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<SEC-DOCUMENT>0000950134-08-018078.txt : 20081017
<SEC-HEADER>0000950134-08-018078.hdr.sgml : 20081017
<ACCEPTANCE-DATETIME>20081016173607
ACCESSION NUMBER:		0000950134-08-018078
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20081120
FILED AS OF DATE:		20081017
DATE AS OF CHANGE:		20081016
EFFECTIVENESS DATE:		20081017

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:		081128025

	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>d64629ddef14a.htm
<DESCRIPTION>DEF 14A
<TEXT>
<HTML>
<HEAD>
<TITLE>def14a</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">

<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: 12pt"><B>SCHEDULE 14A</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Proxy Statement Pursuant to Section 14(a) of the Securities Exchange of 1934 (Amendment No. &#95;&#95;&#95;)
</DIV>


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

</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%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Preliminary Proxy Statement.</TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)).</TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Definitive Proxy Statement.</TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Definitive Additional Materials.</TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Soliciting Material Pursuant to Section&nbsp;140.14A-11(c) or Section&nbsp;240.14a-12.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>AMERICAN REALTY INVESTORS, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></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="width: 100%; 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 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%" nowrap align="left"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No fee required.</TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.</TD>
</TR>

</TABLE>
</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Title of each class of securities to which transaction applies:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Aggregate number of securities to which transaction applies:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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):</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Proposed maximum aggregate value of transaction:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Total fee paid:</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

</TABLE>
</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%" 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: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" 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&nbsp;0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.</TD>
</TR>

</TABLE>
</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount Previously Paid:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form, Schedule or Registration Statement No.:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Filing Party:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 0pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Date Filed:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>


</TABLE>
</DIV>


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



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<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>AMERICAN REALTY INVESTORS, INC.<BR>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS<BR>
TO BE HELD ON NOVEMBER 20, 2008</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 Thursday,
November&nbsp;20, 2008, at 10:00&nbsp;a.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: 2%">&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: 2%">&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: 2%">&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;15, 2008 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;17, 2008.
</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: 6pt; margin-left: 50%">/s/
Louis J. Corna<BR>
Louis J. Corna<BR>
Executive Vice President, General Counsel,<BR>
Tax Counsel and Secretary

</DIV>

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

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

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



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

<!-- link1 "PROXY STATEMENT" -->

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PROXY STATEMENT</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>FOR THE ANNUAL MEETING OF STOCKHOLDERS</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>TO BE HELD NOVEMBER 20, 2008</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 2007 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;17, 2008.
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 Wednesday, October
15, 2008 (the &#147;Record Date&#148;) may vote at the Annual Meeting. On that date, 11,233,672 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;15, 2008, there were 11,233,672 shares of Common
Stock issued and outstanding. The presence, in person or by proxy, of stockholders entitled to
cast at least 5,616,836 votes constitutes a quorum for adopting the proposals at the Annual
Meeting. If you have properly signed and
returned your proxy card by mail, you will be considered part of the quorum, and the persons
</DIV>

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

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<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: 10pt; margin-top: 6pt">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 8,679,277 shares representing approximately 77.26% 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 <U><I>www.amrealtytrust.com.</I></U> We make available free
of charge through our website our most recent Annual Report on Form 10-K, Quarterly Reports on
Forms 10-Q, Current Reports on Form 8-K, 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 Business Conduct and
Ethics, Code of Ethics for Senior
Financial Officers, Corporate Governance Guidelines and Director Independence Standards, all
under separate headings. These charters and principles are not incorporated in this instrument by
</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">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>Multiple Stockholders Sharing the Same Address</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Securities and Exchange Commission (the &#147;SEC&#148;) rules allow for the delivery of a single
copy of an annual report and proxy statement to any household at which two or more stockholders
reside, if it is believed the stockholders are members of the same family. Duplicate account
mailings will be eliminated by allowing stockholders to consent to such elimination, or through
implied consent if a stockholder does not request continuation of duplicate mailings. Depending
upon the practices of your broker, bank or other nominee, you may need to contact them directly to
continue duplicate mailings to your household. If you wish to revoke your consent to householding,
you must contact your broker, bank or other nominee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you hold shares of common stock in your own name as a holder of record, householding will
not apply to your shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you wish to request extra copies free of charge of any annual report, proxy statement or
information statement, please send your request to American Realty Investors, Inc., Attention:
Investor Relations, 1800 Valley View Lane, Suite&nbsp;300, Dallas, Texas 75234 or call (800)&nbsp;400-6407.
</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>


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</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), the cessation of Martin L. White
as a director (November&nbsp;22, 2005), as well as the election of independent Directors Sharon Hunt and
Ted R. Munselle effective on February&nbsp;20, 2004, and Robert A. Jakuszewski on November&nbsp;22, 2005.
</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 November&nbsp;16, 2007) 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="left" style="border-bottom: 0px solid #000000">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Director</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Committee</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <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><TD align="left" 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><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert A. Jakuszewski
</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">Chair</TD>
</TR>
<TR><TD align="left" 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"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ted P. Stokely</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>
<!-- 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
(<U><I>www.amrealtytrust.com).</I></U> 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 on December&nbsp;11, 2007,
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 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
</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">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 eight times during 2007.
</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;17,
2004, and is available on the Company&#146;s Investor Relations website (www.amrealtytrust.com). The
Board selected the current members of the Governance and Nominating Committee for the coming year
on December&nbsp;11, 2007, 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 2007.
</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;17, 2004, and is available on the
Company&#146;s Investor Relations website (<U><I>www.amrealtytrust.com</I></U><I>). </I>The Board selected the
current members of the Compensation Committee for the coming year on December&nbsp;11, 2007, 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 two times during 2007.
</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;On June&nbsp;17, 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. In December&nbsp;2007, the
non-management members of the Board designated Ted R. Munselle to serve in this position until the
Company&#146;s annual meeting of stockholders to be held following the fiscal year ended December&nbsp;31,
2008.
</DIV>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><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="2%" 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="2%" 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="2%" 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="2%" 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>

<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="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="2%" 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
</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">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 during that year 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 (<U><I>www.amrealtytrust.com).</I></U> 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
February&nbsp;2008. During this review, the Board considered transactions and relationships between 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,
Robert A. Jakuszewski 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>


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

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Board Meetings During Fiscal 2007</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board met eleven times during fiscal 2007. 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 four times during fiscal 2007.
</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 2007, $193,100 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, 2006 through
December&nbsp;31, 2006. Those fees received by directors were Sharon Hunt ($47,700), Ted R. Munselle
($48,200), Ted P. Stokely ($49,500) and Robert A. Jakuszewski ($47,700).
</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
provided for automatic annual grants of options to directors of the Company who, at the time of
grant of an option were not, and had 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
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
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 was awarded an option to purchase an additional 1,000 shares on January 1 of
each year. The Directors Plan was terminated by the Board of Directors on December&nbsp;15, 2005. At
December&nbsp;31, 2007, options covering 1,000 shares were exercisable at $8.09, options covering 2,000
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
</DIV>

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

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<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: 10pt; margin-top: 6pt">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 was administered by the Stock Option Committee, which
consisted of three independent directors of the Company, Messrs.&nbsp;Munselle and White and Ms.&nbsp;Hunt.
The exercise price per share of an option is not be less than 100% of the fair market value per
share on the date of grant. The Company received no consideration for the grant of an option. At
December&nbsp;31, 2007, 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. The Option Plan was terminated by the Board of Directors on
December&nbsp;15, 2005. None of the executive officers 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>

<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 (<U><I>www.amrealtytrust.com).</I></U> 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 principal 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
</DIV>

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

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<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: 10pt; margin-top: 6pt">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, 2007. 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;15, 2008.
</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="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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Approximate </B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Name and Address of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Percent of Class**</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic Capital Management, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6,703,045</TD>
    <TD nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">59.67</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1800 Valley View Lane, Suite&nbsp;300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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 nowrap align="right">&nbsp;</TD>
    <TD align="right">1,671,658</TD>
    <TD nowrap>(b)(c)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.88</TD>
    <TD nowrap>%</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>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Realty Advisors, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,374,703</TD>
    <TD nowrap>(a)(b)(c)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">74.55</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1800 Valley View Lane, Suite&nbsp;300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ryan T. Phillips</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,402,305</TD>
    <TD nowrap>(a)(b)(c)(d)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">74.80</TD>
    <TD nowrap>%</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>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>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.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>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.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 234,450 shares owned by One Realco Stock Holdings, Inc. (&#147;ORSH&#148;), a wholly-owned
subsidiary of PIAMI over which each of the directors of ORSH, Ryan T. Phillips and Mickey Ned
Phillips, may be deemed to be the beneficial owners by virtue of their positions as directors of
ORSH. The directors of ORSH disclaim beneficial ownership of such shares.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(d)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 27,602 shares owned by the Gene E. Phillips&#146; Children&#146;s Trust of which Ryan T.
Phillips is a beneficiary.</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt"><!-- Folio -->-10-<!-- /Folio -->
</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: 10pt; margin-top: 6pt"><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;15, 2008.
</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="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="left"><B>Name and Address of Beneficial</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Approximate </B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="LEFT"><DIV style="margin-left:60px; text-indent:-0px"><B> Owner</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent of Class**</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gene S. Bertcher</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,651,675</TD>
    <TD nowrap>(2)(3)(4)(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">77.01</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" 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 nowrap align="right">&nbsp;</TD>
    <TD align="right">279,972</TD>
    <TD nowrap>(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.49</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Louis J. Corna</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,651,675</TD>
    <TD nowrap>(2)(3)(4)(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">77.01</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Alfred Crozier</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,651,675</TD>
    <TD nowrap>(2)(3)(4)(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">77.01</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David R. Fletcher</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,651,675</TD>
    <TD nowrap>(2)(3)(4)(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">77.01</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" 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 nowrap align="right">&nbsp;</TD>
    <TD align="right">277,972</TD>
    <TD nowrap>(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.47</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Jakuszewski</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">276,972</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.47</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Daniel J. Moos</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,651,675</TD>
    <TD nowrap>(2)(3)(4)(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">77.01</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ted R. Munselle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">277,972</TD>
    <TD nowrap>(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.47</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" 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 nowrap align="right">&nbsp;</TD>
    <TD align="right">279,972</TD>
    <TD nowrap>(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.49</TD>
    <TD nowrap>%</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All directors and
executive officers
as a group (ten
people)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,658,675</TD>
    <TD nowrap>(1)(2)(3)(4)(5)(6)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">77.08</TD>
    <TD nowrap>%</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">*</TD>
    <TD>&nbsp;</TD>
    <TD>&#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.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Percentages are based upon 11,233,672 shares of Common Stock outstanding at October&nbsp;15,
2008.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Each of Messrs.&nbsp;Butler, Munselle, Stokely, and Ms.&nbsp;Hunt have options to purchase shares of
Common Stock of ARI which are exercisable within 60&nbsp;days of October&nbsp;15, 2008.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 276,972 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.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>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.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>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.</TD>
</TR>

</TABLE>


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





<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">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 234,450 shares owned by ORSH over which the executive officers of ORSH may
be deemed to be the beneficial owners by virtue of their positions as executive officers of ORSH.
The executive officers of ORSH disclaim beneficial ownership of such shares.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 7,000 shares which may be acquired by the current directors of ARI pursuant to
stock options.</TD>
</TR>

</TABLE>

<!-- link1 "PROPOSAL 1" -->

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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><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 Annual Meeting following the fiscal year ending December&nbsp;31, 2008. All of the
nominees for director are now serving as directors 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, 58 (Affiliated)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker &#151; Land Sales (since July&nbsp;2003) for Prime Income Asset Management, LLC (&#147;Prime&#148;) and
(1992 to June&nbsp;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, 64</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>Robert A. Jakuszewski, 46</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.; 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
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-12-<!-- /Folio -->
</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: 10pt; margin-top: 6pt">(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, and a director of TCI and the Company since November&nbsp;22, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ted. R. Munselle, 52</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.;
President (since December&nbsp;2004 until sold in April&nbsp;2007) of Applied Educational Opportunities, LLC,
an educational organization which had two career training schools located in Texas; Director (since
February&nbsp;2004) of the Company and TCI; Certified Public Accountant employed in public accounting
from 1977 until 1998 when he entered his current employment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ted P. Stokely, 75 (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 (April&nbsp;1990 to February&nbsp;22, 2007) and Chairman
of the Board (November&nbsp;2002 to February&nbsp;22, 2007) of IOT; 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&nbsp;1995) of TCI.
</DIV>

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


<P align="center" style="font-size: 10pt"><!-- Folio -->-13-<!-- /Folio -->
</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">
<!-- link1 "PROPOSAL 2" -->
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL 2</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><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 2008 fiscal year and to conduct
quarterly reviews through September&nbsp;30, 2008. 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. Farmer, Fuqua &#038; Huff, P.C. has served as the Company&#146;s
independent registered public accounting firm for each of the four fiscal years ended December&nbsp;31,
2004, 2005, 2006 and 2007. 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>

<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>Fiscal Years 2007 and 2006 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 2007 and 2006 by the Company&#146;s principal accounting firms, BDO Seidman, LLP
and Farmer, Fuqua &#038; Huff, P.C.:
</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="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Farmer, Fuqua</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>BDO Seidman,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Farmer, Fuqua</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>BDO Seidman,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Type of Fee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>&#038; Huff, P.C.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>LLP</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>&#038; Huff, P.C.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>LLP</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">246,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">148,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">59,632</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</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>
    <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><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">278,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">102,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">59,632</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>
    <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" 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: 2%">&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>

<P align="center" style="font-size: 10pt"><!-- Folio -->-14-<!-- /Folio -->
</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: 10pt; margin-top: 6pt; margin-left: 2%">&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: 2%">&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: 2%">&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>

<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 of Directors is composed of three directors, each of whom
satisfies the requirements of independence, experience and financial literacy under the
requirements of the New York Stock Exchange and the SEC. The Audit Committee has directed the
preparation of this report and has approved its content and submission to the stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee is responsible for, among other things:
</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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>retaining and overseeing the independent registered public accounting firm that
serves as our independent auditor and evaluating their performance and independence;</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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing the annual audit plan with management and the independent registered
public accounting firm;</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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pre-approving any permitted non-audit services provided by our independent
registered public accounting firm;</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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approving the fees to be paid to our independent registered public accounting
girm;</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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing the adequacy and effectiveness of our internal controls with
management, internal auditors and the independent registered public accounting firm;</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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing and discussing the annual audited financial statements and the
interim unaudited financial statements with management and the registered public
accounting firm; 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approving our internal audit plan and reviewing reports of our internal
auditors.</TD>
</TR>

</TABLE>
</DIV>
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</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">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee operates under a written charter adopted by the Board of Directors.
The Committee&#146;s responsibilities are set forth in this charter which is available on our website
at <U><I>www.amrealtytrust.com</I></U><I>.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee assists the Board in fulfilling its responsibilities for general oversight
of the integrity of the Company&#146;s financial statements, the adequacy of the Company&#146;s system of
internal controls, the Company&#146;s risk management, the Company&#146;s compliance with legal and
regulatory requirements, the independent auditors&#146; qualifications and independence, and the
performance of the Company&#146;s independent auditors. The Committee has sole authority over the
selection of the Company&#146;s independent auditors and manages the Company&#146;s relationship with its
independent auditors. The Committee has the authority to obtain advice and assistance from outside
legal, accounting or other advisors as the Committee deems necessary to carry out its duties and
receive appropriate funding, as determined by the Committee, from the Company for such advice and
assistance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee met eight times during 2007. The Committee schedules its meetings with a view
to ensuring that it devotes appropriate attention to all of its tasks. The Committee&#146;s meetings
include private sessions with the Company&#146;s independent auditors without the presence of the
Company&#146;s management, as well as executive sessions consisting of only Committee members. The
Committee also meets senior management from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management has the primary responsibility for the Company&#146;s financial reporting process,
including its system of internal control over financial reporting and for the preparation of
consolidated financial statements in accordance with accounting principles generally accepted in
the United States of America. The Company&#146;s independent auditors are responsible for auditing
those financial statements in accordance with professional standards and expressing an opinion as
to their material conformity with U.S. generally accepted accounting principles and for auditing
management&#146;s assessment of, and the effective operation of, internal control over financial
reporting. The Committee&#146;s responsibility is to monitor and review the Company&#146;s financial
reporting process and discuss management&#146;s report on the Company&#146;s internal control over financial
reporting. It is not the Committee&#146;s duty or responsibility to conduct audits or accounting
reviews or procedures. The Committee has relied, without independent verification, on management&#146;s
representation that the financial statements have been prepared with integrity and objectivity and
in conformity with accounting principles generally accepted in the United States of America and on
the opinion of the independent registered public accountants included in their report on the
Committee&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of its oversight of the Company&#146;s financial statements, the Committee reviews
and discusses with both management and the Company&#146;s independent registered public accountants all
annual and quarterly financial statements prior to their issuance. During 2007, management advised
the Committee that each set of financial statements reviewed had been prepared in accordance with
accounting principles generally accepted in the United States of America, and reviewed significant
accounting and disclosure issues with the Committee. These reviews include discussions with the
independent accountants of the matters required to be discussed pursuant to Statement on Auditing
Standards No.&nbsp;61 (Codification of Statements on Auditing Standards), including the quality (not
merely the acceptability) of the Company&#146;s accounting principles, the reasonableness of significant
judgments, the clarity of disclosures in the financial statements and disclosures related to
critical accounting practices. The Committee has also discussed with Farmer, Fuqua &#038; Huff, P.C.
matters relating to its independence, including a review of audit and non-audit fees, and written
disclosures from Farmer, Fuqua &#038; Huff, P.C. to the Company pursuant to Independence Standards Board Standard No.&nbsp;1 (Independence
Discussions with Audit Committees). The Committee also considered whether non-audit services,
provided by the independent accountants are compatible with the independent accountant&#146;s
independence. The Company
</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">also received regular updates on the amount of fees and scope of audit,
audit-related and tax services provided.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Committee reviewed key initiatives and programs aimed at strengthening the
effectiveness of the Company&#146;s internal and disclosure control structure. As part of this process,
the Committee continued to monitor the scope and adequacy of the Company&#146;s internal controls,
reviewed staffing levels and steps taken to implement recommended improvements in any internal
procedures and controls.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the Committee&#146;s discussion with management and the independent accountants and the
Committee&#146;s review of the representation of management and the report of the independent
accountants to the Board of Directors, the Audit Committee recommended to the Board of Directors,
and the Board of Directors 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, 2007, filed
with the Securities and Exchange Commission. The Audit Committee and the Board of Directors have
also selected Farmer, Fuqua &#038; Huff, P.C. as the Company&#146;s independent registered public accountants
and auditors for the fiscal year ending December&nbsp;31, 2008.
</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%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Sharon Hunt
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Ted R. Munselle
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Robert A. Jakuszewski</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 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
</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">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="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Compensation</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, the Company&#146;s advisor, 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
serves as advisor. See &#147;The Advisor&#148; for a discussion of the compensation payable to Prime under
the Advisory Agreement.
</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 Compensation Committee of the Board of Directors is comprised of at least two directors
who are independent of management and the Company. Each member of the Compensation Committee must
be determined to be independent by the Board under the Corporate Governance Guidelines on Director
Independence adopted by the Board and under the NYSE standards for non-employee directors and Rule
16b-3(b)(3)(i) of the rules and regulations promulgated under the Securities Exchange Act of 1934
and the requirements for &#147;outside directors&#148; set forth in Treasury Regulations, Section&nbsp;27(e)(3).
Each member of the Committee is to be free of any relationship that in the judgment of the Board from time to
time may interfere with the exercise of his or her independent judgment. Each Committee member is
appointed annually subject to removal at any time by the Board and serves until his or her
Committee appointment is terminated by the Board. The Compensation Committee is composed of three
directors, each of whom meets the standards described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purposes of the Compensation Committee are to oversee the policies of the Company relating
to compensation to be paid by the Company to the Company&#146;s principal executive officer (&#147;CEO&#148;) and
any other officers designated by the Board and make recommendations to the Board with respect to
such policies, produce necessary reports and executive compensation for inclusion in the Company&#146;s
proxy statement, in accordance with applicable rules and regulations, and monitor the development
and implementation of succession plans for the CEO and other key executives and make
recommendations to the Board with respect to such plans.
</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 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 the best interest of the stockholders, (ii)&nbsp;review the advisory contract and
recommend any appropriate changes thereto, (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)&nbsp;review the reasonableness of the total fees and
expenses of the Company, and (v)&nbsp;select, when necessary,
</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">a qualified, independent real estate
appraiser to appraise properties to be acquired. See the sub caption &#147;Directors&#146; Compensation&#148; in
the Proxy Statement for a description of the compensation paid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The charter of the Compensation Committee was adopted on March&nbsp;17, 2004, and the members of
the Compensation Committee, all of whom are independent within the meaning of the listing standards
of the NYSE and the Company&#146;s Corporate Governance Guidelines, are listed below. Since its
formation on March&nbsp;17, 2004, the Compensation Committee has annually reviewed its existing charter
and regularly performed the tasks described above relating to the business plan, advisory contract,
reasonableness of compensation paid to the advisor, and the reasonableness of the total fees and
expenses of the Company.
</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%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Sharon Hunt
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Ted R. Munselle
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Robert A. Jakuszewski</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 listed below, 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>Daniel J. Moos, 57</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President and Chief Operating Officer (effective April&nbsp;2007) of the Company, TCI, IOT and
(effective March&nbsp;2007) of Prime; Senior Vice President and Business Line Manager of U.S. Bank
(NYSE)&nbsp;working out of their offices in Houston, Texas from 2003 to April&nbsp;2007; Executive Vice
President and Chief Financial Officer, Fleetcor Technologies a privately held transaction
processing company that was headquartered in New Orleans, Louisiana from 1998 to 2003; Senior Vice
President and Chief Financial Officer, ICSA a privately held internet security and information
company headquartered in Carlisle, Pennsylvania from 1996 to 1998; and for more than five years
prior thereto was employed in various financial and operating roles for PhoneTel Technologies, Inc.
which was a publicly traded telecommunication company on the American Stock Exchange headquartered
in Cleveland, Ohio (1992 to 1996) and LDI which was a publicly traded computer equipment
sales/service and asset leasing company listed on the NASDAQ and headquartered in Corporation of
Cleveland, Ohio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>David R. Fletcher, 48</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 May&nbsp;2008) of the Company,
TCI and IOT. Previously, from April&nbsp;2007 to March&nbsp;2008, Mr.&nbsp;Fletcher was Executive Vice President
and Chief Financial Officer of a wholly-owned subsidiary of Tarragon Corporation, a leading
mixed-use developer of real estate with a focus on for rent and for sale multi-family housing,
which has its common stock listed and traded on the NASDAQ. Prior thereto from November&nbsp;2005 to
June&nbsp;2006, Mr.&nbsp;Fletcher was Senior
</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">Vice President and Chief Financial Officer of Focus Property
Group, a privately held developer of residential master-plan communities; from March&nbsp;2003 to
November&nbsp;2005, Mr.&nbsp;Fletcher was Chief Executive Officer of Hawk Eye Capital, LLC, a privately held
management consulting firm; from March&nbsp;2000 to February&nbsp;2003, he was Chief Financial Officer of
Fuel Links, Inc., a privately held software development company and for more than five years prior
thereto he was employed as a senior manager with Deloitte &#038; Touche LLP and as a commercial real
estate loan officer with Bank of America. Mr.&nbsp;Fletcher holds a Masters in Business Administration
in Finance from the McCombs Graduate School of Business at the University of Texas at Austin,
graduating as a Sord Scholar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Gene S. Bertcher, 59</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President and Chief Accounting Officer (since May&nbsp;2008) of the Company, TCI
and IOT. Prior thereto (from February&nbsp;2008 to March&nbsp;2008) he was Executive Vice President and
Interim Chief Financial Officer of the Company, TCI and IOT. Mr.&nbsp;Bertcher is (and will continue to
be) President and Chief Financial Officer of New Concept Energy, Inc. (formerly CabelTel
International Corporation), a Nevada corporation (&#147;GBR&#148;) which has its common stock listed on the
American Stock Exchange LLC, a position he has occupied since November&nbsp;1, 2004. From January&nbsp;3,
2003 until November&nbsp;1, 2004, Mr.&nbsp;Bertcher was also Chief Executive Officer of GBR. He has been a
certified public accountant since 1973; Mr.&nbsp;Bertcher has been a director since June&nbsp;1999 (and was from November&nbsp;1989 to September&nbsp;1996) of
GBR. Until November&nbsp;1989, Mr.&nbsp;Bertcher was a partner in Grant Thornton, LLP having served as the
Chairman of its National Real Estate and Construction Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Louis J. Corna, 60</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&#151;Tax (October&nbsp;2001 to February&nbsp;2004), Executive Vice President&#151;Tax and
Chief Financial Officer (June&nbsp;2001 to October&nbsp;2001) and Senior Vice President&#151;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&#151;Tax (July&nbsp;2003 to February
2004) of Prime and PIAMI; Private Attorney (January&nbsp;2000 to December&nbsp;2000); Vice President&#151;Taxes
and Assistant Treasurer (March&nbsp;1998 to January&nbsp;2000) of IMC Global, Inc.; Vice President&#151;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;<B>Alfred Crozier, 55</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President-Residential Construction (since November&nbsp;2006) of the Company, TCI
and IOT; Managing Director of Development for Woodmont Investment Company GP, LLC of Dallas, Texas
from November&nbsp;2005 to November&nbsp;2006; President of Sterling Builders, Inc. of Spring, Texas from
October&nbsp;2003 to November&nbsp;2005; Vice President of Westchase Construction, Ltd. of Houston, Texas
from August&nbsp;2001 to September&nbsp;2003. For more than five years prior thereto, Mr.&nbsp;Crozier was
employed by various firms in the construction industry including, Trammell Crow Residential
(February&nbsp;1995 through February&nbsp;2000) and The Finger Companies (August&nbsp;1991 through February&nbsp;1995).
Mr.&nbsp;Crozier is a licensed architect.
</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>

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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: 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;Prime is (and has been since October&nbsp;1, 2003) the contractual advisor to the Company. Prime
is a single member Nevada limited liability company whose sole member is PIAMI, which is owned by
Syntek West, Inc. (20%) and Realty Advisors, LLC (80%). Syntek West, Inc. (&#147;SWI&#148;) is a Nevada
corporation owned by Gene E. Phillips. Realty Advisors, LLC is a Nevada limited liability Company,
the sole member of which is Realty Advisors, Inc. (&#147;RAI&#148;), 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. As of October&nbsp;15, 2008 PIAMI owns 1,437,208 shares of Common Stock of the Company
(approximately 12.79% of the
outstanding). As of that date, One Realco Stock Holdings, Inc., a wholly-owned subsidiary of
PIAMI owns 234,500 shares of Common Stock of the Company (approximately 2.09% of the outstanding).
</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 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: 2%">&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: 2%">&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>

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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; margin-left: 2%">&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: 2%">&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: 2%">&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; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) a construction management fee equal to 6% of the
so-called &#147;hard costs&#148;
only of any costs of construction on a completed basis, based upon amounts st forth
as approved on any architect certificate issued in connection with such
construction, which fee is payable at such time as the applicable architect
certifies other costs for payment to third parties.
</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
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;Effective July&nbsp;1, 2005, the Company and Prime entered into a Cash Management Agreement
to further define the administration of the Company&#146;s day-to-day investment operations,
relationship
</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">contracts, flow of funds and deposit and borrowing of funds. Under the Cash
Management Agreement, all funds of the Company are delivered to Prime which has a deposit liability
to the Company and is responsible for payment of all payables and investment of all excess funds
which earn interest at the Wall Street Journal Prime Rate plus 1% per annum, as set quarterly on
the first day of each calendar quarter. Borrowings for the benefit of the Company bear the same
interest rate. The term of the Cash Management Agreement is coterminous with the Advisory
Agreement, and it is automatically renewed each year unless terminated with the Advisory Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prime may assign the Advisory Agreement only with the prior consent of the Company.
</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="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="70%">&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"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></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">Ryan T. Phillips
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manager</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="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Daniel J. Moos
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Operating Officer</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="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">David R. Fletcher
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief Financial Officer</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="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gene S. Bertcher
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief Accounting Officer</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="left" valign="top">&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, General Counsel, Tax Counsel
and Secretary</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="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Alfred Crozier
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President, Residential Construction</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>


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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"><B>Property Management and Real Estate Brokerage</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Triad Realty Services LP (&#147;Triad&#148;), an affiliate of Prime provides 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 subcontracts with other
entities for the provision of property-level management services at various rates. The general
partner of Triad is PIAMI. The limited partner of Triad is HRS Holdings LLC (&#147;HRSHLLC&#148;). 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 HRSHLLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regis I 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 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>

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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: 12pt"><B>Certain Business Relationships</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prime, the Company&#146;s advisor is an entity of which PIAMI is the sole member. PIAMI is owned
by Realty Advisors, LLC (80%) and Syntek West, Inc. (20%). Prime is also a company for which
Messrs.&nbsp;Bertcher, Corna, Crozier, Fletcher and Moos (all of the executive officers of the
Company) serve as executive officers. The executive officers of the Company also serve as
executive officers of TCI and 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. Mr.
Bertcher is also an officer and director of GBR and as such owes fiduciary duties to GBR.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company contracts with affiliates of Prime for property management services. Currently,
Triad provides such property management services. The general partner of Triad is PIAMI. The
limited partner of Triad is HRSHLLC. 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, which is a company also owned by HRSHLLC. Regis I also provides non-exclusive real estate
brokerage services to the Company and receives brokerage commissions in accordance with the
Advisory Agreement. Regis Hotel I, LLC manages the Company&#146;s seven hotels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company owns an equity interest in TCI which in turn owns 24% of IOT. At December&nbsp;31,
2007, the Company, through two wholly-owned subsidiaries, owned approximately 80% 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 was for
59,115 square feet (approximately 59% of the building), has a term of three years, and provides for
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
million, or $21.50 per square foot. In November&nbsp;2005, the lease was amended to 48,151 square feet
(approximately 49% of the building), with an annual base rent of $1&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 2007 of $56,000, in 2006 of $56,000 and in 2005 of $56,000 from
BCM for BCM&#146;s lease at Addison Hangar. BCM leases 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 2007, the Company paid Prime, its affiliates and related parties $19,983,000 in advisory,
incentive and net income fees, $2,411,000 in mortgage brokerage and equity refinancing fees,
$4,194,000 in property acquisition fees, $4,183,000 in real estate brokerage commissions,
$5,422,000 in construction
supervision fees and $3,773,000 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 2007, Prime received cost
reimbursements of $5,479,000.
</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: 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
18, 2004, called for the Company to repurchase 5,188,750 outstanding Class&nbsp;A units on December&nbsp;31,
2006.
</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.
Effective July&nbsp;1, 2005, such advances bear interest at 1% above prime rate per annum. Also, at
December&nbsp;31, 2007, the Company was owed $29.7&nbsp;million and $1.1&nbsp;million by Prime and Regis I,
respectively.
</DIV>
<!-- link1 "OTHER MATTERS" -->
<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>
<!-- link1 "FINANCIAL STATEMENTS" -->
<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, 2007 and 2006 are contained in the 2007 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>


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

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


<!-- link1 "SOLICITATION OF PROXIES" -->

<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: 6pt">&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>
<!-- link1 "FUTURE PROPOSALS OF STOCKHOLDERS" -->
<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 2008 must be received by us by
December&nbsp;31, 2008, 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="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 26%; 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, 2007 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><U><B>WWW.AMREALTYTRUST.COM</B></U><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="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated: October&nbsp;17, 2008.
</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: 6pt; margin-left: 50%">/s/ Louis J. Corna<BR>
Louis J. Corna<BR>
Executive Vice President, General Counsel,<BR>
Tax Counsel and Secretary

</DIV>


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



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: Helvetica,Arial,sans-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: 23pt; margin-top: 14pt"><B>AMERICAN
REALTY INVESTORS, INC.</B></DIV>
 <DIV align="Center" style="font-size: 12pt; margin-top: 10pt"><b>November&nbsp;20, 2008</b></DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 50pt">Please sign, date 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 size="5"><b>&#8595;</b></font>&nbsp;&nbsp;Please
detach along perforated line and mail in the envelope
provided.&nbsp;&nbsp;<font size="5"><b>&#8595;</b></font>
</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="46%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="border-top: 11px solid #000000">&nbsp;</div></TD>
    <TD valign="top">&nbsp;&nbsp;&nbsp;20530000000000000000&nbsp;&nbsp;&nbsp;7
</TD>
    <TD>&nbsp;</TD>
    <TD  align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">112008</TD>
    <TD  valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 2pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 6pt"><B>The Board of Directors of American Realty Investors, Inc. recommends approval of all nominees for election as directors<br>
and a vote FOR ratification of the appointment of Farmer, Fuqua and
Huff, P.C. as Independent registered public accounting firm.<br>
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE</B>&nbsp;<font face="Wingdings">&#120;</font></DIV>


<DIV align="center" style="font-size: 10pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>


<DIV align="center">
<TABLE style="font-size: 6pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size:2pt">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%" style="border-right:1px solid #000000">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #ffffff">
    <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 style="border-right:1px solid #000000">&nbsp;</TD>
    <TD  align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>FOR</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>AGAINST</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>ABSTAIN</B></TD>
</TR>
<TR valign="bottom">

<TD colspan="3" valign="top" align="left"><FONT style="font-size:8pt">1.
Election of Directors:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right:1px solid #000000">&nbsp;</TD>
    <TD  align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.</TD>


    <TD align="left" valign="top" colspan="3" rowspan="2"><div align="justify">Ratification of the Appointment of Farmer, Fuqua &#038; Huff, P.C.
as Independent Registered Public Accounting Firm.</div></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" rowspan="2"><font style="font-size:14pt; font-family:webdings">c</font></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" rowspan="2"> <font style="font-size:14pt; font-family:webdings">c</font></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" rowspan="2"><font style="font-size:14pt; font-family:webdings">c</font></TD>
</TR>
<TR valign="bottom" style="background: #ffffff">
    <TD valign="top" rowspan="2">
<font style="font-size:14pt; font-family:webdings;">c</font>
<BR>
<BR style="font-size:3pt">
<font style="font-size:14pt; font-family:webdings">c</font>
<BR>
<BR style="font-size:3pt">
<font style="font-size:14pt; font-family:webdings">c</font>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" rowspan="5">
<BR style="font-size:6pt">
<div style="margin-bottom:3pt"><B>FOR ALL NOMINEES</B></div>
<div style="margin-bottom:3pt; margin-top:10pt"><B>WITHHOLD AUTHORITY<br>
FOR ALL NOMINEES</B></DIV>

<DIV style="margin-top:6pt">
<B>FOR ALL EXCEPT<br>
 (See instructions below)</B>
</div>

</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top" rowspan="5"><B>NOMINEES:</B> <br>
O Henry A. Butler<br>
O Sharon Hunt<br>
O Ted R. Munselle<br>
O Ted P. Stokely<br>
O Robert A. Jakuszewski</TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right:1px solid #000000">&nbsp;</TD>


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

    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right:1px solid #000000">&nbsp;</TD>
    <TD  align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top"><BR style="font-size: 6pt">3.</TD>



<TD colspan="9" valign="top" align="left"><div align="justify"><BR style="font-size: 6pt">In their discretion on any other matters which may properly come before the
meeting or any adjournment(s) thereof.</div></TD>
</TR>
<TR valign="bottom" style="background: #ffffff;">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right:1px solid #000000">&nbsp;</TD>
    <TD  align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <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 align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right:1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD colspan="10" valign="top" align="left" rowspan="2"><div align="justify"><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 THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM. ON OTHER MATTERS THAT MAY COME BEFORE SAID MEETING, THIS PROXY
WILL BE VOTED IN THE DISCRETION OF THE ABOVE-NAMED PERSONS.</B></div></TD>
</TR>
<TR valign="bottom" style="background: #ffffff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD style="border-right:1px solid #000000">&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:50pt"><!-- Blank Space -->
    <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 style="border-right:1px solid #000000">&nbsp;</TD>

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

<TD colspan="7" valign="top" align="left"><DIV style="margin-left:65px; text-indent:-65px">
<B><U>INSTRUCTIONS:</U></B> 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:&nbsp;
<font face="wingdings" size="2">&#108;</font></div></TD>
    <TD style="border-right:1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <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 align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:60pt"><!-- Blank Space -->
    <TD valign="top" colspan="7" style="border-bottom:1px solid #000000; border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD style="border-right:1px solid #000000; border-top: 1px solid #000000; border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD  align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <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 align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #ffffff">
    <TD colspan="5" valign="top" align="left" style="border-bottom:1px solid #000000">
<div align="justify">
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.</div>      </TD>
    <TD style="border-bottom:1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="center" valign="middle"><font style="font-size:14pt; font-family:webdings">c</font></TD>
    <TD style="border-bottom:1px solid #000000; border-right:1px solid #000000">&nbsp;</TD>
    <TD  align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <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 align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align=center>
<TABLE style="FONT-SIZE: 7pt" cellSpacing=0 cellPadding=0 width="100%" border=0><!-- Begin Table Head -->

  <TR style="FONT-SIZE: 1pt" vAlign=bottom>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width=1>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD></TR><!-- End Table Head --><!-- Begin Table Body -->
  <TR vAlign=bottom>
    <TD nowrap>
      <DIV style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px">Signature of
      Stockholder&nbsp; </DIV></TD>
    <TD style="FONT-SIZE: 12pt" vAlign=top align=left colSpan=3>
      <DIV
      style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid">&nbsp;</DIV></TD>
    <TD align=left>&nbsp;Date:&nbsp; </TD>
    <TD style="FONT-SIZE: 12pt" vAlign=top align=left colSpan=2>
      <DIV
      style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid">&nbsp;</DIV></TD>
    <TD nowrap align=left colSpan=3>&nbsp;Signature of Stockholder&nbsp; </TD>
    <TD style="FONT-SIZE: 12pt" vAlign=top align=left colSpan=2>
      <DIV
      style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid">&nbsp;</DIV></TD>
    <TD align=left>&nbsp;Date:&nbsp; </TD>
    <TD style="FONT-SIZE: 12pt" vAlign=top align=left colSpan=2>
      <DIV style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid">&nbsp;</DIV></TD></TR><!-- End Table Body --></TABLE></DIV>
<DIV align=left>
<TABLE style="FONT-SIZE: 6pt; COLOR: #000000" cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD></TR>
  <TR vAlign=top>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Note:</B></TD>
    <TD>&nbsp;</TD>
    <TD>
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></TABLE></DIV>





<DIV align="center" style="margin-top:-10">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%"></TD>
    <TD width="46%"></TD>
    <TD width="30%"></TD>
    <TD width="17%"></TD>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="border-top: 11px solid #000000">&nbsp;</div></TD>
    <TD valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD  align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD  valign="top"><DIV style="border-top: 11px solid #000000">&nbsp;</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




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





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


<DIV style="font-family: Helvetica,Arial,sans-serif">

<DIV align="left" style="font-size: 10pt; margin-top: 400pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV>


<DIV align="center" style="margin-top:-10">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%"></TD>
    <TD width="40%"></TD>
    <TD width="30%"></TD>
    <TD width="17%"></TD>
    <TD width="7%"></TD>
    <TD width="2%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="border-top: 0px solid #000000">&nbsp;</div></TD>
    <TD valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD  align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top" nowrap>0&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD  valign="top"><DIV style="border-top: 11px solid #000000">&nbsp;</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<DIV align="center" style="font-size: 13pt; margin-top: 18pt"><B>AMERICAN REALTY INVESTORS, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF<br>
STOCKHOLDERS TO BE HELD NOVEMBER 20, 2008.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned stockholder of AMERICAN REALTY INVESTORS, INC. hereby appoints TED P. STOKELY
and <FONT style="white-space:nowrap">LOUIS J. CORNA,</FONT> 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 Thursday, November&nbsp;20, 2008,
at 10:00&nbsp;a.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 below, 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;17, 2008 Proxy Statement for said
meeting.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>(Continued and to be signed on the reverse side)</B>
</DIV>

<DIV align="center" style="margin-top:-10">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%"></TD>
    <TD width="46%"></TD>
    <TD width="30%"></TD>
    <TD width="17%"></TD>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="border-top: 11px solid #000000">&nbsp;</div></TD>
    <TD valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD  align="right" valign="top">14475&nbsp;&nbsp;</TD>
    <TD align="right" valign="top"></TD>
    <TD  valign="top"><DIV style="border-top: 11px solid #000000">&nbsp;</div></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




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



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