was extended to February&nbsp;2004. In March&nbsp;2002, the Company
funded an additional $1.8&nbsp;million, increasing the outstanding principal balance to $15.5&nbsp;million.
In October&nbsp;2002, $856,900 in interest was collected by the return of 85,690 shares of the
Company&#146;s Series&nbsp;A Preferred Stock. In June&nbsp;2003, the Company sold a participating interest
in $5.8&nbsp;million of the $15.5&nbsp;million balance to BCM, receiving 314,141 TCI shares from BCM. In
February&nbsp;2004, $2.3&nbsp;million in interest was collected, accrued but unpaid interest of $161,000 was
added to the principal, the maturity date was extended to February&nbsp;2007, and the interest rate was
changed to 2% over the prime rate, currently 8.75% All principal and interest are due at maturity.
Ronald E. Kimbrough, Acting Principal Executive Officer, Executive Vice President and Chief
Financial Officer of the Company until May&nbsp;31, 2004, was a 10% shareholder of One Realco. Mr.
Kimbrough did not participate in the day-to-day operations or management of One Realco.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;2, 2003, the Company exchanged all of its 674,971 IOT shares with BCM, receiving
650,000 TCI shares from BCM. In addition, BCM executed a promissory note in favor of the Company
in the amount of $526,000. After the exchange, the Company owned 72.9% of the outstanding shares
of TCI. On June&nbsp;30, 2003, the Company sold a participating interest in $5.8&nbsp;million of its $15.5
million line of credit receivable from One Realco to BCM, receiving 314,141 TCI shares from BCM.
After the transaction, the Company owned 76.8% of the outstanding shares of TCI. In December&nbsp;2003,
the Company purchased 88,600 TCI shares in market transactions and 204,633 TCI shares in private
transactions with related parties for a total of $1.4&nbsp;million. At December&nbsp;31, 2003, the Company,
through two subsidiaries, owned 80% of the outstanding shares of TCI. The Company no longer owns
any IOT shares. At December&nbsp;31, 2003, the Company indirectly owned 19.2% of IOT through
TCI&#146;s ownership of IOT shares. The Company ceased consolidation of IOT&#146;s accounts and
operations effective June&nbsp;2, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2003, Encino Executive Plaza, Ltd., of which ART Encino, Inc., a subsidiary of the
Company, is the sole general partner, borrowed $1.6&nbsp;million from IOT which was then advanced as
loans secured by partnership interests to the Class&nbsp;A Limited Partners of Encino Executive Plaza,
Ltd. The loan from IOT bore interest at 2% per annum and matures in June&nbsp;2006. All principal and
interest are due at maturity. Effective January&nbsp;1, 2004, the interest rate was changed to 5.49%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2004, ARI issued 200,000 shares of Series&nbsp;A 10% Cumulative Convertible Preferred
Stock to Prime, ARI&#146;s advisor. In February&nbsp;2004, 50,000 additional shares were issued to
Prime. ARI&#146;s affiliate receivable was increased by $2.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2004, ARI obtained financing of $7.5&nbsp;million on the Katy land tract. The funds,
along with additional cash of $6.3&nbsp;million, were sent to an affiliate. Subsequently, the affiliate
paid off the existing loan balance on an ARI property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2004, ARI obtained an unsecured loan of $5&nbsp;million. The proceeds of $5&nbsp;million
were received by an affiliate of ARI, increasing ARI&#146;s affiliate receivable.
</DIV>

<P align="center" style="font-size: 10pt">27
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2004, ARI obtained financing of $11.5&nbsp;million on a hotel property. The proceeds of
$11&nbsp;million were received by an affiliate, increasing ARI&#146;s affiliate receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2004, $825,000 was advanced under a security loan arrangement with a financial
institution. The proceeds were paid to an affiliate increasing ARI&#146;s affiliate receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2004, ARI obtained a loan of $3.2&nbsp;million secured by a contract for sale of the Waters
Edge III Apartments. The proceeds of $3.2&nbsp;million were received by an affiliate, increasing
ARI&#146;s affiliate receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2004, ARI advanced $3.3&nbsp;million to the Class&nbsp;A Limited Partners of Edina Park Plaza
Associates, Limited Partnership, of which a subsidiary ARI is the general partner. The loans bear
interest at 10% per annum and mature in September&nbsp;2017. Interest due to ARI will be deducted from
the quarterly return owned by ARI to the Class&nbsp;A Limited Partners, eliminating the quarterly
payments. The outstanding principal is due at maturity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Property Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2002, the Company purchased the Tiberon Trails Apartments (&#147;Tiberon&#148;) from
BCM for $12.3&nbsp;million. The purchase price was determined based on the market value of the property
exchanged, using a multiple of net operating income. The Company assumed debt of $6.4&nbsp;million.
The Company&#146;s receivable from BCM was reduced by $5.9&nbsp;million, and no cash was paid to the
Company. The business purpose of the transaction was to reduce the affiliate payable owed by BCM
to the Company. In March&nbsp;2004, the Company sold Tiberon. In December&nbsp;2003, the Company recognized
a writedown of $2&nbsp;million to reduce the value of Tiberon to its net realizable value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2003, the Company purchased the Travelers land from IOT for $25&nbsp;million, paying
$1.9&nbsp;million in cash and giving a wrap note payable to IOT for $22.8&nbsp;million. The note bears
interest at 5.49%, requires monthly payments sufficient to pay the installments due on the
underlying debt and matures in October&nbsp;2006. The principal is due at maturity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, the Company sold seven properties to subsidiaries of Unified. The
Company sold 39.3 acres of Pioneer Crossing land for $3.9&nbsp;million, 10.7 acres of Marine Creek land
for $1.5&nbsp;million, the Limestone at Vista Ridge Apartments for $19&nbsp;million, the Cliffs of El Dorado
Apartments for $13.4&nbsp;million, the Limestone Canyon Apartments for $18&nbsp;million, the Sendero Ridge
Apartments for $29.4&nbsp;million, and Tivoli Apartments for $16.1&nbsp;million. All of the transactions
included the assumption of debt and notes receivable to the Company for the remainder of the
purchase price. Ted Stokely, Chairman of the Board of the Company, is the General Manager of
Unified. Richard Humphrey, who is employed by Regis I, is President of Unified. Since Unified is
considered a related party to the Company, and the Company is deemed to have continued involvement
and control of these entities, these transactions have not yet been recorded as sales. Instead,
these transactions have been accounted for on the deposit method, and the properties and
corresponding debt will continue to be consolidated by the Company. All of these transactions were
approved by the Board of Directors of the Company. Mr.&nbsp;Stokely abstained from voting on all of
these transactions. The loans on Limestone Canyon Apartments, Limestone at Vista Ridge Apartments
and Tivoli Apartments were approved by their prospective lenders for transfer to the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">purchasing entities. The Company has guaranteed the loans on both of these transfers. Also,
Marine Creek land and the Cliffs of El Dorado Apartments were recognized as sales during 2004.
Management is currently seeking lender approval on the transfer of the notes associated with
Sendero Ridge Apartments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, the Company sold a tract of Marine Creek land to a subsidiary of Unified for
$1.5&nbsp;million, receiving cash and a note receivable. This sale was not recognized as a sale at that
time because Unified is considered a related party with the Company deemed to have continuing
involvement and control. In February&nbsp;2004, Marine Creek was refinanced, which paid in full the
Company&#146;s note payable on the land. The Company recorded the sale of the land and received a
note receivable of $270,000, which was the difference between the sales price and the amount of the
Company&#146;s note payable. The note bears interest at 6%, requires quarterly payments from
available surplus cash and matures in December&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2004, the Company purchased the Treehouse Apartments from an affiliate, with a net
purchase price of $7.5&nbsp;million after assumption of debt and a note receivable, less cash received
of $500,000. The note receivable was from the sale of the Cliffs of El Dorado Apartments to a
related party in 2003. At that time, the sale of the Cliffs of El Dorado Apartments was not
recorded as a sale for accounting purposes. The Company recorded the sale of the Cliffs of El
Dorado Apartments in May&nbsp;2004, when payment was received for the Cliffs of El Dorado Apartments
note receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2004, the Company sold Limestone Canyon II land to a subsidiary of Unified for
$720,000 in the form of a seller note receivable. As no cash was received, the Company elected to
continue consolidating this tract of land until the requirements for the sale have been met. No
sale was recognized, and no note receivable has been recorded.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2002, the Company and TCI sold 21 apartment properties to partnerships
controlled by Metra Capital, LLC (&#147;Metra&#148;). Innovo Group, Inc. (&#147;Innovo&#148;)
is a limited partner in the partnerships that purchased the properties. Joseph Mizrachi, then a
director of the Company, controlled approximately 11.67% of the outstanding common stock of Innovo.
Management determined to treat the sales as financing transactions, and the Company and TCI
continue to report the assets and the new debt incurred by Metra, on their financial statements.
The partnership agreements for each of these partnerships state that &#147;Metra Partners&#148;
(as defined) receive cash flow distributions at least quarterly in an amount sufficient to provide
them with a 15% cumulative compounded annual rate of return on their invested capital, as well as a
cumulative compounded annual amount of 50% of the average outstanding balance of the mortgage
indebtedness secured by any of these properties. Distributions to the Metra Partners were to have
priority over distributions to any other partners. At December&nbsp;31, 2004, 16 of the properties
remained on the Company&#146;s balance sheet, and the Company&#146;s other liabilities included
$1.4&nbsp;million owed to the Metra Partners related to cash received by the Company upon the sale of
these apartments in April&nbsp;2002. On August&nbsp;10, 2004, three entities, including the Company,
instituted an action in Texas State District Court as Cause No.&nbsp;2004-60231-393 styled <I>American
Realty Investors, Inc., Transcontinental Realty Investors, Inc. and Income Opportunity Realty
Investors, Inc., Plaintiffs v. Innovo Realty, Inc. and Innovo Group, Inc., Involuntary Plaintiffs
v. Innovo Realty, Inc., Metra Capital LLC, Innovo Group, Inc., Joseph Mizrachi, Simon Mizrachi,
Herbert Guez, Third Millennium Partners LLC, Third Millennium Partners, Inc., Third Millennium
Group LLC and Sunridge Management, Inc.,</I>
</DIV>

<P align="center" style="font-size: 10pt">29
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Defendants</I>. The Plaintiffs&#146; complaint alleged that a former director of the Company,
and others, offered a plan to the Plaintiffs to create one or more joint venture arrangements with
one or more of the Plaintiffs to pursue alternative forms of financing or refinancing portions of
Plaintiffs&#146; real estate portfolios, which entailed the creation of 22 separate limited
partnerships to acquire 28 separate apartment complexes in three states (Texas, Florida and
Louisiana), the general partners of which were affiliates of, or are controlled by, the former
director of the Company. During April&nbsp;2005, resolution of the litigation occurred, settling all
liabilities remaining from the original partnership arrangements which included a return of
investor equity, prospective asset management fees and miscellaneous fees and transactions costs
from the Plaintiffs as a prepayment of a preferred return, along with a delegation of management
and corresponding payment of management fees to Prime and a motion to dismiss the action as a part
of the resolution. Of the prepayment, the Company recognized expense of $525,000 and a reduction
in liabilities of $3.2&nbsp;million during the second quarter of 2005.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PERFORMANCE GRAPH</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following graph compares the cumulative total stockholder return on the Company&#146;s
shares (ART&#146;s shares prior to August&nbsp;2000) of Common Stock with the Dow Jones US Equity
Market Index (&#147;Total U.S. Market Index&#148;) and the Dow Jones Real Estate Investment Index
(&#147;Real Estate Index&#148;). The comparison assumes that $100 was invested on December&nbsp;31,
1999, in shares of Common Stock of the Company, and in each of the indices and further assumes the
reinvestment of all distributions. Past performance is not necessarily an indicator of future
performance.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="d29537d2953701.gif" alt="(PERFORMANCE GRAPH)">
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Real Estate Index</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265.38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total U.S. Market Index</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91.45</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OTHER MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors knows of no other matters that may be properly or should be brought
before the Annual Meeting. However, if any other matters are properly brought before the Annual
Meeting, the persons named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The audited financial statements of the Company, in comparative form for the years ended
December&nbsp;31, 2004 and 2003 are contained in the 2004 Annual Report to Stockholders, which was
separately mailed to stockholders in advance of this proxy statement. However, such report and the
financial statements contained therein are not to be considered part of this solicitation.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SOLICITATION OF PROXIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 7pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS PROXY STATEMENT IS FURNISHED TO STOCKHOLDERS TO SOLICIT PROXIES ON BEHALF OF THE BOARD OF
DIRECTORS OF AMERICAN REALTY INVESTORS, INC. </B>The cost of soliciting proxies will be born by the
Company. Directors and officers of the Company may, without additional compensation, solicit by
mail, in person or by telecommunication.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FUTURE PROPOSALS OF STOCKHOLDERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholder proposals for our Annual Meeting to be held in 2006 must be received by us by
December&nbsp;31, 2005, and must otherwise comply with the rules promulgated by the Securities and
Exchange Commission to be considered for inclusion in our proxy statement for that year. Any
stockholder proposal, whether or not to be included in our proxy materials, must be sent to our
Corporate Secretary at 1800 Valley View Lane, Suite&nbsp;300, Dallas, Texas 75234.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 6pt; width: 30%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>COPIES OF AMERICAN REALTY INVESTORS, INC.&#146;S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2004 TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (WITHOUT EXHIBITS) ARE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE
THROUGH OUR WEBSITE </B><B><U>WWW.AMREALTYTRUST.COM</U> </B><B>OR UPON WRITTEN REQUEST TO AMERICAN REALTY INVESTORS,
INC., 1800 VALLEY VIEW LANE, SUITE 300, DALLAS, TEXAS 75234, ATTN: INVESTOR RELATIONS.</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dated: October&nbsp;21, 2005.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By order of the Board of Directors,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Louis J. Corna<br><br>Louis J. Corna<br> Executive Vice
President, General Counsel,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Tax Counsel and Secretary</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>ANNUAL MEETING OF STOCKHOLDERS OF</B>
</DIV>


<DIV align="center" style="font-size: 24pt; margin-top: 18pt"><B>AMERICAN REALTY INVESTORS, INC.</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>November&nbsp;22, 2005</B>
</DIV>


<DIV align="center" style="font-size: 18pt; margin-top: 18pt">Please date, sign and mail<BR>
your proxy card in the<BR>
envelope provided as soon<BR>
as possible.
</DIV>


<DIV align="center" style="font-size: 8pt; margin-top: 18pt"><FONT face="wingdings" size="3pt">&#226;</FONT> Please detach along perforated line and mail in the envelope provided. <FONT face="wingdings"; size="3pt">&#226;</FONT>
</DIV>

<P>
<DIV style="width: 100%; border: 1px solid black; padding: 1px;">


<DIV align="center" style="font-size: 8pt; margin-top: 1pt"><B>The Board of Directors of American Realty Investors, Inc. recommends approval of all nominees for election as directors
and a vote FOR ratification of the appointment of Farmer, Fuqua and Huff, P.C. as independent registered public accounting firm.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE </B><FONT face="Wingdings">&#120;</FONT>
</DIV>

</DIV>


<DIV style="position: relative; float: left; width: 49%">
<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="11" valign="top" align="left">1. Election of Directors:</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>NOMINEES:</B></TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left" colspan="2" rowspan="2"><B><FONT face="Wingdings" style="font-size: 20pt">&#111;</FONT></B></TD>
    <TD colspan="3" rowspan="2" valign="middle" align="left"><B>FOR ALL NOMINEES</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">O</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Henry A. Butler</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">O
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sharon Hunt</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left" colspan="2" rowspan="2"><B><FONT face="Wingdings" style="font-size: 20pt">&#111;</FONT></B></TD>
    <TD colspan="3" valign="top" align="left"><B>WITHHOLD AUTHORITY</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">O</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ted R. Munselle</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>FOR ALL NOMINEES</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">O</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ted P. Stokely</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">O
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Robert A. Jakuszewski</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left" colspan="2" rowspan="2"><B><FONT face="Wingdings" style="font-size: 20pt">&#111;</FONT></B></TD>
    <TD colspan="3" valign="top" align="left"><B>FOR ALL EXCEPT</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left">(See instructions below)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><U><B>INSTRUCTION:</B></U></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" valign="top" align="left">To withhold authority to vote for any
individual nominee(s), mark <B>&#147;FOR ALL EXCEPT&#148; </B>and fill in
the circle next to each nominee you wish to withhold, as
shown here: <B><FONT face="wingdings" style="font-size: 11pt">&#108;</FONT></B></TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">To change the address on your account, please check
the box at right and indicate your new address in
the address space above. Please note that changes
to the registered name(s) on the account may not be
submitted via this method.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="middle"><FONT face="Wingdings" style="font-size: 24pt">&#111;</FONT></TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

</DIV>
<DIV style="position: relative; float: right; width: 49%">
<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FOR
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AGAINST
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ABSTAIN</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ratification of the Appointment of Farmer, Fuqua &#038; Huff, P.C.
as Independent Registered Public Accounting Firm
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" Style="font-size: 16pt">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" Style="font-size: 16pt">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" Style="font-size: 16pt">&#111;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">3.</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" valign="top" align="left">In their discretion on any other matters which may properly come before the meeting or any adjournment(s) thereof.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left"><B>THIS PROXY WILL BE
VOTED AS DIRECTED BUT IF NO DIRECTION IS INDICATED, IT WILL BE VOTED
FOR ALL NOMINEES AND FOR RATIFICATION
OF THE APPOINTMENT OF FARMER, FUQUA &#038; HUFF, P.C. AS INDEPENDENT
AUDITORS. ON OTHER MATTERS THAT MAY COME BEFORE SAID MEETING,
THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE ABOVE-NAMED PERSONS.</B></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

</DIV>
<BR clear="all">

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom" style="font-size: 1px">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="bottom" nowrap><DIV style="margin-left:0px; text-indent:-0px">Signature of Stockholder
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 12pt"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Date:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 12pt"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap valign="bottom">Signature of Stockholder
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 12pt"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Date:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 12pt"><DIV style="border: 1px solid #000000">&nbsp;</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="right">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="97%">
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="3%" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Note:</B>
</DIV></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="95%" align="left" valign="top">Please sign exactly as your name or names appear on this Proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator, attorney, trustee or guardian,
please give full title as such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 38pt; margin-top: 6pt">&nbsp;
</DIV>


<DIV align="center" style="font-size: 14pt; margin-top: 18pt"><B>AMERICAN REALTY INVESTORS, INC.</B>
</DIV>


<DIV align="center" style="font-size: 11pt; margin-top: 18pt"><B>THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF<BR>
STOCKHOLDERS TO BE HELD NOVEMBER 22, 2005.</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS</B>
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned stockholder of AMERICAN REALTY INVESTORS, INC. hereby appoints TED P. STOKELY
and LOUIS J. CORNA, and each of them proxies with full power of substitution in each of them, in
the name, place and stead of the undersigned, as attorneys and proxies to vote all shares of Common
Stock, par value $0.01 per share, of AMERICAN REALTY INVESTORS, INC. which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held on November&nbsp;22, 2005 at 12:30
p.m., local Dallas, Texas time, at 1800 Valley View Lane, Suite&nbsp;300, Dallas, Texas 75234, or any
adjournment(s) thereof, with all powers the undersigned would possess if personally present, as
indicated on the reverse side hereof, for the transaction of such business as may properly come
before said meeting or any adjournment(s) thereof, all as set forth in the October&nbsp;21, 2005 Proxy
Statement for said meeting.
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>(Continued and to be signed on the reverse side)</B>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
