This prospectus relates to the offer and sale from time to time of up to          shares of our outstanding common stock by selling shareholders. The prices at which the selling stockholders may sell the shares in this offering will be determined by the prevailing market prices at the time of such sales or by negotiated transactions. We will not receive any proceeds from the sale of the shares.

Prior to this offering, there has been no public market for our common stock. We intend to apply to list our common stock on “                    ” under the symbol “  ”.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information contained in this document and any prospectus supplement that may be provided to you in connection with this offering. We have not authorized anyone to provide you with information that is different. Neither we nor the selling stockholders are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus.

Investing in our common stock will be subject to risks, including risks inherent in our business. The value of your investment may decline and could result in a loss. You should carefully consider the following factors as well as other information contained in this prospectus before deciding to invest in our common stock. Additional risks and uncertainties not presently known to us, or not identified below, may also materially adversely affect our business, liquidity, financial condition and results of operations.

We derive fees for transaction services based on a percentage of the price of the properties acquired or disposed of by our programs and for management services based on a percentage of the rental amounts of the properties in our programs. We are responsible for the management of all of the properties owned by our programs, but as of December 31, 2006 we had subcontracted the property management of 38.7% of our programs’ office, healthcare office and retail properties (based on square footage) and all of our programs’ multi-family properties to third parties. As a result, if any of our programs are unsuccessful, both our transaction services and management services fees will be reduced, if any are paid at all. In addition, failures of our programs to provide competitive investment returns could significantly impair our ability to market future programs. Our inability to spread risk among a large number of programs could cause us to be over-reliant on a limited number of programs for our revenues. We cannot assure you that we will maintain current levels of transaction and management services for our programs’ properties.

A significant element of our business strategy is the growth in the number of our programs. The consummation of any future program will be subject to raising adequate capital for the investment, identifying appropriate assets for acquisition and effectively and efficiently closing the transactions. We cannot assure you that we will be able to identify and invest in additional properties or will be able to raise adequate capital for new programs in the future. If we are unable to consummate new programs in the future, we will not be able to continue to grow the revenue we receive from either transaction or management services.

Our ability to source capital for our programs depends significantly on access to the client base of securities broker-dealers and other financial investment intermediaries that may offer competing investment products. We believe that our future success in developing our business and maintaining a competitive position will depend in large part on our ability to continue to maintain these relationships as well as finding additional securities broker-dealers to facilitate offerings by our programs or to find investors for our TIC programs. We cannot be sure that we will continue to gain access to these channels. In addition, competition for capital is intense, and we may not be able to obtain the capital required to complete a program. The inability to have this access could have a material adverse effect on our business and results of operations.

Our securities programs are sold through third-party broker-dealers who are members of our selling group. While we have established relationships with our selling group, we are required to enter into a new agreement with each member of the selling group for each new program we offer. In addition, our programs may be removed from a selling broker-dealer’s approved program list at any time for any reason. We cannot assure you of the continued participation of existing members of our selling group nor can we assure you that our selling group will expand. While we continue to diversify and add new investment channels for our

We rely on selling broker-dealers and our sales force to properly offer our securities programs to customers in compliance with our selling agreements and with applicable regulatory requirements. While these persons are responsible for their activities as registered broker-dealers, their actions may nonetheless result in complaints or legal or regulatory action against us.

Section 1031 of the Internal Revenue Code provides for the deferral of capital gains taxes which would ordinarily arise from the sale of real estate through a tax-deferred exchange of property, which defers the recognition of capital gains tax until such time as the replacement property is sold in a taxable transaction. These transactions are referred to as 1031 exchanges. In 2002, the Internal Revenue Service, or IRS, issued advance ruling guidelines outlining the requirements for properly structured TIC arrangements, which we believe validate the TIC structure generally and as we employ it. However, as recently as May 2006, the Senate Finance Committee proposed a bill in the negotiations over the budget reconciliation tax-cutting package to modify Section 1031 treatment for TICs as a way to raise additional tax revenue. The proposal was unsuccessful, but we cannot assure you that in the future there will not be attempts to limit or disallow the tax deferral benefits for TIC transactions. If we were no longer able to structure TIC programs as 1031 exchanges for our investors, we would lose a significant amount of revenue in the future, which would materially affect our results of operations. Moreover, any attempt to limit or disallow the tax deferral benefits of the 1031 exchange generally would have a material adverse effect on the real estate industry generally and on our business and results of operations.

We structure TIC programs and public non-traded REITs to provide favorable tax treatment to investors. For example, our TIC investors are able to defer the recognition of gain on sale of investment or business property if they enter into a 1031 exchange. Similarly, qualified REITs generally are not subject to federal income tax at corporate rates, which permits REITs to make larger distributions to investors (i.e. without reduction for federal income tax imposed at the corporate level). If we fail to properly structure a TIC transaction or if a REIT fails to satisfy the complex requirements for qualification and taxation as a REIT under the Internal Revenue Code, we could be subject to claims by investors as a result of additional tax they may be required to pay or because they are unable to receive the distributions they expected at the time they made their investment. In addition, any failure to satisfy applicable tax regulations in structuring our programs would negatively affect our reputation, which would in turn affect our ability to earn additional fees from new programs. Claims by investors could lead to losses and any reduction in our fees would have a material adverse effect on our revenues.

Our success depends significantly upon the performance of the properties we manage. The revenue we generate from our management services business is generally a percentage of gross rental income from the properties. The performance of these properties will depend upon the following factors, among others, many of which are partially or completely outside of our control:

We may from time to time invest our capital in certain real estate investments with other real estate firms or with institutional investors such as pension plans. Any co-investment will generally require us to make initial capital contributions, and some co-investment entities may request additional capital from us and our subsidiaries holding investments in those assets. These contributions could adversely impact our cash flows and financial condition. Moreover, the failure to provide these contributions could have adverse consequences to our interests in these investments. These adverse consequences could include damage to our reputation with our co-investment partners as well as dilution of ownership and the necessity of obtaining alternative funding from other sources that may be on disadvantageous terms, if available at all.

We depend on the services of our Chairman and largest stockholder, Anthony W. Thompson, as well as our other key executive officers: Scott D. Peters, Andrea R. Biller, Francene LaPoint and Jeffrey T. Hanson. We have obtained key person insurance for Mr. Thompson. However, the loss of any or all of these executives, and our inability to find, or any delay in finding, a replacement with equivalent skill and experience, could adversely impact our ability to facilitate the structuring of transactions, acquisitions, property management and dispositions.

Our programs generally focus on acquiring assets satisfying particular investment criteria, such as type or quality of tenants. There is generally no or little focus on the geographic location of a particular property. We cannot guarantee, however, that our programs will have or, will be able to maintain, a significant amount of geographic diversity. As of December 31, 2006, a majority of our programs’ properties (by square footage) were located in Texas, California, Florida and Colorado. Geographic concentration of properties exposes our

Although Realty was required to have real estate licenses in states in which it acted as a broker for our programs and received real estate commissions, Realty did not hold a license in certain of those states when it earned fees for those services. In addition, almost all of Triple Net Properties’ revenue was based on an arrangement with Realty to share fees from our programs. Triple Net Properties did not hold a real estate license in any state, although most states in which properties of our programs were located may have required Triple Net Properties to hold a license in order to share fees. As a result, we may be subject to penalties, such as fines (which could be a multiple of the amount received), restitution payments and termination of management agreements, and to the suspension or revocation of Realty’s real estate broker licenses.

We have entered into agreements with third-party management companies to provide property management services for a significant number of our programs’ properties, and we expect to enter into similar third-party management agreements with respect to properties our programs acquire in the future. We do not supervise these third-party managers and their personnel on a day-to-day basis and we cannot assure you that they will manage our programs’ properties in a manner that is consistent with their obligations under our agreements, that they will not be negligent in their performance or engage in other criminal or fraudulent activity, or that these managers will not otherwise default on their management obligations to us. If any of the foregoing occurs, the relationships with our programs’ tenants could be damaged, which may cause the tenants not to renew their leases, and we could incur liabilities resulting from loss or injury to the properties or to persons at the properties. If we are unable to lease the properties or we become subject to significant liabilities as a result of third-party management performance issues, our operating results and financial condition could be substantially harmed.

One of our business strategies is to develop new programs. The development of a new program requires the identification and subsequent acquisition of properties when the opportunity arises. In some instances, in order to effectively and efficiently complete a program, we may provide deposits for the acquisition of property or actually purchase the property and warehouse it temporarily for the program. If we do not have cash on hand available to pay these deposits or fund an acquisition, we or our programs may be required to incur additional indebtedness, which indebtedness may not be available on acceptable terms. If we incur substantial debt, we could lose our interests in any properties that have been provided as collateral for any secured borrowing, or we could lose our assets if the debt is recourse to us. In addition, our cash flow from operations may not be sufficient to repay these obligations upon their maturity, making it necessary for us to raise additional capital or dispose of some of our assets. We cannot assure you that we will be able to borrow additional debt on satisfactory terms, or at all.

From time to time we provide certain guarantees of loans for properties under management. As of December 31, 2006, there were 107 loans for properties under management that were guaranteed, with approximately $2.4 billion in total principal outstanding secured by properties with a total aggregate purchase price of approximately $3.4 billion. Substantially all of the approximate $2.4 billion total principal outstanding guaranteed was non-recourse/carve-out guarantees, and of this amount, $26.4 million was in the form of mezzanine debt and $28.7 million was other full/partial recourse guarantees. If we are called upon to satisfy a substantial portion of these guarantees, our operating results and financial condition could be materially harmed.

The agreements under which we provide advisory and management services to public non-traded REITs may generally be terminated by each REIT following a notice period, with or without cause. We cannot assure you that these agreements will not be terminated. In addition, if we have a significant amount of TIC programs selling their properties or public non-traded REITs liquidating in the same period, our revenues would decrease unless we are able to find replacement programs to generate new fees. We are currently in the process of liquidating two of our public non-traded REITs and, as a result, our management fees from these REITs have been reduced due to the number of properties that have been sold. Any decrease in our fees, as a result of termination of a contract or customary close out or liquidation of a program, could have a material adverse effect on our business, results of operations and financial condition.

The potential growth in revenue from our transaction and management services depends in large part on future capital raising in existing or future programs, as well as on our ability to make resultant acquisitions on behalf of our programs, both of which are subject to uncertainty, including uncertainty with respect to capital market and real estate market conditions. This uncertainty can create volatility in our earnings because of the resulting increased volatility in transaction and management services revenues. Our revenue may be negatively affected by factors that include not only our inability to increase our portfolio of properties under management, but also changes in valuation of those properties and sales (through planned liquidation or otherwise) of properties.

Historically, we have on occasion reduced the investment cost for some, but not all, investors in the same TIC program by waiving or crediting all or a portion of our fees for the real estate acquisition or financing for the TIC program, and we may do so again in the future. Our purpose in doing so has been to improve projected investment returns and attract TIC investors. As a result of these waivers and credits, in some of our TIC programs investors have different investment costs per percentage ownership interest in the relevant property. While our offering materials for prior TIC programs disclosed the possibility that we might offer waivers and credits for specific types of fees on a selective basis to some, but not all, TIC investors, they did not disclose all of the categories of fees for which we actually provided credits. Consequently, investors in these programs who did not receive the waivers or credits could bring claims against us. We have modified the disclosure in our offering materials for current and future TIC programs to make clear that we may waive or credit any or all categories of our fees in a program on a selective basis to some, but not all, TIC investors in the same program; that these waivers and credits may be made on a disproportionate basis; and that the waiver or credit provided to a particular investor may exceed the fees allocated to that investor.

In 2006, we experienced material weaknesses and significant deficiencies in our internal control over financial reporting. Ensuring that we have adequate financial and accounting controls to produce accurate financial statements on a timely basis and sufficient legal compliance oversight are costly and time-consuming efforts that need to be evaluated frequently. Failure to achieve and maintain effective controls and procedures for financial reporting may result in our inability to provide timely and accurate financial information.

We have on occasion waived or credited our fees for real estate acquisitions and financings for our TIC programs to improve projected investment returns and attract TIC investors. There has also been a trend toward lower fees in some segments of the third-party asset management business, and fees paid for the management of properties in our TIC programs or public non-traded REITs could follow these trends. In order for us to maintain our fee structure in a competitive environment, we must be able to provide clients with investment returns and service that will encourage them to be willing to pay such fees. We cannot assure you that we will be able to maintain our current fee structures. Fee reductions on existing or future new business could have a material adverse impact on our revenue and profitability.

Due to the geographic scope of our operations and various real estate services we provide, we are subject to numerous federal, state and local laws and regulations specific to the services performed. For example, the brokerage of real estate sales and leasing transactions requires us to maintain brokerage licenses in each state in which we operate. If we fail to maintain our licenses or conduct brokerage activities without a license, we may be required to pay fines or return commissions received or have licenses suspended. In addition, because the size and scope of real estate sales transactions have increased significantly during the past several years, both the difficulty of ensuring compliance with the numerous state licensing regimes and the possible loss resulting from non-compliance have increased. Furthermore, the laws and regulations applicable to our business also may change in ways that increase the costs of compliance.

The securities industry in the United States is subject to extensive regulation under both federal and state laws. Broker-dealers are subject to regulations covering all aspects of the securities business. The Securities and Exchange Commission, or SEC, the National Association of Securities Dealers, or the NASD, and other self-regulatory organizations and state securities commissions can censure, fine, issue cease-and-desist orders to, suspend or expel a broker-dealer or any of its officers or employees. The ability to comply with applicable laws and rules is largely dependent on an internal system to ensure compliance, as well as the ability to attract and retain qualified compliance personnel. We could be subject to disciplinary or other actions in the future due to claimed noncompliance with these securities regulations, which could have a material adverse effect on our operations and profitability.

We may experience continued rapid growth in our operations, which may place a significant strain on our management, administrative, operational and financial infrastructure. Our success will depend in part upon the ability of our executive officers to manage growth effectively. Our ability to grow also depends upon our ability to successfully hire, train, supervise and manage new employees, obtain financing for our capital needs, expand our systems effectively, allocate our human resources optimally, maintain clear lines of communication between our transactional and management functions and our finance and accounting functions and manage the pressures on our management and our administrative, operational and financial infrastructure. We also

Our programs are subject to varying degrees of risk that generally arise from the ownership of real estate. For example, the income we are able to generate from management fees is derived from the gross rental income on the properties in our programs. The rental income depends upon the ability of the tenants of our programs’ properties to generate enough income to make their lease payments to us. Changes beyond our control may adversely affect the tenants’ ability to make lease payments or could require them to terminate their leases. Either an inability to make lease payments or a termination of one or more leases could reduce the management fees we receive. These changes include, among others, the following:

Due to these changes, among others, tenants and lease guarantors, if any, may be unable to make their lease payments.

Defaults by tenants or the failure of any guarantors of tenants’ guarantor to fulfill their obligations, or other early termination of a lease could, depending upon the size of the leased premises and our ability as property manager to successfully find a substitute tenant, have a material adverse effect on our revenue.

These conflicts include but are not limited to the following:

We cannot assure you that one or more of these conflicts will not result in claims by investors in our programs, which could have a material adverse effect on our results of operations and financial condition.

We believe there are only limited barriers to entry in our business. Current and future competitors may have more resources than we have. In transaction services, we face competition with other real estate firms in the acquisition and disposition of properties, and we also compete with other sponsors of real estate investor programs for investors to provide the capital to allow us to make these investments. We also compete against other real estate companies who may be chosen by a broker-dealer as an investment platform instead of us. In management services, we compete with other property managers for viable tenants for our programs’ properties. We face competition from institutions that provide or arrange for other types of financing through private or public offerings of equity or debt and from traditional bank financings. The number and activities of our competitors could have a material adverse effect on our financial condition and results of operations.

On September 16, 2004, Triple Net Properties learned that the SEC Los Angeles Enforcement Division, or the SEC Staff, is conducting an investigation referred to as “In the matter of Triple Net Properties, LLC.” The SEC requested information from Triple Net Properties relating to disclosure in public and private securities offerings sponsored by Triple Net Properties and its affiliates prior to 2005, or the Triple Net securities offerings. The SEC Staff also requested information from Capital Corp., the dealer-manager for the Triple Net securities offerings. The SEC Staff requested financial and other information regarding the Triple Net securities offerings and the disclosures included in the related offering documents from each of Triple Net Properties and Capital Corp.

Triple Net Properties and Capital Corp. are engaged in settlement negotiations with the SEC staff regarding this matter. Based on these negotiations, we believe that the conclusion to this matter will not result in a material adverse affect to our results of operations, financial condition or ability to conduct our business. The settlement negotiations are continuing, and any settlement negotiated with the SEC Staff must be approved by the Commission. Since the matter is not concluded, it remains subject to the risk that the SEC may seek additional remedies, including substantial fines and injunctive relief that, if obtained, could materially adversely affect our ability to conduct our program offerings. Additionally, any resolution of this matter that reflects negatively on our reputation could materially and adversely affect the willingness of our existing programs to continue to use our management services and of potential investors to invest in our future programs. The matters that are the subject of this investigation could also give rise to claims against us by investors in our programs. At this time, we cannot assess how or when the outcome of the matter will be ultimately determined.

The securities of our TIC programs are offered and sold in reliance upon a private placement offering exemption from registration under the Securities Act and applicable state securities laws. If we or our dealer-manager failed to comply with the requirements of the relevant exemption and an offering were in process, we may have to terminate the offering. If an offering was completed, the investors may have the right, if they so desired, to rescind their purchase of the securities. A rescission offer could also be required under applicable state securities laws and regulations in states where any securities were offered without registration or qualification pursuant to a private offering or other exemption. If a number of holders sought rescission at one time, the applicable program would be required to make significant payments which could adversely affect its business and as a result, the fees generated by us from such program. If one of our programs was forced to terminate an offering before it was completed or to make a rescission offer, our reputation would also likely be significantly harmed. Any reduction in fees as a result of a rescission offer or a loss of reputation would have a material adverse effect on our business and results of operations.

Our business is negatively impacted by periods of economic slowdown or recession, rising interest rates and declining demand for real estate. These economic conditions could have a number of effects, which could have a material adverse impact on certain segments of our business, including a decline in:

The real estate market tends to be cyclical and related to the condition of the economy and to the perceptions of investors and users as to the economic outlook. A downturn in the economy or the real estate market could have a material adverse effect on our business, financial condition or results of operations.

In the last two years, interest rates in the United States have generally increased. If interest rates were to continue to rise, our financing costs would likely rise and our net yield to investors may decline. This downward pressure on net yields to investors in our programs could compare poorly to rising yields on alternative investments. Additionally, as interest rates rise, valuations of commercial real estate properties typically decline. A decrease in both the attractiveness of our programs and the value of assets held by these programs could cause a decrease in both transaction and management services revenues, which would have an adverse effect on our results of operations.

The commercial real estate industry is highly competitive on an international, national and regional level. Our programs face competition from REITs, institutional pension plans, and other public and private real estate companies and private real estate investors for the acquisition of properties and for raising capital to create programs to make these acquisitions. Competition may prevent our programs from acquiring desirable properties or increase the price they must pay for real estate. In addition, the number of entities and the amount of funds competing for suitable investment properties may increase, resulting in increased demand and increased prices paid for these properties. If our programs pay higher prices for properties, investors may experience a lower return on investment and be less inclined to invest in our next program which may decrease our profitability. Increased competition for properties may also preclude our programs from acquiring properties that would generate the most attractive returns to investors or may reduce the number of properties our programs could acquire, which could have an adverse effect on our business.

Because real estate investments are relatively illiquid, our ability to promptly facilitate a sale of one or more properties or investments in our programs in response to changing economic, financial and investment conditions may be limited. In particular, these risks could arise from weakness in the market for a property, changes in the financial condition or prospects of prospective purchasers, changes in regional, national or international economic conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located. Fees from the disposition of properties would be materially affected if we were unable to facilitate a significant number of property dispositions for our programs.

We carry commercial general liability, fire and extended coverage insurance with respect to our programs’ properties. We obtain coverage that has policy specifications and insured limits that we believe are customarily carried for similar properties. We cannot assure you, however, that particular risks that are currently insurable will continue to be insurable on an economic basis or that current levels of coverage will continue to be available. In addition, we generally do not obtain insurance against certain risks, such as floods.

Should a property sustain damage or an occupant sustain an injury, we may incur losses due to insurance deductibles, co-payments on insured losses or uninsured losses. In the event of a substantial property loss or personal injury, the insurance coverage may not be sufficient to pay the full damages. In the event of an uninsured loss, we could lose some or all of our capital investment, cash flow and anticipated profits related to one or more properties. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it not feasible to use insurance proceeds to replace a property after it has been damaged or destroyed. Under these circumstances, the insurance proceeds we receive, if any, might not be adequate to restore our economic position with respect to the property. In the event of a significant loss at one or more of the properties in our programs, the remaining insurance under the applicable policy, if any, could be insufficient to adequately insure the remaining properties. In this event, securing additional insurance, if possible, could be significantly more expensive than the current policy. A loss at any of these properties or an increase in premium as a result of a loss could decrease the income from or value of properties under management in our programs, which in turn would reduce the fees we receive from these programs. Any decrease or loss in fees could have a material adverse effect on our financial condition or results of operations.

Federal, state and local laws and regulations impose various environmental zoning restrictions, use controls, and disclosure obligations which impact the management, development, use, and/or sale of real

In addition, in our role as a property manager, we could incur liability under environmental laws for the investigation or remediation of hazardous or toxic substances or wastes at properties we currently or formerly managed, or at off-site locations where wastes from such properties were disposed. This liability can be imposed without regard for the lawfulness of the original disposal activity, or our knowledge of, or fault for, the release or contamination. Further, liability under some of these laws may be joint and several, meaning that one liable party could be held responsible for all costs related to a contaminated site. We could also be held liable for property damage or personal injury claims alleged to result from environmental contamination, or from asbestos-containing materials, mold or lead-based paint present at the properties we manage. Similarly, we are obliged, under the debt financing arrangements on the properties owned by our TIC programs, to provide an indemnity to the lenders for environmental liabilities and to remediate any environmental problems that might arise. Insurance for these matters may not be available.

Certain requirements governing the removal or encapsulation of asbestos-containing materials, as well as recently enacted local ordinances obligating property managers to inspect for and remove lead-based paint in certain buildings, could increase our costs of legal compliance and potentially subject us to violations or claims. Further, mold contamination has been linked to a number of health problems, which has resulted in litigation from tenants seeking various remedies. There can be no assurance that our programs will not be subject to litigation relating to asbestos mold contamination or that any claims would be covered by our insurance policy.

If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired. If our finance and accounting personnel insufficiently support us in fulfilling these public-company compliance obligations, or if we are unable to hire adequate finance and accounting personnel, we could face significant legal liability, which could have a material adverse effect on our financial condition and results of

In addition, we also expect that being a public company subject to these rules and regulations will require us to modify our director and officer liability insurance, and we may be required to accept reduced policy limits or incur substantially higher costs to obtain the same or similar coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers.

As a public company, we will be required to evaluate, document and test our internal control over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, or Section 404. Beginning with our Annual Report on Form 10-K for the year ending December 31, 2008, Section 404 requires us to evaluate and report on our internal control over financial reporting and have our independent registered public accountants attest to our evaluation. Such report will contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of the year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weakness in our internal control over financial reporting identified by management. The report will also contain a statement that our independent registered public accountants have issued an attestation report on management’s assessment of internal controls. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. In addition, if we identify one or more significant deficiencies or material weaknesses in our internal control over financial reporting, and if we cannot remediate in time to meet a deadline for compliance with Section 404, we will be unable to assert that such internal controls are effective.

We have prepared an internal plan of action for compliance with Section 404 and for strengthening and testing our system of internal control to provide the basis for our report, but we cannot assure you that this plan of action will be sufficient to meet the rigorous requirements of Section 404. In addition, our independent registered public accountants may issue an adverse opinion regarding management’s assessment of Section 404 compliance. It is also possible that our independent registered public accountants may not be in a position to adequately assess our compliance with Section 404 on a timely basis, which could lead to our inability to comply with our reporting requirements under the Securities Exchange Act of 1934, as amended. If we are unable to conclude that we have effective internal control over financial reporting or our independent registered public accountants are unable to provide us with an unqualified report, investors could lose confidence in our reported financial information and our company, which could result in a decline in the market price of our common stock, and cause us to fail to meet our reporting obligations in the future, which in turn could impact our ability to raise additional financing if needed in the future. Our failure to comply with Section 404 or our reporting requirements could also subject us to a variety of administrative sanctions, including the suspension or delisting of our common stock from any exchange on which our common stock may become listed and the inability of registered broker-dealers to make a market in our common stock.

There has not been a public market for our common stock. An active trading market for our common stock may not develop following this offering. You may not be able to sell your shares quickly or at the market price if trading in our common stock is not active. The initial public offering price for the shares may not be indicative of prices that will prevail in the trading market.

Even if an active trading market for our common stock develops, the market price for our common stock may be highly volatile and could be subject to wide fluctuations. The stock market in general often experiences substantial volatility that is seemingly unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. As a result of this volatility, investors may not be able to sell their common stock at or above the initial public offering price. The price for our common stock will be determined in the marketplace and may be influenced by many factors, including:

These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending or settling the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock or if our operating results do not meet their expectations, our stock price could decline.

As of December 31, 2006, Anthony W. Thompson, our Chairman of the Board and largest stockholder, beneficially owned or controlled 25.9% of the outstanding shares of our common stock. In addition, Scott D. Peters, Andrea R. Biller, Francene LaPoint and Jeffrey T. Hanson, our key executive officers, beneficially owned or controlled in the aggregate approximately 2.0% of the outstanding shares of our common stock. As a result, Mr. Thompson and our other key executive officers will be able to exercise significant influence over the election of our directors, and therefore, our management and policies, through their collective voting power and may vote their shares of our common stock in ways with which you may disagree or which may be adverse to your interests as a stockholder. This voting concentration may discourage, delay or prevent a change in control or acquisition of our company, even one that you believe is beneficial to you as a stockholder. This voting concentration may also adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

We may in the future issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of our present stockholders and purchasers of common stock offered hereby. We are currently authorized to issue 95,000,000 shares of common stock and 5,000,000 shares of preferred stock with preferences and rights as determined by our board of directors. As of December 31, 2006, 42,366,407 shares of common stock were issued and outstanding. Pursuant to our 2006 Long-term Incentive Plan, we reserved 2,339,200 shares of our common stock for issuance as restricted stock, stock options and/or other equity based grants to employees and directors. Of the reserved shares, 1,436,200 may be awarded as restricted stock and 903,000 may be awarded as stock options and/or other equity based grants. As of March 31, 2007, we have issued 615,000 shares of common stock, as restricted stock, to our initial four independent directors and certain executive officers and employees. Additionally, we have granted to certain executive officers and employees options to purchase up to 903,000 of our shares of our common stock with an option exercise price equal to $10.00 per share.

The potential issuance of additional shares of common stock may create downward pressure on the trading price of our common stock. We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with the hiring of personnel, future acquisitions, future private placements of our securities for capital raising purposes, or for other business purposes.

As of December 31, 2006, Anthony W. Thompson, our Chairman of the Board and largest stockholder, beneficially owned or controlled 25.9% of the outstanding shares of our common stock. In addition, Scott D. Peters, Andrea R. Biller, Francene LaPoint and Jeffrey T. Hanson, our key executive officers, beneficially owned or controlled in the aggregate approximately 2.0% of the outstanding shares of our common stock. We initially reserved 2,339,200 shares of our common stock for issuance to our officers, non-employee directors, employees, and consultants in the form of restricted stock or options to purchase shares of our common stock pursuant to our 2006 Long-term Incentive Plan. Of the reserved shares, we currently have 821,200 shares of common stock, as restricted stock, available for future issuance. Future sales of substantial amounts of our common stock, or the perception that sales could occur, could have a material adverse effect on the price of our common stock.

There can be no assurance that the anticipated cash flow from operations will be sufficient to meet all of our cash requirements. We intend to continue to make investments to support our business growth and may required additional funds to respond to business challenges. Accordingly, we may need to complete additional equity or debt financings to secure additional funds. We cannot assure you that further equity or debt financing will be available on acceptable terms, if at all. In addition, the terms of any debt financing may restrict our financial and operating flexibility. If we raise additional funds through further issuances of equity or debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders or our common stock, including share of common stock sold in this offering. Our inability to obtain any needed financing, or the terms on which it may be available, could have a material adverse effect on our business.

Although our management has recommended to our board of directors that it declare quarterly dividends, future cash dividends will depend upon our results of operations, financial condition, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Also, there can be no assurance we will pay dividends even if the necessary financial conditions are met and sufficient cash is available for distribution.

The existence of some provisions under Delaware law, our certificate of incorporation and bylaws could delay or prevent a change in control, which could adversely affect the price of our common stock. Delaware law imposes restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock.

We are including the following discussion to inform you of some of the risks and uncertainties that can affect our company. Various statements contained in this prospectus, including those that express a belief, expectation, or intention, as well as those that are not statements of historical fact, are forward-looking statements. We use words such as “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should” and similar expressions to identify forward-looking statements. The forward-looking statements in this prospectus speak only as of the date of this prospectus; we disclaim any obligation to update these statements unless required by applicable securities laws, and we caution you not to rely on them unduly. You are further cautioned that any forward-looking statements are not guarantees of future performance. Our beliefs, expectations and intentions can change as a result of many possible events or factors, not all of which are known to us or are within our control, and a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such factors, risks and uncertainties include, but are not limited to:

You should carefully consider these and other factors, risks and uncertainties before you make an investment decision with respect to our common stock.

The proceeds from the sale of each of the selling stockholder’s common stock will belong to that selling stockholder. We will not receive any proceeds from such sales.

For the quarters ended December 31, 2006 and March 31, 2007, our board of directors declared dividends per share of our common stock of $0.09 and $0.045, respectively. We intend to pay a $0.09 quarterly dividend for the remainder of 2007. The determination to pay the initial dividend and regular quarterly cash dividends to our stockholders is at the discretion of our board of directors and will depend upon our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant. The percentage of our dividends that exceeds our current accumulated earnings and profits may vary substantially from year to year. For a discussion of the tax treatment of dividends to our non-United States stockholders, see “U.S. Federal Tax Considerations for Non-U.S. Stockholders.” We cannot assure you of the amount of any dividends that may be declared in the future, if at all. If we are unable to successfully execute our business strategy, we may not have cash available to make distributions.

The following sets forth the selected historical consolidated financial data for NNN Realty Advisors, Inc. and its subsidiaries for the years ended, and as of, December 31, 2006, 2005, 2004, 2003 and 2002. The selected historical consolidated financial data for the years ended December 31, 2006, 2005 and 2004 and as of December 31, 2006 and 2005 have been derived from the audited consolidated financial statements included elsewhere in this prospectus. The selected historical consolidated financial data for the years ended December 31, 2003 and 2002 and as of December 31, 2004, 2003 and 2002 have been derived from the audited consolidated financial statements not included in this offering memorandum.

The following selected historical consolidated financial data reflect our performance for the periods listed and may not be indicative of our future financial performance. This information should be read in conjunction with our audited annual consolidated financial statements and related notes included elsewhere in this prospectus and other financial information appearing under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Condensed Combined Financial Statements of NNN Realty Advisors, Inc.”

The following discussion and analysis of the financial condition and results of operations should be read together with its financial statements and the related notes included elsewhere in this prospectus and other financial information appearing under “Selected Consolidated Financial Data” and “Unaudited Pro Forma Condensed Combined Financial Statements” The following discussion reflects our performance for the periods listed and may not be indicative of our future financial performance. In addition, some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties and assumptions. Actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis as a result of many factors, including those discussed in the “Risk Factors” section of this offering memorandum.

We are a full-service commercial real estate asset management and services firm. We sponsor real estate investment programs to provide investors with the opportunity to engage in tax-deferred exchanges of real property and to invest in other real estate investment vehicles. We raise capital for these programs through an extensive network of broker-dealer relationships. We also structure, acquire, manage and disposes of real estate for these programs, earning fees for each of these services.

We were organized in September 2006 to acquire each of Triple Net Properties, LLC, Triple Net Properties Realty, Inc., or Realty, and NNN Capital Corp., or Capital Corp., and to bring the businesses conducted by those companies under one corporate umbrella. On November 16, 2006, we completed a $160.0 million private placement of common stock to institutional investors and certain accredited investors with 16 million shares of our common stock sold in the offering at $10.00 per share.

Certain accounting policies are considered to be critical accounting policies, as they require management to make assumptions about matters that are highly uncertain at the time the estimate is made and changes in the accounting estimate are reasonably likely to occur from period to period. We believe that the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Transaction Services Revenue — We earn fees associated with structuring, negotiating and closing acquisitions of real estate properties to third-party investors. Such fees include acquisition and disposition fees. Acquisition and disposition fees are earned and recognized when the acquisition or disposition is closed. Organizational Marketing Expense Allowance, or OMEA, fees are earned and recognized from gross proceeds of equity raised in connection with these offerings and are used to pay formation costs, as well as organizational and marketing costs. We are entitled to loan advisory fees for arranging financing related to properties under management. These fees are collected and recognized upon the closing of such loans.

Management Services Revenue — We earn asset and property management fees primarily for managing the operations of real estate properties owned by the real estate programs, REITs and limited liability companies that invest in real estate or value funds we sponsor. Such fees are based on pre-established formulas and contractual arrangements and are earned as such services are performed. We are entitled to receive reimbursement for expenses associated with managing the properties; these expenses include salaries for property managers and other personnel providing services to the property. Each property is charged an accounting fee for costs associated with preparing financial reports. We are entitled to leasing commissions when a new tenant is secured and upon tenant renewals. Leasing commissions are recognized upon execution of leases.

Dealer-Manager Services Revenue — We facilitate capital raising transactions for our programs through Capital Corp. We act as a dealer-manager exclusively for our programs and do not provide securities services to any third party. Our wholesale dealer-manager services are comprised of raising capital for our programs through our selling broker-dealer relationships. Most of the commissions, fees and allowances earned for our dealer-manager services are passed on to the selling broker-dealers as commissions and to cover offering expenses, and we retain the balance.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, with the assistance of independent valuation specialists, the purchase price of acquired properties is allocated to tangible and identified intangible assets and liabilities based on their respective fair values. The allocation to tangible assets (building and land) is based upon determination of the value of the property as if it were vacant using discounted cash flow models similar to those used by independent appraisers. Factors considered include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. Additionally, the purchase price of the applicable property is allocated to the above or below market value of in-place leases and the value of in-place leases and related tenant relationships.

The value allocable to the above or below market component of the acquired in-place leases is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) our estimate of the amounts that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in identified intangible assets and below market lease values are included in identified intangible liabilities-net in the accompanying consolidated financial statements and are amortized to rental revenue over the weighted-average remaining term of the acquired leases with each property.

The total amount of identified intangible assets acquired is further allocated to in-place lease costs and the value of tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered in allocating these values include the nature and extent of the credit quality and expectations of lease renewals, among other factors. These allocations are subject to change within one year of the date of purchase based on information related to one or more events identified at the date of purchase that confirm the value of an asset or liability of an acquired property.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets are periodically evaluated for potential impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. In the event that periodic assessments reflect that the carrying amount of the asset exceeds the sum of the undiscounted cash flows (excluding interest) that are expected to result from the use and eventual disposition of the asset, we would recognize an impairment loss to the extent the carrying amount exceeded the fair value of the property. We estimate the fair value using available market information or other industry valuation techniques such as present value calculations. No impairment losses were recognized for the years ended December 31, 2006 and 2005. For the year ended December 31, 2004, we recognized an impairment loss related to our land held for sale of $300,000. This property was sold in 2005.

We recognize goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). Under SFAS No. 142, goodwill is recorded at its carrying value and is tested for impairment at least annually or more frequently if impairment indicators exist at a level of reporting referred to as a reporting unit. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. If a potential impairment exists, an impairment loss is recognized to the extent the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and

In July 2006, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN No. 48”), which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return, including a decision whether to file or not to file in a particular jurisdiction. Additionally, FIN No. 48 provides guidance on the derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements for uncertain tax positions. The accounting provisions of FIN No. 48 are effective for reporting periods beginning after December 15, 2006. There may be an impact from the adoption of FIN No. 48 related to the acquisition of Capital Corp. on December 14, 2006 and we are currently in the process of evaluating this impact. Other than as it relates to the acquisition of Capital Corp., we believe that the adoption of FIN No. 48 will not have a significant impact on our consolidated financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB No. 108”). SAB No. 108 provides guidance on the consideration of effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The SEC staff believes registrants must quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. SAB No. 108 is effective for the first annual period ending after November 15, 2006 with early application encouraged. The adoption of SAB No. 108 on January 1, 2007 did not have a significant effect on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective as of the beginning of our 2008 fiscal year. We are currently assessing the impact of the adoption of SFAS No. 157 and its impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits companies to measure many financial instruments and certain other items at fair value at specified election dates. SFAS No. 159 will be effective beginning January 1, 2008. We are currently assessing the impact of the adoption of SFAS No. 159 and its impact on our consolidated financial statements.

We divide our services into three primary business segments, transaction services, management services and dealer-manager services.

The following summarizes comparative results of operations for the periods indicated.

The $849,000, or 1.5%, increase in transaction related fees in 2006, was primarily due to increases of $2.9 million, or 7.5%, in real estate acquisition and disposition fees and $3.9 million in other revenue primarily due to $2.8 million in incentive fees in 2006 paid to us at disposition. These increases were partially offset by decreases of $3.7 million in OMEA fees and $2.0 million in loan advisory fees associated with arranging financing for the properties acquired.

The net increase in real estate acquisition and disposition fees for the year ended December 31, 2006 was primarily due to a $6.1 million, or 63.5%, increase in fees realized from the sales of properties, with $15.7 million in fees realized from the disposition of 22 properties, including $5.3 million in fees earned as a result of the liquidation of G REIT for the year ended December 31, 2006, compared to $9.6 million from the disposition of 28 properties for the same period in 2005. Included in this increase was $686,000 in net fees earned as a result of the acquisition of Realty (from the acquisition date, November 16, 2006 through December 31, 2006). Partially offsetting the increase in disposition fees was a reduction of $410,000 as a result of amortizing the identified intangible contract rights associated with the acquisition of Realty. Fees on dispositions as a percentage of aggregate sales price (excluding one property sold in 2006 and five properties sold in 2005 for which we waived the entire amount of the disposition fee) was 1.9% for the year ended December 31, 2006, compared to 1.6% for the same period in 2005.

Acquisition fees decreased $3.2 million, or 11.2%, for the year ended December 31, 2006, compared to the same period in 2005. During 2006, we acquired 45 properties (including five which were consolidated as of December 31, 2006) on behalf of our sponsored programs for an approximate aggregate total of $1.4 billion, compared to 40 properties for an approximate aggregate total of $1.6 billion during 2005. The decrease in

OMEA fees decreased $3.7 million, or 32.5%, to $7.7 million for the year ended December 31, 2006, compared to $11.4 million for the same period in 2005. The decrease in these fees was primarily due to $3.4 million in fees waived for various investors in a number of other programs and $774,000 in non-recurring credits granted to investors between July and September 2006, partially offset by $380,000 as a result of additional capital raised of $15.3 million in 2006.

Loan advisory fees decreased $2.0 million, or 31.1%, to $4.5 million for the year ended December 31, 2006, compared to $6.5 million for the same period in 2005, primarily due to a decrease in the aggregate total loan balance of properties acquired on behalf of our programs which resulted in an approximate $1.5 million decrease in loan advisory fees and $547,000 in credits granted to investors between July and September 2006 in two of our programs.

Transaction services revenue increased $849,000, or 1.5%, to $56.9 million, or 59.1% as a percentage of total services revenue for the year ended December 31, 2006, compared to $56.0 million, or 64.3% as a percentage of total services revenue for the same period in 2005. The increase in transaction services revenue was primarily due to an increase in the fees earned from the disposition of properties.

The $7.6 million, or 24.3%, increase in management services was primarily due to an increase in property and asset management fees of $6.6 million, or 24.6%, to $33.3 million for 2006, compared to $26.7 million for 2005. This increase was primarily the result of the growth in recurring revenue, as total square footage of assets under management increased to an average of approximately 26.2 million for the year ended December 31, 2006, compared to approximately 22.9 million for the same period in 2005. Property and asset management fees per average square foot was $1.27 for the year ended December 31, 2006, compared to $1.17 for the same period in 2005.

Management services revenue also increased to 40.1% as a percentage of total services revenue for the year ended December 31, 2006, compared to 35.7% as a percentage of total services revenue for the same period in 2005.

As a result of the completion of the acquisition of Capital Corp. on December 14, 2006, we earned $722,000 in dealer-manager revenue from the acquisition date through December 31, 2006.

Rental Revenue.  Rental revenue increased to $9.2 million for the year ended December 31, 2006, compared to $3.8 million in the same period in 2005 primarily due to the acquisition of a property in June 2005 and rents received under sub-leases with third parties which commenced in the second half of 2005.

Interest Income.  The $847,000, or 42.8%, increase in interest income was primarily due to a $645,000 increase in interest on advances for deposits on properties acquired and $202,000 in interest on advances to properties.

Total expense increased $23.1 million, or 31.2%, to $97.3 million for the year ended December 31, 2006, compared to $74.2 million for the same period in 2005. Total services expense of $76.5 million in 2006 increased as a percentage of total services revenue to 79.5%, compared to 65.4% of total services revenue for the year ended December 31, 2005. During 2006, we incurred approximately $12.5 million in non-recurring items and one time expenses primarily due to the completion of an offering pursuant to Rule 144A of the Securities Act, or the 144A offering, and our formation transactions, compared to $5.0 million in non-recurring items in 2005 due to expenses associated with the SEC investigation. These non-recurring items primarily consisted of $4.0 million in additional credits granted to investors, $1.2 million in documentary and transfer taxes for one of our programs, $978,000 in other non-recurring costs, $2.7 million in costs associated with the early redemption of the $27.5 million participating loan credit agreement with Wachovia Bank and $544,000 associated with the redemption of Triple Net Properties’ redeemable preferred membership units. Additionally, in September 2006, we awarded a bonus of $2.1 million to our Chief Executive Officer, which was payable in 283,165 membership units of Triple Net Properties (converted to 202,368 shares of our common stock), or $1.3 million, and cash of $854,000. We also paid a sign-on bonus of $750,000 and incurred $333,000 in non cash stock-based compensation expense related to one of our executives in 2006. Excluding these non-recurring items, total services expense in 2006 as a percentage of total services revenue was approximately 65.0%, compared to approximately 60.0% of total services revenue for the same period in 2005.

Transaction related expense increased $15.9 million, or 58.4%, for the year ended December 31, 2006, compared to the same period in 2005 due to an increase of $11.5 million in compensation related costs and $4.4 million in operating and administrative expense.

Compensation costs increased $11.5 million, or 90.2%, to $24.3 million for the year ended December 31, 2006, compared to $12.8 million for the same period in 2005 and included an increase of $6.1 million in salary related costs, $3.0 million in bonuses and $1.8 million in stock compensation expense. The increase in salary related costs included an additional $552,000 as a direct result of hiring additional personnel in preparing for strategic initiatives for 2006 and 2007, including NNN Apartment REIT, Inc. and NNN Healthcare/Office REIT, Inc. as well as our Strategic Office Fund I, L.P., with an overall increase of approximately 45.0% in full-time equivalent employees. As of December 31, 2006, there were approximately 202 full-time equivalent employees associated with transaction related services, compared to 141 as of December 31, 2005.

Operating and administrative expense increased by $4.4 million, or 30.4%, to $19.0 million for the year ended December 31, 2006, compared to $14.5 million for the same period in 2005, primarily due to $4.0 million in non-recurring credits granted to investors in the fourth quarter of 2006, $1.6 million in documentary and transfer taxes and closing and other transaction related costs that we agreed to pay for programs we sponsored, $1.4 million of which was related to one of our programs in the last half of 2006, $720,000 in incentive fees associated with the disposition of properties, $624,000 in rent expense due to leasing additional space in our corporate headquarters building and $1.3 million in other transaction related costs due to our overall growth as we prepare our strategic platform related to our new programs such as NNN Apartment REIT and NNN Healthcare/Office REIT, as well as our Strategic Office Fund I, L.P. These increases were partially offset by a decrease of $4.0 million, or 36.8%, in OMEA related costs. The OMEA fees earned from the offerings are used to pay legal and formation costs as well as marketing related costs associated with these programs.

Management services related expense increased $3.0 million, or 10.3%, to $32.7 million for the year ended December 31, 2006, compared to $29.6 million for the same period in 2005, primarily due to an

Compensation costs increased $7.1 million, or 42.3%, to $23.9 million for the year ended December 31, 2006, compared to $16.8 million for the same period in 2005 and included an increase of $3.1 million in salary related costs, $2.0 million in bonus and $1.8 million in stock compensation expense. The increase in salary related costs included an additional $544,000 as a direct result of hiring additional personnel in preparing for strategic initiatives for 2006 and 2007, including NNN Apartment REIT and NNN Healthcare/Office REIT, as well as our Strategic Office Fund I, L.P., with an overall increase of approximately 16.0% in full-time equivalent employees. As of December 31, 2006 there were approximately 216 full-time equivalent employees associated with management related services, compared to 186 as of December 31, 2005.

Operating and administrative expense decreased $4.1 million, or 31.5%, to $8.8 million for the year ended December 31, 2006, compared to $12.9 million for the same period in 2005, primarily due to a $4.0 million decrease in bad debt expense and $427,000 in operating expense, partially offset by an increase of $524,000 in rent expense due to leasing additional space in our corporate headquarters building.

As a result of the completion of the acquisition of Capital Corp. on December 14, 2006, we incurred $559,000 in dealer-manager expense from the acquisition date through December 31, 2006.

Other operating expense increased $3.6 million, or 20.6%, to $20.8 million for the year ended December 31, 2006, compared to $17.3 million for the same period in 2005. The net increase was primarily due to $5.2 million, or 117.5%, in rental related expense attributable to a Colorado property acquired from investors in one of our TIC programs and rental related costs under leases with third parties which commenced in the second half of 2005. Also contributing to the increase was $4.6 million, or 287.1%, in interest expense primarily due to a $2.0 million prepayment penalty associated with the early redemption of the $27.5 million participating loan credit agreement with Wachovia Bank entered into in September 2006 and repaid with the proceeds from our 144A private equity offering as well as $1.0 million in interest on this participating loan, $666,000 for a full year of interest associated with notes payable on the acquired Colorado property, and a $544,000 prepayment penalty for the early redemption of the $6.1 million redeemable preferred liability. These increases were partially offset by a decrease of $4.6 million, or 117.9%, in reserves and other, which consisted of a $2.9 million charge in June 2005 as a result of the reduced valuation of the Colorado property and a reduction of $700,000 in Triple Net Properties’ loss contingency related to the SEC investigation. As of December 31, 2006, $300,000 was accrued by Triple Net Properties and $300,000 was accrued by Capital Corp., compared to $1.0 million accrued by Triple Net Properties as of December 31, 2005. Other decreases in operating expense included $1.1 million in general and administrative costs and $739,000 in depreciation and amortization expense.

Operating income (operating revenue minus operating expense) for the year ended December 31, 2006 of $11.0 million was 10.1% of total revenue, compared to $18.6 million, or 20.1% of total revenue, for the year ended December 31, 2005. The lower year-over-year operating income was a result of non-recurring items and one time expenses that primarily resulted from the completion of our 144A private equity offering and formation transaction.

During 2006, we incurred approximately $15.0 million in non-recurring items and one time expenses that primarily resulted from the completion of our 144A private equity offering and formation transactions, as well as a reduction of disposition fees of $410,000 as a result of amortizing the identified intangible contract rights associated with the acquisition of Realty, compared to $5.0 million in non-recurring items in 2005 due to expenses associated with the SEC investigation. Excluding these non-recurring items, operating income was $26.4 million, an increase of $2.8 million, or 11.8%, in 2006, compared to $23.7 million for the same period in 2005.

The following table reconciles operating income adjusted for non-recurring items to operating income:

During 2006, we acquired four properties to resell to one of our sponsored programs, one of which was resold to a joint venture in 2006 whereby we retained 10% of the ownership interests, and two were placed into our sponsored NNN Healthcare/Office REIT, Inc. in the first quarter 2007. In accordance with SFAS No. 144, for the year ended December 31, 2006, discontinued operations included the net income (loss) of one property and its associated LLC entity resold to a joint venture and three properties and their associated LLC entities classified as held for sale as of December 31, 2006 (See Note 21 — Discontinued Operations of the Notes to Consolidated Financial Statements).

We recognized a tax benefit of $4.2 million for the year ended December 31, 2006. Effective with the close of our 144A private equity offering, Triple Net Properties became our wholly-owned subsidiary, which caused a change in Triple Net Properties’ tax status from a non-taxable partnership to a taxable C corporation. The change in tax status required us to recognize an income tax benefit of $2.9 million for the future tax effects attributable to temporary differences between GAAP basis and tax accounting principles as of the effective date of November 15, 2006.

As a result of the above items, net income decreased $2.0 million to $16.1 million for the year ended December 31, 2006, compared to net income of $18.1 million for the same period in 2005.

The following summarizes comparative results of operations for the periods indicated.

The $12.8 million, or 29.7%, increase in transaction related fees was primarily due to an increase of $9.7 million, or 35.4%, in acquisition fees, an increase of $3.8 million, or 174.7%, in loan advisory fees

The increase in disposition fees of $9.7 million, or 35.4%, was primarily due to an $8.1 million, or 533.2%, increase in disposition fees realized from the sales of properties with $9.6 million in disposition fees realized from the disposition of 28 properties in 2005, compared to $1.5 million realized from the disposition of nine properties in 2004. Disposition fees as a percentage of aggregate sales price (excluding 5 properties sold in 2005 and 1 property sold in 2004 for which we waived the entire amount of the disposition fee) was 1.6% for the year ended December 31, 2005, compared to 1.5% for the same period in 2004.

Also contributing to this increase was $1.6 million in acquisition fees realized from the acquisition of real estate assets primarily due to acquiring properties with greater aggregate acquisition costs in 2005 compared to 2004. During 2005, we acquired 40 properties on behalf of our sponsored programs for an approximate aggregate total of $1.6 billion, compared to 41 properties for an approximate aggregate total of $1.3 billion in 2004. Acquisition fees as a percentage of aggregate acquisition price were 1.8% for the year ended December 31, 2005, compared to 2.0% for same period in 2004.

Transaction services revenue increased $12.8 million, or 29.7%, to $56.0 million during 2005. Transaction services revenue was relatively consistent with 2004 as a percentage of total services revenue (64.3% in 2005 compared to 66.5% in 2004). The increase in transaction revenue was primarily due to an increase in the average purchase price of the properties acquired on behalf of we sponsored programs, which nearly doubled in 2005.

The $9.4 million, or 43.2%, increase in management services was primarily due to an increase of $7.0 million, or 35.5%, in property and asset management fees to $26.8 million for the year ended December 31, 2005, compared to $19.7 million for the same period in 2004. The increase in property management fees was primarily due to an increase in the number of the properties managed in 2005. For the year ended December 31, 2005, an average of 120 properties was managed, with total square footage averaging approximately 22.9 million for properties under management, compared to an average of 94 properties, with total square footage averaging approximately 16.9 million for properties under management, for the year ended December 31, 2004. Property and asset management fees per average square foot were $1.17 for the year ended December 31, 2005 compared to $1.17 for the same period in 2004.

Also contributing to the increase in management services was $973,000 in other fees earned from managing the assets or property and $600,000 in loan refinancings for properties under management.

Management revenue increased $9.4 million, or 43.2%, to $31.1 million for the year ended December 31, 2005, compared to $21.7 million in 2004. Management services revenue in 2005 was relatively consistent with 2004 as a percentage of total services revenue (35.7% in 2005 compared to 33.5% in 2004).

Rental Revenue.  Rental revenue increased to $3.8 million for the year ended December 31, 2005, compared to $0 for the same period in 2004, primarily due to the acquisition of a property and rents received under leases with third parties in the second half of 2005.

Interest Income.  Interest income decreased $330,000, or 14.3%, to $2.0 million for the year ended December 31, 2005, compared to $2.3 million earned for the same period in 2004.

Total services expense increased $10.0 million, or 21.2%, to $57.0 million for the year ended December 31, 2005. Total services expense in 2005 decreased as a percentage of total services revenue to 65.4%, compared to 72.4% of total services revenue for the same period in 2004.

Compensation costs increased $4.3 million, or 51.5%, to $12.8 million for the year ended December 31, 2005 from $8.4 million in for the same period in 2004, primarily due to hiring key executives and additional employees to develop our infrastructure and in preparing for strategic initiatives. As of December 31, 2005, there were approximately 141 full-time equivalent employees associated with transaction related services, compared to 109 at December 31, 2004.

Operating and administrative expense decreased $2.2 million, or 12.9%, to $14.5 million in 2005, compared to $16.7 million in 2004, primarily due to $2.2 million in costs associated with a program that was terminated in 2004.

Compensation costs increased $5.7 million, or 51.5%, to $16.8 million for the year ended December 31, 2005 from $11.1 million for the same period in 2004, primarily due to hiring additional employees to develop our infrastructure and in preparing for strategic initiatives. As of December 31, 2005, there were approximately 186 full-time equivalent employees associated with management related services, compared to 144 at December 31, 2004.

Operating and administrative expense increased $2.1 million, or 19.1%, to $12.9 million for the year ended December 31, 2005, compared to $10.8 million for the same period in 2004, primarily due to write-offs of uncollectible advances to seven properties.

The increase in other operating expense of $13.2 million, or 321.3%, was primarily due to costs associated with the SEC investigation, including legal and other professional fees, which increased $3.4 million, or 578.8%, to $4.0 million for the year ended December 31, 2005, compared to $592,000 for the same period in 2004. Also contributing to the increase was a $1.0 million loss contingency accrued pending the outcome of the SEC investigation, a $2.9 million valuation charge associated with a Colorado property acquired from investors in one of our TIC programs in 2005 and $4.5 million in rental related expense.

Depreciation and amortization expense increased $1.5 million, or 118.7%, to $2.8 million in 2005, compared to $1.3 million in 2004, primarily due to a change in the estimated life of computer equipment to more accurately reflect the assets’ service life of 3 years from 5 years.

Operating income for the year ended December 31, 2005 of $18.6 million was 20.1% of total revenue, compared to $16.1 million, or 24.0% of total revenue, for the year ended December 31, 2004. The increase in operating income was a result of an increase in volume of activity, the average purchase price of the properties acquired on behalf of our sponsored programs and a reduction in services expense as a percentage of services revenue. The decline in operating income as a percentage of revenue was primarily attributable to costs associated with the SEC investigation and a valuation charge associated with a property acquired from investors in 2005.

As a result of the above items, net income increased $1.9 million, or 11.6%, to $18.1 million for the year ended December 31, 2005, compared to $16.2 million for the same period in 2004.

We seek to create and maintain a capital structure that allows for financial flexibility and diversification of capital resources. Primary sources of liquidity to fund distributions are from retained earnings and borrowings under a line of credit.

Primary uses of cash are to fund deposits for the acquisitions of properties on behalf of our investors and to fund distributions to our stockholders.

We believe that we will have sufficient capital resources to satisfy our liquidity needs over the next twelve-month period. We expect to meet our short-term liquidity needs, which may include principal repayments of debt obligations, capital expenditures and distributions to stockholders, through retained earnings and borrowings under our $25.0 million line of credit with LaSalle Bank, N.A.

In September 2006, we entered into a $10.0 million revolving line of credit with LaSalle Bank, N.A. to replace our then existing $8.5 million revolving line of credit with Bank of America, N.A. This line of credit consists of $7.5 million for use in property acquisitions and $2.5 million for general corporate purposes and bears interest at either prime rate plus 0.50% or three-month LIBOR plus 3.25%, at our option, on each drawdown, and matures in March 2008. On September 15, 2006, we repaid this LaSalle line of credit in full with proceeds from our Wachovia loan described below.

In September 2006, we entered into a $27.5 million participating loan credit agreement with Wachovia Bank, N.A. The facility’s fixed interest was 6.0% per year plus a contingent interest equal to 24.9% of our adjusted net income for each period, less any amount of fixed interest paid in such period, with a maturity date in April 2016. All amounts outstanding under this facility were repaid in full in November 2006 with the proceeds from our 144A private equity offering.

In November 2006, we completed a 144A private equity offering in which we raised approximately $146.0 million in net proceeds. We used $31.2 million of these proceeds to repay in full all amounts outstanding under our participating loan credit agreement with Wachovia Bank N.A. and to fund certain cash costs in connection with our formation transactions. We are applying the remaining proceeds to fund:

In February 2007, we entered into a $25.0 million revolving line of credit with LaSalle Bank, N.A. This line of credit consists of $10.0 million for use in property acquisitions and $15.0 million for general corporate purposes and bears interest at either prime rate or three-month LIBOR plus 1.50%, at our option, on each drawdown, and matures in February 2010. As of March 31, 2007, there were no amounts outstanding under this facility.

We expect to meet our long-term liquidity requirements, which may include investments in various real estate investor programs and institutional funds, through retained cash flow, borrowings under our line of credit, additional long-term secured and unsecured borrowings and proceeds from the potential issuance of debt or equity securities.

On September 16, 2004, Triple Net Properties learned that the SEC Los Angeles Enforcement Division, or the SEC Staff, is conducting an investigation referred to as “In the matter of Triple Net Properties, LLC.” The SEC staff requested information from Triple Net Properties relating to disclosure in public and private securities offerings sponsored by Triple Net Properties and its affiliates prior to 2005, or the Triple Net Properties securities offerings. The SEC also requested information from Capital Corp., the dealer-manager for the Triple Net Properties securities offerings. The SEC requested financial and other information regarding the Triple Net Properties securities offerings and the disclosures included in the related offering documents from each of Triple Net Properties and Capital Corp. Triple Net Properties and Capital Corp. believe they have cooperated fully with the SEC Staff’s investigation.

Based on these negotiations, management believes that the conclusion to this matter will not result in a material adverse affect to our results of operations, financial condition or ability to conduct our business, and management has accrued a loss contingency of $600,000 at December 31, 2006 on behalf of Triple Net Properties and Capital Corp. on a consolidated basis, compared to $1.0 million accrued by Triple Net Properties for the same period in 2005.

To the extent that we pay the SEC an amount in excess of $1.0 million in connection with any settlement or other resolution of this matter, Anthony W. Thompson, our founder and Chairman, has agreed to forfeit to us up to 1,210,000 shares of our common stock. In connection with this arrangement, we have entered into an escrow agreement with Mr. Thompson and an independent escrow agent, pursuant to which the escrow agent holds these 1,210,000 shares of our common stock that are otherwise issuable to Mr. Thompson in connection with our formation transactions to secure Mr. Thompson’s obligations to us. Mr. Thompson’s liability under this arrangement will not exceed the value of the shares in the escrow.

Certain non-recurring credits were granted to investors in some of our programs, which reduced revenue by $2.5 million in the third quarter of 2006. In October 2006, certain non-recurring credits were also granted to investors in some of our TIC programs, which resulted in an expense of $3.6 million in the fourth quarter of 2006. Our offering materials for our TIC programs generally disclose the possibility that we might offer waivers and credits for specific types of fees on a selective basis to some, but not all, TIC investors, but they have not disclosed all of the categories of fees for which we have actually provided credits. As a result, investors in these programs who did not receive the waivers or credits could bring claims against us.

Although Realty was required to have real estate licenses in all of the states in which it acted as a broker for our programs and received real estate commissions, Realty did not hold a license in certain of those states when it earned fees for those services. In addition, almost all of Triple Net Properties’ revenue was based on an arrangement with Realty to share fees from our programs. Triple Net Properties did not hold a real estate license in any state, although most states in which properties of our programs were located may have required Triple Net Properties to hold a license in order to share fees. As a result, we may be subject to penalties, such as fines (which could be a multiple of the amount received), restitution payments and termination of management agreements, and to the suspension or revocation of Realty’s real estate broker licenses. To the extent that we incur any liability arising from the failure to comply with real estate broker licensing requirements in certain states, Anthony W. Thompson, Louis J. Rogers and Jeffrey T. Hanson have agreed to forfeit to us up to an aggregate of 4,686,500 shares of our common stock. In addition, Mr. Thompson has agreed to indemnify us, to the extent the liability incurred by us for such matters exceeds the deemed $46,865,000 value of these shares, up to an additional $9,435,000 in cash. The above indemnifications expire on November 16, 2009.

The following table summarizes contractual obligations as of December 31, 2006 and the effect that such obligations are expected to have on our liquidity and cash flow in future periods. This table does not reflect any available extension options.