Edgar Filing: AMERICAN COMMUNITY PROPERTIES TRUST

American Community Properties Trust Form 10-Q 06-30-2006

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006, OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _________________

Commission file number 1-14369

AMERICAN COMMUNITY PROPERTIES TRUST

(Exact name of registrant as specified in its charter)

MARYLAND

(State or other jurisdiction of incorporation or organization)

52-2058165

(I.R.S. Employer Identification No.)

222 Smallwood Village Center

St. Charles, Maryland 20602

(Address of principal executive offices)(Zip Code)

(301) 843-8600

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “an accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):.

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of August 7, 2006, there were 5,197,954 Common Shares, par value $0.01 per share, outstanding

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AMERICAN COMMUNITY PROPERTIES TRUST

FORM 10-Q

JUNE 30, 2006

TABLE OF CONTENTS

		Page Number

PART I	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements

	Consolidated Statements of Income for the Six Months Ended June 30, 2006 (Unaudited) and June 30, 2005 (Unaudited)	3

	Consolidated Statements of Income for the Three Months Ended June 30, 2006 (Unaudited) and June 30, 2005 (Unaudited)	4

	Consolidated Balance Sheets as of June 30, 2006 (Unaudited) and December 31, 2005 (Audited)	5

	Consolidated Statement of Changes in Shareholders' Equity for the Six Months Ended June 30, 2006 (Unaudited)	6

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 (Unaudited) and June 30, 2005 (Unaudited)	7

	Notes to Consolidated Financial Statements (Unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations for the Six and Three Months Ended June 30, 2006 and 2005	23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4.	Controls and Procedures	35

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	36

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Submission of Matters to a Vote of Security Holders	39

Item 5.	Other Information	39

Item 6.	Exhibits	39

	Signatures	40

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AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30,
(In thousands, except per share amounts)
(Unaudited)

	2006			2005
Revenues
Rental property revenues	$	26,138		$	10,828
Community development-land sales		6,626			12,721
Homebuilding-home sales		11,259			-
Management and other fees, substantially all from related entities		565			1,697
Reimbursement of expenses related to managed entities		1,104			3,227
Total revenues		45,692			28,473

Expenses
Rental property operating expenses		12,343			4,374
Cost of land sales		3,666			8,880
Cost of home sales		8,521			21
General, administrative, selling and marketing		5,007			5,415
Depreciation and amortization		4,074			1,950
Expenses reimbursed from managed entities		1,104			3,227
Total expenses		34,715			23,867

Operating income		10,977			4,606

Other income (expense)
Interest and other income		218			646
Equity in earnings from unconsolidated entities		343			628
Interest expense		(7,200	)		(3,379	)
Minority interest in consolidated entities		(2,666	)		(238	)

Income before provision for income taxes		1,672			2,263
Provision for income taxes		714			747

Net income	$	958		$	1,516

Earnings per share
Basic and diluted	$	0.18		$	0.29
Weighted average shares outstanding
Basic and diluted		5,198			5,192
Cash dividends per share	$	0.63		$	0.20

Note: The income statement for the six months ended June 30, 2006 reflects the adoption of Emerging Issues Task Force Issue 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” (“EITF 04-05”) on January 1, 2006 (Refer to Note 2).

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

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AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30,
(In thousands, except per share amounts)
(Unaudited)

	2006			2005
Revenues
Rental property revenues	$	13,347		$	5,487
Community development-land sales		2,682			8,973
Homebuilding-home sales		7,234			-
Management and other fees, substantially all from related entities		275			970
Reimbursement of expenses related to managed entities		532			1,650
Total revenues		24,070			17,080

Expenses
Rental property operating expenses		6,388			2,281
Cost of land sales		1,430			6,236
Cost of home sales		5,487			11
General, administrative, selling and marketing		2,342			2,711
Depreciation and amortization		2,101			942
Expenses reimbursed from managed entities		532			1,650
Total expenses		18,280			13,831

Operating income		5,790			3,249

Other income (expense)
Interest and other income		89			521
Equity in earnings from unconsolidated entities		173			283
Interest expense		(3,699	)		(1,623	)
Minority interest in consolidated entities		(1,601	)		(212	)

Income before provision for income taxes		752			2,218
Provision for income taxes		295			742

Net income	$	457		$	1,476

Earnings per share
Basic and diluted	$	0.09		$	0.28
Weighted average shares outstanding
Basic and diluted		5,198			5,192
Cash dividends per share	$	0.10		$	0.10

Note: The income statement for the three months ended June 30, 2006 reflects the adoption of Emerging Issues Task Force Issue 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” (“EITF 04-05”) on January 1, 2006 (Refer to Note 2).

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

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AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
	As of			As of
	June 30, 2006			December 31, 2005
	(Unaudited)			(Audited)
ASSETS
ASSETS:
Investments in real estate:
Operating real estate, net of accumulated depreciation	$	143,496		$	76,578
of $139,631 and $46,412 respectively
Land and development costs		60,041			54,232
Condominiums under construction		13,454			17,621
Rental projects under construction or development		12,205			4,458
Investments in real estate, net		229,196			152,889

Cash and cash equivalents		13,465			21,156
Restricted cash and escrow deposits		21,326			8,925
Investments in unconsolidated real estate entities		6,657			9,738
Receivable from bond proceeds		16,873			8,422
Accounts receivable		1,853			1,332
Deferred tax assets		16,167			5,610
Property and equipment, net of accumulated depreciation		1,138			1,182
Deferred charges and other assets, net of amortization of
$2,127 and $898 respectively		10,829			7,831

Total Assets	$	317,504		$	217,085

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Non-recourse debt	$	236,327		$	119,865
Recourse debt		42,481			32,981
Accounts payable and accrued liabilities		20,349			19,243
Deferred income		4,091			3,961
Accrued current income tax liability		1,178			6,545
Total Liabilities		304,426			182,595

SHAREHOLDERS' EQUITY:
Common shares, $.01 par value, 10,000,000 shares authorized,
5,197,954 shares issued and outstanding as of
June 30, 2006 and December 31, 2005		52			52
Treasury stock, 67,709 shares at cost		(376	)		(376	)
Additional paid-in capital		17,066			17,066
Retained earnings (deficit)		(3,664	)		17,748
Total Shareholders' Equity		13,078			34,490

Total Liabilities and Shareholders' Equity	$	317,504		$	217,085

Note: The balance sheet as of June 30, 2006 reflects the adoption of Emerging Issues Task Force Issue 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” (“EITF 04-05”) on January 1, 2006 (Refer to Note 2).

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

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AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share amounts)





	Common Shares							Additional		Retained
			Par		Treasury			Earnings		Earnings
	Number		Value		Stock			Capital		(Deficit)			Total

Balance December 31, 2005 (Audited)		5,197,954	$	52	$	(376	)	$	17,066	$	17,748		$	34,490
Net income		-		-		-			-		958			958
Dividends paid		-		-		-			-		(3,232	)		(3,232	)
Cumulative effect of change in accounting for EITF 04-05		-		-		-			-		(19,138	)		(19,138	)
Balance June 30, 2006 (Unaudited)		5,197,954	$	52	$	(376	)	$	17,066	$	(3,664	)	$	13,078
The accompanying notes are an integral part of these consolidated statements.

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AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(In thousands)
(Unaudited)

	2006			2005

Cash Flows from Operating Activities
Net income	$	958		$	1,516
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		4,074			1,950
Deficit distribution to minority interests		2,646			179
Benefit for deferred income taxes		(716	)		(3,495	)
Equity in earnings-unconsolidated entities		(343	)		(628	)
Cost of sales-community development		3,666			8,880
Cost of sales-homebuilding		8,521			21
Stock based compensation expense		102			655
Minority interest in consolidated entities		2,666			238
Amortization of deferred loan costs		275			312
Changes in notes and accounts receivable		175			291
Additions to community development assets		(9,475	)		(10,214	)
Homebuilding-construction expenditures		(4,354	)		(5,976	)
Deferred income		130			-
Changes in accounts payable, accrued liabilities		(6,255	)		4,498
Net cash provided by (used in) operating activities		2,070			(1,773	)

Cash Flows from Investing Activities
Investment in office building and apartment construction		(7,747	)		(1,957	)
Distribution from land real estate joint venture		-			1,160
Cash from newly consolidated properties		4,723			-
Change in investments-unconsolidated apartment partnerships		-			1,116
Change in investments-unconsolidated commercial partnerships		338			356
Change in restricted cash		560			112
Additions to rental operating properties, net		(20,193	)		(2,043	)
Other assets		(521	)		(347	)
Net cash used in investing activities		(22,840	)		(1,603	)

Cash Flows from Financing Activities
Cash proceeds from debt financing		37,279			18,245
Payment of debt		(19,399	)		(12,416	)
County Bonds proceeds, net of undisbursed funds		1,077			1,214
Payments of distributions to minority interests		(2,646	)		(179	)
Dividends paid to shareholders		(3,232	)		(1,024	)
Net cash provided by financing activities		13,079			5,840

Net (Decrease) Increase in Cash and Cash Equivalents		(7,691	)		2,464
Cash and Cash Equivalents, Beginning of Year		21,156			16,138
Cash and Cash Equivalents, June 30,	$	13,465		$	18,602
The accompanying notes are an integral part of these consolidated statements.

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AMERICAN COMMUNITY PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

(Unaudited)

(1)

ORGANIZATION

American Community Properties Trust ("ACPT") is a self-managed holding company that is primarily engaged in the investment of rental properties, property management services, community development, and homebuilding. These operations are concentrated in the Washington, D.C. metropolitan area and Puerto Rico and are carried out through American Rental Properties Trust ("ARPT"), American Rental Management Company ("ARMC "), American Land Development U.S., Inc. ("ALD") and IGP Group Corp. ("IGP Group") and their subsidiaries.

ACPT is taxed as a U.S. partnership and its taxable income flows through to its shareholders. ACPT is subject to Puerto Rico taxes on IGP Group's taxable income, generating foreign tax credits that are passed through to ACPT's shareholders. ACPT's federal taxable income consists of certain passive income from IGP Group, a controlled foreign corporation, additional distributions from IGP Group including Puerto Rico taxes paid on behalf of ACPT, and dividends from ACPT's U.S. subsidiaries. Other than Interstate Commercial Properties ("ICP"), which is taxed as a Puerto Rico corporation, the taxable income from the remaining Puerto Rico operating entities passes through to IGP Group or ALD. Of this taxable income, only the portion of taxable income applicable to the profits, losses or gains on the residential land sold in Parque Escorial passes through to ALD. ALD, ARMC, and ARPT are taxed as U.S. corporations. The taxable income from the U.S. apartment properties flows through to ARPT.

(2)

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the accounts of ACPT and its subsidiaries and partnerships, after eliminating all intercompany transactions. Unless the context otherwise requires, all of the entities included in the consolidated financial statements are hereinafter referred to collectively as the “Company” or “ACPT.”

The Company consolidates entities which are not variable interest entities as defined by FASB Interpretation No. 46 (revised December 2003) (“FIN 46 (R)”) in which it owns, directly or indirectly, a majority voting interest in the entity. In addition, beginning January 1, 2006, the Company consolidates entities, regardless of ownership percentage, in which the Company serves as the general partner and the limited partners do not have substantive kick-out rights or substantive participation rights in accordance with Emerging Issues Task Force Issue 04-05, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights," (“EITF 04-05”).

As of December 31, 2005, the consolidated group included ACPT and its four major subsidiaries, ARPT, ARMC, ALD and IGP Group. In addition, the consolidated group includes American Housing Management Company, American Housing Properties L.P. (“AHP”), St. Charles Community, LLC, Interstate General Properties Limited Partnership S.E., Land Development Associates, S.E., LDA Group LLC, Torres del Escorial, Inc., Escorial Office Building I, Inc., Interstate Commercial Properties, Inc., Bannister Associates Limited Partnership, Coachman's Limited Partnership, Crossland Associates Limited Partnership, Fox Chase Apartments General Partnership, Headen House Associates Limited Partnership, Lancaster Apartments Limited Partnership, New Forest Apartments General Partnership, Owings Chase, LLC, Palmer Apartments Associates Limited Partnership, Prescott Square, LLC, Sheffield Greens Apartments, LLC, Village Lake L.P., Wakefield Terrace Associates Limited Partnership, and Wakefield Third Age Associates Limited Partnership.

Beginning January 1, 2006, as a result of EITF 04-05, the consolidated group also includes the following properties: Alturas del Senorial Associates Limited Partnership, Bayamon Garden Associates Limited Partnership, Carolina Associates Limited Partnership S.E., Colinas de San Juan Associates Limited Partnership, Essex Apartments Associates Limited Partnership, Huntington Associates Limited Partnership, Jardines de Caparra Associates Limited Partnership, Monserrate Associates Limited Partnership, San Anton Associates S.E., Turabo Limited Dividend Partnership and Valle del Sol Associates Limited Partnership. Historically, these partnerships had been recorded using the equity method of accounting.

On April 28, 2006, the Company, through its subsidiary AHP, completed the acquisition of two apartment properties, Milford Station I LLC and Milford Station II LLC, in Baltimore, Maryland containing a total of 250 units for approximately $14,300,000. We allocated the purchase price of acquired properties to land, building and in-place leases based on the relative fair value of each component in accordance with SFAS No. 141, “Business Combinations.” The acquisitions of Milford I and Milford II are included within our results of operations from the date of acquisition, April 28, 2006.

The Company's investment in the four real estate entities that it does not control, does not serve as the general partner, or for which it is not the primary beneficiary if such entity is a variable interest entity, are recorded using the equity method of accounting. Refer to Note 3 for further discussion regarding investments in unconsolidated real estate entities.

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Interim Financial Reporting

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The Company has no items of other comprehensive income for any of the periods presented. In the opinion of management, these unaudited financial statements reflect all adjustments (which are of a normal recurring nature) necessary to present a fair statement of results for the interim period. While management believes that the disclosures presented are adequate to make the information not misleading, these financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report filed on Form 10-K/A for the year ended December 31, 2005. The operating results for the six and three months ended June 30, 2006 and 2005 are not necessarily indicative of the results that may be expected for the full year. Net income per share is calculated based on weighted average shares outstanding.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements, and accompanying notes and disclosures. These estimates and assumptions are prepared using management's best judgment after considering past and current events and economic conditions. Actual results could differ from those estimates and assumptions.

Implementation of EITF 04-05

As of January 1, 2006, we consolidated 11 partnerships which were previously unconsolidated as a result of the application of EITF 04-05. Those partnerships own, or control other entities that own, 14 apartment properties. Our interests in the profits and losses of these partnerships range from 1 to 50 percent. The initial consolidation of those partnerships resulted in increases (decreases), net of intercompany eliminations, and included the recording of deferred taxes in amounts reported in our consolidated balance sheet as of January 1, 2006, as follows (in thousands):

		Increase (decrease)
Operating real estate, net of accumulated depreciation	$	53,282
Cash and cash equivalents		4,723
Investments in unconsolidated real estate entities		(920	)
Deferred tax assets		9,841
All other assets		11,618
Total assets	$	78,544

Non-recourse debt	$	98,556
All other liabilities		(874	)
Shareholders’ equity		(19,138	)
Total liabilities and shareholders’ equity	$	78,544

The Company recorded an overall reduction to retained earnings of $19.1 million in a manner similar to a cumulative effect of a change in accounting principle. The retained earnings impact is net of a deferred tax asset recorded of $9.8 million related to temporary differences arising from the negative deficits absorbed by the Company as a result of consolidating the partnerships.

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The impact to our consolidated statements of income for the six months ended June 30, 2006 is summarized as follows:

	Balance prior						Six Months
	to the						Ended
	Implementation			Increase			June 30,
	of EITF 04-05			(Decrease)			2006
Rental property revenues	$	12,524		$	13,614		$	26,138
Management and other fees		1,477			(912	)		565
Reimbursement of expenses related to managed entities		3,181			(2,077	)		1,104
Total revenues		35,067			10,625			45,692

Rental property operating expenses		5,512			6,831			12,343
Depreciation and amortization		2,212			1,862			4,074
Expenses reimbursed from managed entities		3,181			(2,077	)		1,104
Total expenses		28,099			6,616			34,715

Operating income		6,968			4,009			10,977

Equity in earnings from unconsolidated entities		510			(167	)		343
Interest expense		(3,737	)		(3,463	)		(7,200	)
Minority interest in consolidated entities		(214	)		(2,452	)		(2,666	)

Income (loss) before provision (benefit) for income taxes		3,745			(2,073	)		1,672
Provision (benefit) for income taxes		1,373			(659	)		714

Net income		2,372			(1,414	)		958

Earnings per share basic and diluted	$	0.46		$	(0.28	)	$	0.18

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The impact to our consolidated statements of income for the three months ended June 30, 2006 is summarized as follows:

	Balance prior						Three Months
	to the						Ended
	Implementation			Increase			June 30,
	of EITF 04-05			(Decrease)			2006
Rental property revenues	$	6,499		$	6,848		$	13,347
Management and other fees		750			(475	)		275
Reimbursement of expenses related to managed entities		1,617			(1,085	)		532
Total revenues		18,782			5,288			24,070

Rental property operating expenses		2,865			3,523			6,388
Depreciation and amortization		1,167			934			2,101
Expenses reimbursed from managed entities		1,617			(1,085	)		532
Total expenses		14,908			3,372			18,280

Operating income		3,874			1,916			5,790

Equity in earnings from unconsolidated entities		234			(61	)		173
Interest expense		(1,958	)		(1,741	)		(3,699	)
Minority interest in consolidated entities		(206	)		(1,395	)		(1,601	)

Income (loss) before provision (benefit) for income taxes		2,033			(1,281	)		752
Provision (benefit) for income taxes		709			(414	)		295

Net income		1,324			(867	)		457

Earnings per share basic and diluted	$	0.26		$	(0.17	)	$	0.09

In prior periods, we used the equity method of accounting to account for our investments in the partnerships that we consolidated in 2006 in accordance with EITF 04-05. Under the equity method of accounting, we recognized partnership income or losses based generally on our percentage interest in the partnership. Consolidation of a partnership does not ordinarily result in a change to the net amount of the partnership income or loss that is recognized using the equity method of accounting. However, when consolidated real estate partnerships make cash distributions or allocate losses to partners in excess of the minority partners’ basis in the property, generally accepted accounting principles require that the consolidating partner record a charge equal to the amount of such excess distribution. Certain of the partnerships that we consolidated in accordance with EITF 04-05 had deficits in equity that resulted from distributions made to the partners in excess of basis and losses during prior periods when we accounted for our investment using the equity method of accounting. We would have been required to recognize the non-controlling partners’ share of those distributions in excess of basis and losses had we consolidated these entities in prior periods.

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Cash Dividends

As announced on March 10, 2006, the Company entered into a closing agreement with the United States Internal Revenue Service ("IRS") by which the Company will maintain its publicly traded partnership ("PTP") status for U.S. federal income tax purposes. The closing agreement with the IRS required the Company to report approximately $5.0 million to shareholders as taxable income on March 29, 2006. Under the terms of the Company's governing documents, the Company was required to make minimum annual distributions to the shareholders equal to at least 45% of net taxable income allocated to shareholders. Accordingly, the Board of Trustees declared a dividend of $0.43 per share, or approximately $2,230,000 in the aggregate, that was paid on April 12, 2006 to shareholders of record on March 29, 2006.

On March 30, 2006, the Board of Trustees declared a cash dividend of $0.10 per share, paid on April 27, 2006 to shareholders of record on April 13, 2006. On May 15, 2006, the Board of Trustees declared a $0.10 cash dividend paid on June 13, 2006 to shareholders of record on May 30, 2006.

Depreciable Assets and Depreciation

The Company's operating real estate is stated at cost and includes all costs related to acquisitions, development and construction. The Company makes assessments of the useful lives of our real estate assets for purposes of determining the amount of depreciation expense to reflect on our income statement on an annual basis. The assessments, all of which are judgmental determinations, are as follows:

·	Buildings and improvements are depreciated over five to forty years using the straight-line or double declining balance methods,

·	Furniture, fixtures and equipment are depreciated over five to seven years using the straight-line method,

·	Leasehold improvements are capitalized and depreciated over the lesser of the life of the lease or their estimated useful life,

·	Maintenance and other repair costs are charged to operations as incurred.

The table below presents the major classes of depreciable assets as of June 30, 2006 and December 31, 2005 (in thousands):

	June 30,		December 31,
	2006		2005
	(unaudited)		(audited)

Land	$	23,649	$	10,065
Building		240,184		102,140
Building improvements		12,160		4,525
Equipment		7,134		6,260
		283,127		122,990
Accumulated depreciation		139,631		46,412
Operating properties, net	$	143,496	$	76,578

Other Property and Equipment

In addition, the Company owned other property and equipment of $1,138,000 and $1,182,000, net of accumulated depreciation, respectively, as of June 30, 2006 and December 31, 2005 respectively.

Depreciation

Total depreciation expense was $4,074,000 and $1,950,000 for the six months ended June 30, 2006 and 2005, respectively, and $2,101,000 and $942,000 for the three months ended June 30, 2006 and 2005, respectively.

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Reclassifications

Certain amounts from prior years have been reclassified to conform to our current year's presentation. This includes the reclassification of the Company’s consolidated balance sheet as of December 31, 2005 to conform to the revised presentation elected as of January 1, 2006. The revised presentation as of June 30, 2006 is more condensed than prior periods and categorizes assets and liabilities by type.

Impact of Recently Issued Accounting Standards

SFAS 123(R)

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), "Share Based Payment," a revision of SFAS No. 123, which is similar in concept to SFAS No. 123, but requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Pro forma disclosure is no longer an alternative. In addition, this revision requires a public entity to measure the cost of employee services received in exchange for an award of liability instruments at their fair value. The use of intrinsic value for liability instruments is no longer allowed for public entities.

The Company implemented the provisions of SFAS No. 123(R) as of January 1, 2006, the impact of which was not material on the Company’s financial position or results of operations.

SFAS 154

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections," which replaces APB Opinion No. 20 and SFAS No. 3, and changes the requirements for the accounting for and reporting of a change in accounting principle. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, although early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date SFAS 154 was issued. The adoption of SFAS 154 did not have a material impact on our financial condition or results of operations.

FIN 48

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. In addition, FIN 48 requires expanded disclosure with respect to the uncertainty in income taxes and is effective as of the beginning of our 2007 fiscal year. We are currently evaluating the impact, if any, that FIN 48 will have on our financial statements.

(3)

INVESTMENT IN UNCONSOLIDATED REAL ESTATE ENTITIES

The Company accounts for investments in unconsolidated real estate entities that are not considered variable interest entities under FIN 46 (R) in accordance with SOP 78-9 "Accounting for Investments in Real Estate Ventures" and APB Opinion No. 18 "The Equity Method of Accounting for Investments in Common Stock". For entities that are considered variable interest entities under FIN 46(R), the Company performs an assessment to determine the primary beneficiary of the entity as required by FIN 46(R). The Company accounts for variable interest entities in which the Company is not a primary beneficiary and does not bear a majority of the risk of expected loss in accordance with the equity method of accounting.

The Company considers many factors in determining whether or not an investment should be recorded under the equity method, such as economic and ownership interests, authority to make decisions, and contractual and substantive participating rights of the partners. Income and losses are recognized in accordance with the terms of the partnership agreements and any guarantee obligations or commitments for financial support. The Company's investments in unconsolidated real estate entities accounted for under the equity method of accounting consisted of general partnership interests in two limited partnerships which own apartment properties in the United States; a limited partnership interest in a limited partnership that owns a commercial property in Puerto Rico; and a 50% ownership interest in a joint venture formed as a limited liability company.

Apartment Partnerships

On January 1, 2006, the Company adopted EITF 04-05 which now requires us to consolidate 11 additional partnerships, which historically, were recorded using the equity method of accounting (refer to Note 2). The unconsolidated apartment partnerships as of June 30, 2006 include two partnerships owning 110 rental units compared to 13 partnerships owning 3,463 rental units in 16 apartment complexes as of June 30, 2005. The two remaining unconsolidated complexes are owned by Brookside Gardens Limited Partnership and Lakeside Apartments Limited Partnership.

We have determined that two of our unconsolidated apartment partnerships, Brookside Gardens and Lakeside Apartments, are variable interest entities under FIN 46-R, however, the Company is not required to consolidate the partnerships due to the fact that it is not the primary beneficiary and does not bear the majority of the risk of expected losses. The Company holds less than a 20% economic interest in Brookside and Lakeside. As a general partner, we have significant influence over operations of Brookside and Lakeside that is disproportionate to our economic ownership in these two partnerships. In accordance with SOP 78-9 and APB No. 18, these investments are accounted for under the equity method. The Company is exposed to losses for Brookside of $199,000 and Lakeside of $172,000, consisting of our net investment, loans and unpaid fees. All amounts are fully reserved. Pursuant to the partnership agreement for Brookside, the Company, as general partner, is responsible for providing operating deficit loans to the partnership in the event that it is not able to generate sufficient cash flows from its operating activities.

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Commercial Partnerships

The Company holds a limited partner interest in a commercial property in Puerto Rico that it accounts for under the equity method of accounting. ELI, S.E. ("ELI"), is a partnership formed for the purpose of constructing a building for lease to the State Insurance Fund of the Government of Puerto Rico. ACPT contributed the land in exchange for $700,000 and 27.82% ownership interest in the partnership's assets, equal to a 45.26% interest in cash flow generated by the thirty-year lease of the building.

On April 30, 2004, the Company purchased a 50% limited partnership interest in El Monte Properties, S.E. ("El Monte") from Insular Properties Limited Partnership ("Insular") for $1,462,500. Insular is owned by the J. Michael Wilson Family, a related party. In December 2004, a third party buyer purchased El Monte for $20,000,000, $17,000,000 in cash and $3,000,000 in notes. The net cash proceeds from the sale of the real estate were distributed to the partners. As a result, the Company received $2,500,000 in cash and recognized $986,000 of income in 2004. The gain on sale was reduced by the amount of the seller's note which is subject to future subordination. In January 2005, El Monte distributed to the Company its share of the $3,000,000 note, $1,500,000. The Company will recognize income as it receives cash payments on the note. The note is due in installments over a three year period beginning in December 2007. El Monte will distribute any remaining cash when it winds up its affairs.

Land Development Joint Venture

In September 2004, the Company entered into a joint venture agreement with Lennar Corporation for the development of a 352-unit, active adult community located in St. Charles, Maryland. At that time, a limited liability company, St. Charles Active Adult Community, LLC, was formed to carry out the terms of this agreement whereby Lennar and the Company would each hold a 50% ownership interest in the limited liability company. The joint venture's operating agreement calls for the development of 352 lots to be sold to Lennar's homebuilding division under a purchase agreement starting in the end of 2005. The Company will manage the project's development for a market rate fee pursuant to a management agreement. In September 2004, the Company transferred land to the joint venture in exchange for a 50% ownership interest and $4,277,000 in cash. The Company's investment in the joint venture was recorded at 50% of the historical cost basis of the land with the other 50% recorded within our deferred charges and other assets. The proceeds received are reflected as deferred revenue. The deferred revenue and related deferred costs will be recognized into income as the joint venture sells lots to Lennar. In March 2005, the joint venture closed a non-recourse development loan which was amended in June 2006. Per the amended terms of the loan, both the Company and Lennar provided development completion guarantees and Lennar is required to purchase a minimum of 100 lots per year; therefore the joint venture is required to develop 100 lots per year. During the first six months of 2006, the joint venture did not sell any lots to Lennar’s homebuilding division.

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The following table summarizes the financial data and principal activities of the unconsolidated real estate entities, which the Company accounts for under the equity method. The information is presented to segregate the apartment partnerships from the commercial partnerships as well as our 50% ownership interest in the land development joint venture, which are all accounted for as “investments in unconsolidated real estate entities” on the balance sheet.

						Land
						Development
	Apartment			Commercial		Joint
	Partnerships			Partnerships		Venture			Total
	(In thousands)
Summary Financial Position:
Total Assets
June 30, 2006	$	5,231		$	28,334	$	14,234		$	47,799
December 31, 2005		77,830			28,464		11,947			118,241
Total Non-Recourse Debt
June 30, 2006		3,268			23,475		6,173			32,916
December 31, 2005		101,848			23,120		4,019			128,987
Total Other Liabilities
June 30, 2006		1,245			852		1,127			3,224
December 31, 2005		9,782			1,516		994			12,292
Total (Deficit) Equity
June 30, 2006		718			4,006		6,934			11,658
December 31, 2005		(33,800	)		3,828		6,934			(23,038	)
Company's Investment, net (1)
June 30, 2006		-			4,829		1,828			6,657
December 31, 2005		(1,597	)		4,824		1,828			5,055

Summary of Operations
Total Revenue
Six Months Ended June 30, 2006		392			1,828		-			2,220
Six Months Ended June 30, 2005		13,871			1,827		-			15,698
Three Months Ended June 30, 2006		193			915		-			1,108
Three Months Ended June 30, 2005		6,956			913		-			7,869
Net Income
Six Months Ended June 30, 2006		(58	)		926		-			868
Six Months Ended June 30, 2005		1,017			898		(3	)		1,912
Three Months Ended June 30, 2006		(31	)		468		-			437
Three Months Ended June 30, 2005		361			466		(3	)		824
Company's Recognition of Equity in Earnings
Six Months Ended June 30, 2006		-			343		-			343
Six Months Ended June 30, 2005		256			372		-			628
Three Months Ended June 30, 2006		-			173		-			173
Three Months Ended June 30, 2005		104			179		-			283

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						Land
						Development
	Apartment		Commercial			Joint
	Partnerships		Partnerships			Venture		Total
	(In thousands)
Summary of Cash Flows:
Cash Flows from Operating Activities
Six Months Ended June 30, 2006	$	77	$	1,032		$	132	$	1,241
Six Months Ended June 30, 2005		3,196		875			42		4,113
Three Months Ended June 30, 2006		24		173			721		918
Three Months Ended June 30, 2005		1,020		7			42		1,069
Company's Share of Cash Flows from Operating Activities
Six Months Ended June 30, 2006		1		467			66		534
Six Months Ended June 30, 2005		1,014		396			21		1,431
Three Months Ended June 30, 2006		-		78			361		439
Three Months Ended June 30, 2005		313		(3	)		21		331
Operating Cash Distributions
Six Months Ended June 30, 2006		-		747			-		747
Six Months Ended June 30, 2005		2,478		753			2,320		5,551
Three Months Ended June 30, 2006		-		388			-		388
Three Months Ended June 30, 2005		993		341			2,320		3,654
Company's Share of Operating Cash Distributions
Six Months Ended June 30, 2006		-		339			-		339
Six Months Ended June 30, 2005		1,075		356			1,160		2,591
Three Months Ended June 30, 2006		-		176			-		176
Three Months Ended June 30, 2005		398		154			1,160		1,712
Refinancing Cash Distributions
Six Months Ended June 30, 2006		-		-			-		-
Six Months Ended June 30, 2005		100		-			-		100
Three Months Ended June 30, 2006		-		-			-		-
Three Months Ended June 30, 2005		100		-			-		100
Company's Share of Refinancing Cash Distributions
Six Months Ended June 30, 2006		-		-			-		-
Six Months Ended June 30, 2005		1		-			-		1
Three Months Ended June 30, 2006		-		-			-		-
Three Months Ended June 30, 2005		1		-			-		1

Notes:

(1) Represents the Company's net investment, including assets and accrued liabilities in the consolidated balance sheet for unconsolidated real estate entities.

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(4)

DEBT

The Company's outstanding debt is collateralized primarily by land, land improvements, homebuilding assets, receivables, investment properties, investments in partnerships, and rental properties. The following table summarizes the indebtedness of the Company at June 30, 2006 and December 31, 2005 (in thousands):

Maturity

Interest

Outstanding as of

Dates

Rates (a)

June 30,

December 31,

From/To

2006

2005

(unaudited)

(audited)

Recourse Debt

Community Development (b), (c), (d)

06-30-07/03-01-21

4%-P+1%

30,221

14,161

Homebuilding (e)

10-31-07

7,514

13,905

Investment Properties (f)

05-15-07/01-23-13

P+1.25%/6.98%

4,615

4,752

General obligations (g)

07-29-07/05-01-10

Non-interest bearing/5.99%

131

163

Total Recourse Debt

42,481

32,981

Non-Recourse Debt

Community Development (h)

11-23-07

Non-interest bearing

500

500

Investment Properties (i), (j), (k)

04-30-09/08-01-47

4.95%/10%

235,827

119,365

Total Non-Recourse Debt

236,327

119,865

Total Debt

278,808

152,846

(a)

"P" = Prime lending interest rate. (The prime rate at June 30, 2006 was 8.25%)

(b)

As of June 30, 2006, $22,689,000 of the community development recourse debt relates to the general obligation bonds issued by the Charles County government as described in detail under the heading "Financial Commitments" in Note 5.

(c)

On April 14, 2006, the Company closed a three year $14,000,000 revolving line of credit loan (“the Revolver”) secured by a first lien deed of trust on property located in St. Charles, MD. The maximum amount of the loan at any one time is $14,000,000. The facility includes various sub-limits on a revolving basis for amounts to finance apartment project acquisitions and land development in St. Charles. The terms require certain financial covenants to be calculated annually as of December 31, including a tangible net worth to senior debt ratio for ALD and a minimum net worth test for ACPT. As of June 30, 2006, the Company borrowed $6,700,000 on the Revolver.

(d)

The remainder of the outstanding balance of our community development recourse debt, $800,000, is fully collateralized by approximately 490 acres within Parque El Commandante.

(e)

The outstanding recourse debt related to the homebuilding operations is composed of a $26,000,000 revolving construction loan with a maximum outstanding balance limited to $18,000,000 for Torres Del Escorial. This loan is secured by a mortgage on the property and will be repaid by the proceeds from home sales.

(f)

As of June 30, 2006 and December 31, 2005, the outstanding recourse debt within the investment properties is comprised of a loan borrowed to finance the acquisition of our properties Village Lake and Coachman's in January 2003, as well as a 2 year, $3,000,000 recourse note with Columbia Bank that the Company obtained in June 2005. The loan with Columbia Bank carries a fixed interest rate of 6.98% and requires the Company to pay monthly principal and interest payments until its maturity on May 15, 2007 and is collateralized by the Company's cash receipts from the two apartment properties acquired in 2004 and two parcels of land in St. Charles acquired in the second quarter of 2005.

(g)

The general recourse debt outstanding as of June 30, 2006 is made up of various capital leases outstanding within our U.S. and Puerto Rico operations as well as vehicle notes.

(h)

In the fourth quarter 2005, the Company purchased 22 residential acres adjacent to the Sheffield Neighborhood for $1,000,000. The Company funded half of the purchase price with cash and signed a two-year note for $500,000 due in November 2007. The Company plans to annex the land into the St. Charles mater plan community.

(i)

The non-recourse debt related to the investment properties is collateralized by the apartment projects. As of June 30, 2006, approximately $88,330,000 of this debt is secured by the Federal Housing Administration ("FHA") or the Maryland Housing Fund. The non-recourse debt balance is also composed of an $8,618,000 mortgage on the office building in Parque Escorial. The mortgage is a thirty-year loan with a ten year fixed rate equal to 7.33%. At the end of the first ten years the interest rate will be reset, at the discretion of management, to a fixed rate for an additional five, seven or ten years equal to the SWAP rate plus 2.25%. The non-recourse debt related to the investment properties also includes a construction loan for Sheffield Greens Apartments LLC (Sheffield Greens). As of June 30, 2006, the balance of the construction loan was $10,978,000.

(j)

On April 5, 2006, the non-recourse mortgage for one of our consolidated apartment properties in Puerto Rico, Colinas de San Juan Associates L.P., was refinanced with a ten-year, 6.59% non-recourse mortgage loan of $9,680,000. The proceeds from the refinancing were used for capital improvements at the property site and distributions to the general and limited partners.

(k)

On April 28, 2006, the Company, through its subsidiary AHP, completed the acquisition of two apartment properties, Milford Station I LLC and Milford Station II LLC, in Baltimore, Maryland containing a total of 250 units for approximately $14,300,000. The acquisition was financed through a combination of $11,836,000 of non-recourse notes and borrowing $3,755,000 from the Revolver which included funding improvement escrows and payment of closing costs.

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The Company’s loans contain various financial, cross collateral, cross default, technical and restrictive provisions. As of June 30, 2006, the Company is in compliance with the financial covenants and the other provisions of its loan agreements.

(5)

COMMITMENTS AND CONTINGENT LIABILITIES

Financial Commitments

Pursuant to an agreement reached between ACPT and the Charles County Commissioners in 2002, the Company agreed to accelerate the construction of two major roadway links to the Charles County (the "County") road system. Also, as part of the agreement, the County agreed to issue general obligation public improvement bonds (the “Bonds”) to finance $20,000,000 of this construction guaranteed by letters of credit provided by Lennar as part of a residential lot sales contract for 1,950 lots in Fairway Village. In March 2006, the Charles County Commissioners issued the last tranche of Bonds on behalf of the Company in conjunction with the roadway construction project. The Bonds bear interest rates from 4% to 8% and call for semi-annual interest payments and annual principal payments and mature in fifteen years. The Company is obligated to pay interest and principal on the full amount of the Bonds; as such, the Company recorded the full amount of the debt and a receivable from the County representing the remaining Bond proceeds to be advanced to the Company over an eighteen month period by the Charles County Commissioners as major infrastructure development within the project occurs. As part of the agreement, the Company will pay the County a monthly payment equal to one-sixth of the semi-annual interest payments and one-twelfth of the annual principal payment.

In August 2005, the Company signed a memorandum of understanding ("MOU") with the Charles County Commissioners regarding a land donation that will house a planned minor league baseball stadium and entertainment complex. Under the terms of the MOU, the Company donated 42 acres of land in St. Charles to Charles County on December 31, 2005. The Company also agreed to expedite off-site utilities, storm-water management and road construction improvements that will serve the entertainment complex and future portions of St. Charles so that the improvements will be completed concurrently with the entertainment complex. Charles County will be responsible for infrastructure improvements on the site of the complex. In return, Charles County agreed to issue $7,000,000 of general obligation bonds to finance the infrastructure improvements. In March 2006, $4,000,000 of these bonds were issued for this project. The funds for this project will be repaid by ACPT over a 15-year period. In addition, the County agreed to issue an additional 100 school allocations a year to St. Charles commencing with the issuance of bonds. The County will also require ACPT to fund an escrow account from lot sales that will be used to repay these bonds.

As of June 30, 2006, ACPT is guarantor of $23,578,000 of surety bonds for the completion of land development projects with Charles County; substantially all are for the benefit of the Charles County Commissioners.

Consulting Agreements and Arrangements

ACPT entered into a consulting and retirement compensation agreement with Interstate General Company L.P.’s (“IGC”) founder and Chief Executive Officer, James J. Wilson, effective October 5, 1998 (the "Consulting Agreement"). IGC was the predecessor company to ACPT. Under the terms of the Consulting Agreement, the Company will pay Mr. Wilson $200,000 per year through October 2008.

Guarantees

ACPT and its subsidiaries typically provide guarantees for another subsidiary's loans. In many cases more than one company guarantees the same debt. Since all of these companies are consolidated, the debt or other financial commitment made by the subsidiaries to third parties and guaranteed by ACPT, is included within ACPT's consolidated financial statements. As of June 30, 2006, ACPT has guaranteed $34,036,000 of outstanding debt owed by its subsidiaries. IGP has guaranteed $8,314,000 of its subsidiaries' outstanding debt. LDA guaranteed $7,514,000 of outstanding debt owed by its subsidiary. In addition, St. Charles Community LLC guaranteed $11,347,000 of outstanding debt owed by AHP. The guarantees will remain in effect until the debt service is fully repaid by the respective borrowing subsidiary. The terms of the debt service guarantees outstanding range from one to nine years. In addition to debt service guarantees, both the Company and Lennar provided development completion guarantees related to the St. Charles Active Adult Community Joint Venture. We do not expect any of these guarantees to impair the individual subsidiary or the Company's ability to conduct business or to pursue its future development plans.

Legal Matters

There have been no material changes to the legal proceedings previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005.

The Company and/or its subsidiaries have been named as defendants, along with other companies, in tenant-related lawsuits. The Company carries liability insurance against certain types of claims that management believes meets industry standards. To date, payments made to the plaintiffs of the settled cases were covered by our insurance policy. The Company believes it has strong defenses to the claims, and intends to continue to defend itself vigorously in these matters.

In the normal course of business, ACPT is involved in various pending or unasserted claims. In the opinion of management, these are not expected to have a material impact on the financial condition or future operations of ACPT.

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(6)

RELATED PARTY TRANSACTIONS

Certain officers and trustees of ACPT have ownership interests in various entities that conduct business with the Company. The financial impact of the related party transactions on the accompanying consolidated financial statements are reflected below (in thousands):

CONSOLIDATED STATEMENT OF INCOME:
			Six Months Ended						Three Months Ended
			June 30,						June 30,
			2006			2005			2006			2005

Management and Other Fees (A)
Unconsolidated subsidiaries with third party partners			$	19		$	1,135		$	9		$	683
Affiliates of J. Michael Wilson, CEO and Chairman				248			244			117			122
			$	267		$	1,379		$	126		$	805
General and Administrative Expense
Affiliates of J. Michael Wilson, CEO and Chairman	(B1	)	$	19		$	69		$	-		$	37
Reserve additions and other write-offs-
Unconsolidated real estate entities with third party partners	(A	)		5			(18	)		(1	)		(8	)
Reimbursement to IBC for ACPT’s share of J. Michael Wilson's salary				188			175			94			87
Reimbursement of administrative costs-
Affiliates of J. Michael Wilson, CEO and Chairman				(5	)		(9	)		(2	)		(5	)
James J. Wilson, IGC chairman and director	(B2	)		100			100			50			50
Thomas J. Shafer, Trustee	(B3	)		30			21			15			10
			$	337		$	338		$	156		$	171


										Balance			Balance
										June 30,			December 31,
										2006			2005
Assets Related to Rental Properties
Receivables-All unsecured and due on demand
Unconsolidated real estate entities with third party partners, net of reserves									$	-		$	506
Other Assets
Receivables-All unsecured and due on demand
Affiliate of J. Michael Wilson, CEO and Chairman									$	85		$	108
									$	85		$	108

(A) Management and Other Services

The Company provides management and other support services to its unconsolidated subsidiaries and other affiliated entities in the normal course of business. The fees earned from these services are typically collected on a monthly basis, one month in arrears. Receivables are unsecured and due on demand. Certain partnerships experiencing cash shortfalls have not paid timely. Generally, receivable balances of these partnerships are fully reserved, until satisfied or the prospect of collectibility improves. The collectibility of management fee receivables is evaluated quarterly. Any increase or decrease in the reserves is reflected accordingly as additional bad debt expenses or recovery of such expenses.

In prior years, we managed a commercial property in Puerto Rico owned by the Wilson Family. The Wilson Family property was sold to a third party in April 2005. Management fees generated by this property represented less than 1% of the Company's total revenue.

Effective April 30, 2006, ARMC’s management agreement with Chastleton Associates LP terminated due to the fact that the apartment property was sold to a third party. The property was previously owned by an affiliate. Management fees generated by this property accounted for less than 1% of the Company’s total revenue. The Company earned an agreed-upon management fee for administrative services through the end of the second quarter 2006.

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(B) Other

Other transactions with related parties are as follows:

(1)	In 2005, the Company rented executive office space and other property from an affiliate in the United States pursuant to a lease that expires in 2010. In management’s opinion, all leases with affiliated persons were on terms at least as favorable as these generally available from unaffiliated persons for comparable property. Effective January 27, 2006, the office building was sold to a third party who assumed the Company’s lease agreements.
(2)	Represents fees paid to James J. Wilson pursuant to a consulting and retirement agreement. At Mr. Wilson's request, payments are made to IGC.
(3)	Represents fees paid to Thomas J. Shafer, a trustee, pursuant to a consulting agreement.

Related Party Acquisitions

El Monte

On April 30, 2004, the Company purchased a 50% limited partnership interest in El Monte Properties S.E. ("El Monte") from Insular Properties Limited Partnership ("Insular") for $1,462,500. Insular is owned by the J. Michael Wilson Family. Per the terms of the agreement, the Company was responsible to fund $400,000 of capital improvements and lease stabilization costs, and had a priority on cash distributions up to its advances plus accrued interest at 8%, investment and a 13% cumulative preferred return on its investment. The purchase price was based on a third party appraisal of $16,500,000 dated April 22, 2003. The Company's limited partnership investment was accounted for under the equity method of accounting.

In December 2004, a third party buyer purchased El Monte for $20,000,000 - $17,000,000 in cash and $3,000,000 in notes. The net cash proceeds from the sale of the real estate were distributed to the partners. As a result, the Company received $2,500,000 in cash and recognized $986,000 of income in 2004. El Monte distributed the note, $1,500,000 to the Company in January 2005. The note bears interest at a rate of prime plus 2% with a ceiling rate of 9% and matures on December 3, 2009. The note is payable in three installments, the first installment of $250,000 is due on December 3, 2007, the second installment of $250,000 is due on December 3, 2008 and the balance is due on December 3, 2009. The Company will recognize the $1,500,000 as income as the cash payments on the note are received. El Monte will distribute any remaining cash when it winds up its affairs.

(7)

SEGMENT INFORMATION

ACPT has two reportable segments: U.S. operations and Puerto Rico operations. The Company's chief decision-makers allocate resources and evaluate the Company's performance based on these two segments. The U.S. segment is comprised of different components grouped by product type or service, to include: investments in rental properties, community development and property management services. The Puerto Rico segment entails the following components: investment in rental properties, community development, homebuilding and property management services. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Customer Dependence

Residential land sales to Lennar within our U.S. segment were $5,024,000 for the six months ended June 30, 2006 which represents 22% of the U.S. segment's revenue and 11% of our total year-to-date consolidated revenue. No other customers accounted for more than 10% of our consolidated revenue for the six and three months ended June 30, 2006.

During the second quarter of 2005, the Company sold commercial land for $7,448,000 to Jalexis, Inc. within our Puerto Rico segment. That commercial land sale represented 64% of the Puerto Rico segment's revenue and 26% of our consolidated revenue for the six months ended June 30, 2005, and 91% of the Puerto Rico segment’s revenue and 44% of the consolidated revenue for the three months ended June 30, 2005. No other customers accounted for more than 10% of our consolidated revenue in the six and three months ended June 30, 2006.

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The following presents the segment information for the six months ended June 30, 2006 and 2005 (in thousands):

	United			Puerto			Inter-
Six Months (Unaudited)	States			Rico			Segment			Total
2006:
Rental property revenues	$	15,606		$	10,532		$	-		$	26,138
Rental property operating expenses		7,155			5,188			-			12,343
Land sales revenue		6,626			-			-			6,626
Cost of land sales		3,666			-			-			3,666
Home sales revenue		-			11,259			-			11,259
Cost of home sales		-			8,521			-			8,521
Management and other fees		269			296			-			565
General, administrative, selling and marketing expense		3,396			1,611			-			5,007
Depreciation and amortization		2,275			1,799			-			4,074
Operating income		6,009			4,968			-			10,977
Interest income		59			60			(18	)		101
Equity in earnings from unconsolidated entities		-			343			-			343
Interest expense		4,048			3,170			(18	)		7,200
Minority interest in consolidated entities		312			2,354			-			2,666
Income (loss) before provision for income taxes		1,710			(38	)		-			1,672
Income tax provision (benefit)		729			(15	)		-			714
Net income (loss)		981			(23	)		-			958
Gross profit on land sales		2,960			-			-			2,960
Gross profit (loss) on home sales		-			2,738			-			2,738
Total assets		208,106			109,767			(369	)		317,504
Additions to long lived assets		24,208			908			-			25,116
2005:
Rental property revenues	$	10,828		$	-		$	-		$	10,828
Rental property operating expenses		4,374			-			-			4,374
Land sales revenue		2,324			10,397			-			12,721
Cost of land sales		1,547			7,492			(159	)		8,880
Home sales revenue		-			-			-			-
Cost of home sales		-			21			-			21
Management and other fees		505			1,194			(2	)		1,697
General, administrative, selling and marketing expense		3,731			1,686			(2	)		5,415
Depreciation and amortization		1,888			62			-			1,950
Operating income		2,117			2,330			159			4,606
Interest income		91			371			(382	)		80
Equity in earnings from unconsolidated entities		73			555			-			628
Interest expense		3,544			145			(310	)		3,379
Minority interest in consolidated entities		238			-			-			238
(Loss) Income before (benefit) provision for income taxes		(1,499	)		3,674			88			2,263
Income tax (benefit) provision		(548	)		1,295			-			747
Net (loss) income		(951	)		2,379			88			1,516
Gross profit on land sales		777			2,905			159			3,841
Gross profit on home sales		-			(21	)		-			(21	)
Total assets		146,083			68,122			(10,058	)		204,147
Additions to long lived assets		5,323			1,290			-			6,613

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Table of Contents

The following presents the segment information for the three months ended June 30, 2006 and 2005 (in thousands):

	United		Puerto		Inter-
Three Months (Unaudited)	States		Rico		Segment		Total
2006:
Rental property revenues	$	8,059	$	5,288	$	-	$	13,347
Rental property operating expenses		3,725		2,663		-		6,388
Land sales revenue		2,682		-		-		2,682
Cost of land sales