june09_10q.htm
UNITED STATES
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, 2009
OR
 
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)

Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS
Common Shares, $.01 par value
NAME OF EACH EXCHANGE ON WHICH REGISTERED
NYSE Amex

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 / /

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).        Yes /x/ No / /

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  / /  Accelerated filer  / /   Non-accelerated filer  / /    Smaller Reporting Company /x/

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  / /    No  /x/

As of August 1, 2009, there were 5,229,954 common shares outstanding.
 



AMERICAN COMMUNITY PROPERTIES TRUST
FORM 10-Q
JUNE 30, 2009
TABLE OF CONTENTS


PART I
FINANCIAL INFORMATION
 
     
Item 1.
Consolidated Financial Statements
 
 
 
 
 
3
 
4
     
 
5
     
 
6
     
 
7
     
 
8
     
Item 2.
35
     
Item 4T.
51
     
OTHER INFORMATION
 
     
Item 1.
51
     
Item 1A.
52
     
Item 2
52
     
Item 3.
52
     
Item 4.
52
     
Item 5.
52
     
Item 6.
52
     
 
53




 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
FOR THE SIX MONTHS ENDED JUNE 30,
 
(In thousands, except per share amounts)
 
(Unaudited)
 
   
2009
   
2008
 
Revenues
           
  Rental property revenues
 
$
17,172
   
$
16,879
 
  Community development-land sales
   
3,529
     
5,997
 
  Homebuilding-home sales
   
-
     
2,982
 
  Management and other fees, substantially all from related entities
   
110
     
140
 
  Reimbursement of expenses related to managed entities
   
544
     
762
 
    Total revenues
   
21,355
     
26,760
 
                 
Expenses
               
  Rental property operating expenses
   
7,473
     
7,718
 
  Cost of land sales
   
2,644
     
4,725
 
  Cost of home sales
   
20
     
2,300
 
  General, administrative, selling and marketing
   
4,393
     
5,046
 
  Depreciation
   
2,525
     
2,748
 
  Expenses reimbursed from managed entities
   
544
     
762
 
    Total expenses
   
17,599
     
23,299
 
                 
Operating Income
   
      3,756
     
3,461
 
                 
Other income (expense)
               
  Interest and other income
   
206
     
362
 
  Equity in earnings from unconsolidated entities
   
206
     
331
 
  Interest expense
   
(5,505
)
   
(4,996
)
                 
Loss before benefit for income taxes
   
(1,337
)
   
(842
)
Benefit for income taxes
   
(1,029
)
   
(275
)
                 
Loss from continuing operations
   
(308
)
   
(567
)
Income from discontinued operations
               
     (less applicable income taxes of $617 and ($275), respectively)
   
  2,288
     
517
 
                 
Consolidated net income (loss)
   
1,980
     
(50
)
  Less: Net income attributable to noncontrolling interest
   
1,292
     
1,321
 
 Net income (loss) attributable to ACPT
 
$
688
   
 $
(1,371
)
                 
Income (loss) per common share – Basic and Diluted
               
  Loss from continuing operations
 
$
(0.06
)
 
$
(0.11
)
  Discontinued operations
   
0.44
     
0.10
 
  Income attributable to noncontrolling interest
   
(0.25
)
   
(0.25
  Income (loss) applicable to common shareholders
 
$
0.13
   
$
(0.26
)
                 
Weighted average common shares outstanding:
               
  Basic and diluted
   
5,223
     
5,212
 
Cash dividends per common share
 
$
-
   
$
-
 
The accompanying notes are an integral part of these consolidated statements.
         



 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
FOR THE THREE MONTHS ENDED JUNE 30,
 
(In thousands, except per share amounts)
 
(Unaudited)
 
   
2009
   
2008
 
Revenues
           
  Rental property revenues
  $ 8,677     $ 8,478  
  Community development-land sales
    2,998       4,951  
  Homebuilding-home sales
    -       738  
  Management and other fees, substantially all from related entities
    47       72  
  Reimbursement of expenses related to managed entities
    247       381  
    Total revenues
    11,969       14,620  
                 
Expenses
               
  Rental property operating expenses
    3,740       3,893  
  Cost of land sales
    2,198       3,822  
  Cost of home sales
    8       583  
  General, administrative, selling and marketing
    2,056       2,714  
  Depreciation
    1,267       1,277  
  Expenses reimbursed from managed entities
    247       381  
    Total expenses
    9,516       12,670  
                 
Operating Income
    2,453       1,950  
                 
Other income (expense)
               
  Interest and other income
    103       188  
  Equity in earnings from unconsolidated entities
    109       163  
  Interest expense
    (2,670 )     (2,524 )
                 
Loss before provision (benefit) for income taxes
    (5 )     (223 )
Provision (benefit) for income taxes
    140       (102 )
                 
Loss from continuing operations
    (145 )     (121 )
Income from discontinued operations
(less applicable income taxes of $249 and ($44), respectively)
    1,522       105  
                 
Consolidated net income (loss)
    1,377       (16 )
  Less: Net income attributable to noncontrolling interest
    519       162  
Net income (loss) attributable to ACPT
    858       (178 )
                 
Earnings (loss)  per share –Basic and Diluted
               
  Loss from continuing operations
  $ (0.03 )   $ (0.03 )
  Discontinued operations
    0.29       0.03  
  Income attributable to noncontrolling interest
    (0.10 )     (0.03 )
  Income (loss) applicable to common shareholders
  $ 0.16     $ (0.03 )
                 
Weighted average shares outstanding:
               
  Basic and diluted
    5,223       5,213  
Cash dividends per share
  $ -     $ -  
The accompanying notes are an integral part of these consolidated statements.
         

 
 
CONSOLIDATED BALANCE SHEETS
 
(In thousands, except share and per share amounts)
 
   
As of
June 30,
2009
   
As of
December 31,
  2008
 
   
(Unaudited)
       
ASSETS
           
ASSETS:
           
Investments in real estate, at cost:
           
  Operating real estate, net of accumulated depreciation
           
   of $82,672 and $79,379, respectively
 
$
80,374
   
$
82,918
 
  Land and development costs
   
97,741
     
96,266
 
  Condominiums under construction
   
1,794
     
1,745
 
  Rental projects under construction or development
   
15,204
     
4,564
 
    Investments in real estate, net
   
195,113
     
185,493
 
                 
Property and related assets held for sale
   
96,937
     
93,628
 
                 
Cash and cash equivalents
   
20,508
     
24,035
 
Restricted cash and escrow deposits
   
11,546
     
9,500
 
Investments in unconsolidated real estate entities
   
5,989
     
5,121
 
Receivable from bond proceeds
   
2,622
     
2,052
 
Accounts receivable, net
   
845
     
992
 
Deferred tax assets
   
26,112
     
28,540
 
Property and equipment, net of accumulated depreciation
   
800
     
898
 
Deferred charges and other assets, net of amortization of
               
  $3,643 and $2,764, respectively
   
4,834
     
4,934
 
    Total Assets
 
$
365,306
   
$
355,193
 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
LIABILITIES:
               
Non-recourse debt
 
$
173,736
   
$
168,221
 
Recourse debt
   
39,043
     
39,416
 
Accounts payable and accrued liabilities
   
20,959
     
19,553
 
Deferred income
   
144
     
200
 
Accrued current income tax liability
   
14,334
     
14,754
 
Liabilities related to assets held for sale
   
115,005
     
111,812
 
    Total Liabilities
   
363,221
     
353,956
 
                 
COMMITMENTS AND CONTINGENT LIABILITIES  (NOTE 6)
               
                 
SHAREHOLDERS’ EQUITY
               
  ACPT’s shareholders equity:
               
    Common shares, $.01 par value, 10,000,000 shares authorized,
               
     5,229,954 shares issued and outstanding
               
      as of June 30, 2009 and December 31, 2008
   
52
     
52
 
    Treasury stock, 67,709 shares at cost
   
(376
)
   
(376
)
    Additional paid-in capital
   
18,608
     
18,144
 
    Retained deficit
   
(15,791
)
   
(16,479
)
        Total ACPT shareholders’ equity
   
2,493
     
1,341
 
  Noncontrolling interests
   
(408
)
   
(104
)
    Total  Shareholders’ Equity
   
2,085
     
1,237
 
    Total Liabilities and Shareholders’ Equity
 
$
365,306
   
$
355,193
 
The accompanying notes are an integral part of these consolidated statements.


 
 
(In thousands, except share amounts)
                                           
                                           
   
ACPT Shareholders’ Equity
             
   
Common Shares
         
Additional
         
Non-
   
Total
 
         
Par
   
Treasury
   
Paid-in
   
Retained
   
Controlling
   
Shareholders’
 
   
Number
   
Value
   
Stock
   
Capital
   
Deficit
   
Interest
   
Equity
 
                                           
Balance December 31, 2008
   
5,229,954
   
$
52
   
$
(376
)
 
$
18,144
   
$
(16,479
)
 
$
(104
 
$
1,237
 
Net income attributable to ACPT
   
-
     
-
     
-
     
-
     
688
     
-
     
688
 
Net income attributable to noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
1,292
     
1,292
 
Dividends paid to noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
(1,596
)
   
(1,596
)
Equity Compensation
   
-
     
-
     
-
     
464
     
-
     
-
     
464
 
Balance June 30, 2009 (unaudited)
   
5,229,954
   
$
52
   
$
(376
)
 
$
18,608
   
$
(15,791
)
 
$
(408
)
 
$
2,085
 
The accompanying notes are an integral part of these consolidated statements.
 




CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(In thousands)
(Unaudited)
         
     
2009 
     
2008 
 
 Cash Flows from Operating Activities
               
  Consolidated net income (loss)
 
$
1,980
   
$
(50
)
   Adjustments to reconcile consolidated net income (loss) to net cash provided
               
    by (used in) operating activities:
               
      Depreciation
   
2,525
     
5,042
 
      (Benefit) provision for deferred income taxes
   
749
     
(419
)
      Equity in earnings from unconsolidated entities
   
(206
)
   
(331
)
      Distribution of earnings from unconsolidated entities
   
319
     
331
 
      Cost of land sales
   
2,644
     
4,725
 
      Cost of home sales
   
20
     
2,300
 
      Write-down of assets
   
842
     
-
 
      Stock based compensation expense
   
464
     
100
 
      Amortization of deferred loan costs
   
414
     
440
 
      Changes in accounts receivable
   
53
     
594
 
      Additions to land and development costs
   
(7,750
)
   
(12,890
)
      Additions to condominiums under construction
   
(69
)
   
(127
)
      Change in deferred income
   
(56
)
   
(126
)
      Change in deferred charges and other assets
   
 1,496
     
1,213
 
      Changes in accounts payable, accrued liabilities
   
(2,000
   
(1,811
)
  Net cash provided by (used in) operating activities
   
1,425
     
(1,009
)
                 
Cash Flows from Investing Activities
               
  Investment in rental projects under construction or development
   
(4,192
)
   
(1,206
)
  Change in investments - unconsolidated entities
   
(981
)
   
19
 
  Net deposits to restricted cash
   
(2,598
)
   
(1,228
  Additions to operating real estate, net
   
(1,790
)
   
(1,567
)
  Net purchase of other assets
   
(1,725
)
   
(100
)
  Net cash used in investing activities
   
(11,286
)
   
(4,082
)
                 
Cash Flows from Financing Activities
               
  Cash proceeds from debt financing
   
12,886
     
1,292
 
  Payment of debt
   
(5,543
)
   
(1,911
)
  County Bonds proceeds, net of undisbursed funds
   
587
     
4,176
 
  Payments of distributions to noncontrolling interests
   
(1,596
)
   
(1,247
)
  Net cash provided by financing activities
   
6,334
     
2,310
 
Net Decrease in Cash and Cash Equivalents
   
(3,527
)
   
(2,781
)
Cash and Cash Equivalents, Beginning of Period
   
24,035
     
24,912
 
Cash and Cash Equivalents, End of Period
 
$
20,508
   
$
22,131
 
                 
 The accompanying notes are an integral part of these consolidated statements.
               



AMERICAN COMMUNITY PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)
ORGANIZATION

American Community Properties Trust (“ACPT”) is a self-managed holding company that is primarily engaged in the business of investing in and managing multifamily rental properties as well as community development and homebuilding.  ACPT’s operations are primarily concentrated in the Washington, D.C. metropolitan area and Puerto Rico and are carried out through its U.S. subsidiaries, American Rental Properties Trust ("ARPT"), American Rental Management Company ("ARMC "), American Land Development, Inc. ("ALD") and their subsidiaries and its Puerto Rican subsidiary, IGP Group Corp. ("IGP Group").

ACPT is taxed as a U.S. partnership and its income flows through to its shareholders.  ACPT is subject to Puerto Rico income taxes on IGP Group’s taxable income, generating foreign tax credits that have been passed through to ACPT’s shareholders.  A federal tax regulation has been proposed that could eliminate ACPT’s ability to pass through these foreign tax credits to its shareholders.  Comments on the proposed regulation are currently being evaluated, and the final regulation will be effective for tax years beginning after the final regulation is ultimately published in the Federal Register.  ACPT’s income consists of (i) certain passive income from IGP Group, (ii) additional distributions from IGP Group including Puerto Rico taxes paid on behalf of ACPT and (iii) dividends from ACPT’s U.S. subsidiaries.  Other than Interstate Commercial Properties (“ICP”), which is a subsidiary of IGP Group and is taxed as a Puerto Rico corporation, the income from the remaining Puerto Rico operating entities passes through to IGP Group or ALD.  Of this income, only the portion attributable to the profits, losses or gains on the residential land sold in our Parque Escorial property passes through to ALD.  ALD, ARMC, and ARPT are taxed as U.S. corporations. 

(2)
LIQUIDITY RESOURCES AND DEBT MATURITIES
 
The Company is in discussions with lenders to refinance or extend certain debt that is scheduled to mature in the near term.  The Company’s loans contain various financial, cross collateral, cross default, technical and restrictive provisions.  The Company has one line of credit and one non-recourse mortgage that mature in 2009.

In Puerto Rico, a $10,000,000 credit facility, with an outstanding balance of $6,128,000 as of June 30, 2009, matures on August 31, 2009.   The Company anticipates that the balance outstanding on this facility will be approximately $8,300,000 as of August 31, 2009.   While the Company will seek to extend this loan and ultimately refinance it into a construction loan for the development of residential condominiums, the current state of the credit market may prevent these plans from occurring.  Interstate General Properties Limited Partnership S.E. (“IGP”), another subsidiary of the Company, provided a guarantee on this credit facility; however, the lender’s recourse under this guarantee is limited to the collateral, except in the case of fraud, intentional misrepresentation, or misappropriation of income associated with the collateral. In the event of a default, the lender’s sole recourse is to foreclose on the property.  An event of default on this facility will not affect any other debt facility held by the Company. The collateral to support the line of credit consists of approximately 500 acres of land, which has a cost basis of $11,650,000 at June 30, 2009.  This property generates rental revenue of approximately $204,000 annually for a quarry site.  The property is also in the planning stages to be developed as the Company’s second planned community in Puerto Rico.

On June 30, 2009, the Company successfully refinanced the existing mortgage on the Monserrate Associates apartment property.  The new mortgage for $10,920,000 is a 58-month term loan, with an amortization schedule of 25 years, maturing on April 30, 2014.  The loan bears interest at prime plus 300 basis points (6.25% as of June 30, 2009), with a balloon payment of $10,055,000 at the maturity date.  The refinancing generated net cash of approximately $4,000,000, which is currently being set aside in accordance with the provisions of the Company’s IGP LP sale agreement.  The proceeds from this refinance will benefit the purchasers of IGP LP.

As a result of the Company’s existing commitments and the downturn in the residential real estate market, the Company expects to use its resources conservatively in 2009.  Anticipated cash flow from operations, existing loans, refinanced or extended loans, asset sales, and new financing are expected to meet financial commitments for


the next twelve months.  However, there are no assurances that these funds will be generated.  Even without refinancing or extending existing loans, the Company believes that it has sufficient liquidity to satisfy its obligations as they come due, with the exception of the Puerto Rico debt discussed above.

 (3)
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the accounts of American Community Properties Trust and its majority owned subsidiaries and partnerships, after eliminating all intercompany transactions.  All of the entities included in the consolidated financial statements are hereinafter referred to collectively as the "Company" or "ACPT."

The Company consolidates entities that are not variable interest entities as defined by Financial Accounting Standard Board (“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, 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”).  The assets of consolidated real estate partnerships not 100% owned by the Company are generally not available to pay creditors of the Company.

     The consolidated group includes ACPT and its four major subsidiaries, ARPT, ARMC, ALD, and IGP Group.  In addition, the consolidated group includes the following other entities:
Alturas del Senorial Associates Limited Partnership
 
Land Development Associates S.E.
American Housing Management Company
 
LDA Group, LLC
    American Housing Properties L.P.
 
Milford Station I, LLC
Bannister Associates Limited Partnership
 
Milford Station II, LLC
Bayamon Garden Associates Limited Partnership
 
Monserrate Associates Limited Partnership
Carolina Associates Limited Partnership S.E.
 
New Forest Apartments, LLC
Coachman's Apartments, LLC
 
Nottingham South, LLC
Colinas de San Juan Associates Limited Partnership
 
Owings Chase, LLC
Crossland Associates Limited Partnership
 
Palmer Apartments Associates Limited Partnership
Escorial Office Building I, Inc.
 
Prescott Square, LLC
Essex Apartments Associates Limited Partnership
 
St. Charles Community, LLC
Fox Chase Apartments, LLC
 
San Anton Associates S.E.
Gleneagles Apartments, LLC
 
Sheffield Greens Apartments, LLC
Headen House Associates Limited Partnership
 
Torres del Escorial, Inc.
Huntington Associates Limited Partnership
 
Turabo Limited Dividend Partnership
Interstate Commercial Properties, Inc.
 
Valle del Sol Associates Limited Partnership
Interstate General Properties Limited Partnership, S.E.
 
Village Lake Apartments, LLC
Jardines de Caparra Associates Limited Partnership
 
Wakefield Terrace Associates Limited Partnership
Lancaster Apartments Limited Partnership
 
Wakefield Third Age Associates Limited Partnership

The Company’s investments in entities that it does not control are recorded using the equity method of accounting.  Refer to Note 4 for further discussion regarding Investments in Unconsolidated Real Estate Entities.

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 for the year ended December 31, 2008.  The operating results for the six and three months ended June 30, 2009 and 2008, are not necessarily indicative of the results that may be expected for the full year. Net income (loss) 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.

Sales, Profit Recognition and Cost Capitalization
 
In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 66, “Accounting for Sales of Real Estate,” community development land sales are recognized at closing only when sufficient down payments have been obtained, possession and other attributes of ownership have been transferred to the buyer, and ACPT has no significant continuing involvement.  Under the provisions of SFAS 66, related to condominium sales, revenues and costs are to be recognized when construction is beyond the preliminary stage, the buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit, sufficient units in the project have been sold to ensure that the property will not be converted to rental property, the sales proceeds are collectible and the aggregate sales proceeds and the total cost of the project can be reasonably estimated.  Accordingly we recognize revenues and costs upon settlement with the homebuyer which does not occur until after we receive use and occupancy permits for the building.
 
The costs of developing the land are allocated to our land assets and charged to cost of sales as the related inventories are sold using the relative sales value method which rely on estimated costs and sales values.   In accordance with SFAS No. 67 "Accounting for Costs and Initial Rental Operations of Real Estate Projects", the costs of acquiring and developing land are allocated to these assets and charged to cost of sales as the related inventories are sold. Within our homebuilding operations, the costs of acquiring the land and construction of the condominiums are allocated to these assets and charged to cost of sales as the condominiums are sold.  The cost of sales is determined by the percentage of completion method.  The Company considers interest expense on all debt available for capitalization to the extent of average qualifying assets for the period.  Interest specific to the construction of qualifying assets, represented primarily by our recourse debt, is first considered for capitalization.  To the extent qualifying assets exceed debt specifically identified, a weighted average rate including all other debt is applied.  Any excess interest is reflected as interest expense.

Impairment of Long-Lived Assets and Adjustments to Assets Held for Sale
 
ACPT carries its rental properties, homebuilding inventory, land and development costs at the lower of cost or fair value in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."  For real estate assets such as our rental properties which the Company plans to hold and use, which includes property to be developed in the future, property currently under development and real estate projects that are completed or substantially complete, we evaluate whether the carrying amount of each of these assets will be recovered from their undiscounted future cash flows arising from their use and eventual disposition.  If the carrying value were to be greater than the undiscounted future cash flows, we would recognize an impairment charge to the extent the carrying amount is not recoverable.  Our estimates of the undiscounted operating cash flows expected to be generated by each asset are performed on an individual project basis and based on a number of assumptions that are subject to economic and market uncertainties, including, among others, demand for apartment units, competition, changes in market rental rates, and costs to operate and complete each project.
 
Assets classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell and are not depreciated or amortized while classified as held for sale. Fair value of assets held for sale is


based on estimated future cash flows, which includes expected proceeds to be received. ACPT recognizes a loss for any initial or subsequent write-down to fair value less costs to sell and recognizes a gain for any subsequent increase in fair value less costs to sell, up to the cumulative loss previously recognized. During the six months ended June 30, 2009, ACPT recognized a loss on write-down to fair value less cost to sell of $838,000 related to the revaluation of the Baltimore properties.   The Company has binding agreements for three of the five properties (Nottingham, Milford I and II) subject to loan assumption and has recently re-listed Owings Chase and Prescott Square. As a result, the Company revised its estimated sales values determined though discussions with our broker, which represent Level 3 inputs under the fair value hierarchy in SFAS No. 157, “Fair Value Measurements”, and an asset write-down was required to further reduce the carrying values of the Baltimore properties to their estimated fair market value less costs to sell.
       
The Company evaluates, on an individual project basis, whether the carrying value of its substantially completed real estate projects, such as our homebuilding inventory that are to be sold, will be recovered based on the fair value less cost to sell.  If the carrying value were to be greater than the fair value less costs to sell, we would recognize a charge to the extent the carrying amount is not recoverable.  Our estimates of the fair value less costs to sell are based on a number of assumptions that are subject to economic and market uncertainties, including, among others, comparable sales, demand for commercial and residential lots and competition.  The Company performed similar reviews for land held for future development and sale considering such factors as the cash flows associated with future development expenditures.  Should this evaluation indicate that an impairment has occurred, the Company will record an impairment charge equal to the excess of the historical cost over fair value less costs to sell.  There were no impairment charges for the six months ended June 30, 2009 and 2008.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, unrestricted deposits with financial institutions and short-term investments with original maturities of three months or less. Restricted cash and escrow deposits include funds held in restricted escrow accounts used for maintenance and capital improvements with the approval of the U.S. Department of Housing and Urban Development (“HUD”) and/or the State Finance Agency.  The account also includes tenant security deposits as well as deposits collected within our homebuilding operations as well as funds in an escrow account that are restricted for the repayment of the Charles County bonds.
 
As of June 30, 2009, the Company had cash and cash equivalents of $20,508,000 and restricted cash of $11,546,000.  Included in the Company’s cash and cash equivalents is $15,199,000 of cash located within multifamily apartment entities, over which the Company does not have direct control.  Cash flow from our consolidated apartment properties whose mortgage loans are insured by the Federal Housing Authority ("FHA"), or financed through the housing agencies in Maryland, Virginia or Puerto Rico (the "Financing Agencies,") are subject to guidelines and limits established by the apartment partnerships' regulatory agreements with HUD and the State Financing Agencies.  For two of our Puerto Rico partnerships, the regulatory agreements also require that if cash from operations exceeds the allowable cash distributions, the surplus must be deposited into restricted escrow accounts held by the mortgagee and controlled by HUD or the applicable Financing Agency.

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

Operating Real Estate

The table below presents the major classes of depreciable assets as of June 30, 2009 and December 31, 2008 (in thousands):
 
   
June 30, 
2009
   
December 31,   2008
 
   
(Unaudited)
       
Building
 
$
142,678
   
$
141,917
 
Building improvements
   
2,678
     
1,463
 
Equipment
   
5,740
     
6,912
 
     
151,096
     
150,292
 
Less: Accumulated depreciation
   
82,672
     
79,379
 
     
68,424
     
70,913
 
Land
   
11,950
     
12,005
 
Operating properties, net
 
$
80,374
   
$
82,918
 
                 
 
 
Other Property and Equipment

In addition, the Company owned other property and equipment of $822,000 and $920,000, net of accumulated depreciation of $2,648,000 and $2,553,000, respectively, as of June 30, 2009 and December 31, 2008, respectively.  These balances include $22,000 which has been reallocated to property and related assets held for sale.

Depreciation

Total depreciation expense was $2,525,000 and $5,042,000 for the six months ended June 30, 2009 and 2008, respectively.  For the six months ended June 30, 2008, $2,319,000 has been reclassified as discontinued operations. Total depreciation expense was $1,267,000 and $2,445,000 for the three months ended June 30, 2009 and 2008, respectively.  For the three months ended June 30, 2008, $1,168,000 has been reclassified as discontinued operations.
 
Impact of Recently Adopted Accounting Standards
 
In September 2006, the FASB issued SFAS No. 157 which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. SFAS No. 157 applies to accounting pronouncements that require or permit fair value measurements, except for share-based payments under SFAS No. 123(R). We adopted the recognition and disclosure provisions of SFAS No. 157 for financial assets and financial liabilities and for nonfinancial assets and nonfinancial liabilities that are re-measured at least annually effective January 1, 2008; the adoption did not have a material impact on our financial position, results of operations or cash flows. In accordance with the FASB Staff Position (“FSP”) SFAS No. 157-2, “Effective Date of FASB Statement No. 157”, we adopted the provisions of SFAS No. 157 for all other nonfinancial assets and nonfinancial liabilities effective January 1, 2009 and the adoption did not have a material impact on our financial position, results of operations or cash flows.
 
In December 2007, the FASB issued SFAS 160, "Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51" ("SFAS 160").  SFAS 160 replaces the concept of minority interest with noncontrolling interests in subsidiaries.  Noncontrolling interests are now reported as a component of equity in the consolidated statement of financial position.  Earnings attributable to noncontrolling interests will continue to be reported as a part of consolidated earnings; however, SFAS 160 requires that income attributable to both controlling and noncontrolling interests be presented separately on the face of the consolidated income statement.  In addition, SFAS 160 provides that when losses attributable to noncontrolling interests exceed the noncontrolling interest’s basis, losses continue to be attributed to the noncontrolling interest as opposed to being absorbed by the consolidating entity.  SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively.   The Company adopted SFAS 160 on January 1, 2009.  The effect of adoption was a reclassification of Minority Interest, historically shown in liabilities, to a new line item, Noncontrolling Interests, included in shareholders’ equity, and


the reclassification of Minority Interest from Retained Deficit as it represented distributions and losses in excess of basis.  

The following table illustrates the pro forma amounts of loss from continuing operations, discontinued operations and net income that would have been attributed to the Company’s shareholders for the six and three months ended June 30, 2009, had the provisions of Accounting Research Bulletin No. 51, prior to their amendment by SFAS 160 been applied (in thousands, except per unit amounts):

   
Six Months
   
Three Months
 
       (Loss) income from continuing operations
  $ (996 )   $ (145 )
Income from discontinued operations
    89       1,003  
Pro forma net (loss) income attributable to ACPT’s shareholders 
  $ (907 )   $ 858  
                 
Basic and diluted earnings (loss) per common unit
               
(Loss) income from continuing operations
  $ (0.19 )   $ (0.03 )
Income from discontinued operations
    0.02       0.19  
Pro forma net (loss) income attributable to ACPT’s shareholders
  $ (0.17 )   $ 0.16  
                 

In December 2007, the FASB issued Statement No. 141R, “Business Combinations” (“SFAS 141R”).  This statement changes the accounting for acquisitions specifically eliminating the step acquisition model, changing the recognition of contingent consideration from being recognized when it is probable to being recognized at the time of acquisition, disallowing the capitalization of transaction costs and delays when restructurings related to acquisitions can be recognized.  The Company adopted SFAS 141R on January 1, 2009, and it did not have a material impact on the Company's results of operations.
 
In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8 Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.  This FSP amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to require public entities to provide additional disclosures about transfers of financial assets.  It also amends FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities. See Note 4 for the required disclosures.

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance for determining the fair value of assets and liabilities when the volume and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also provides guidance on identifying circumstances that indicate an observed transaction used to determine fair value is not orderly and, therefore, is not indicative of fair value.  The Company adopted FSP FAS 157-4 effective April 1, 2009.  There was not a material impact on its results of operations, cash flows or financial condition.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP expands the fair value disclosure requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to include interim periods, and amends APB Opinion No. 28, Interim Financial Reporting, to require these disclosures in summarized financial information in interim reporting periods. The Company adopted FSP FAS 107-1 effective April 1, 2009.  The balance sheet carrying amounts of cash and cash equivalents, receivables and other current assets approximate fair value due to the short-term nature of these itemsThe fair value of our non-recourse and recourse debt is sensitive to fluctuations in interest rates.  The carrying amount of these financial instruments approximates their fair value as of June 30, 2009.
   
    The fair value of our non-recourse and recourse debt is sensitive to fluctuations in interest rates. As of June 30, 2009, the book value of long-term fixed rate debt was $306,588,000, and the fair value of total debt was $333,361,000. As of December 31, 2008, the book value of long-term fixed rate debt was $294,721,000, and the fair value of total debt was $343,076,000.  Fair value was determined by discounting future cash flows using borrowing rates currently available to the Company for debt with similar terms and maturities. This represents Level 3 under the fair value hierarchy in SFAS No. 157.  Considerable judgement is necessary to estimate the fair value of financial instruments.  The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments.
 
In May 2009, the FASB issued SFAS No. 165, Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued.  This statement details the period after the balance sheet date during which management shall evaluate events or transactions, the circumstances under which an entity shall recognize events or
 
- 13 -
 
transactions in it financial statements, and the disclosures that an entity shall make about events and transactions that occurred after the balance sheet date.  We adopted the provisions of SFAS No. 165 effective April 1, 2009.  See Note 13 for required disclosures.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS No. 168”), which provides certain changes to the evaluation of a variable interest entity (VIE) including requiring a qualitative rather than quantitative analysis to determine the primary beneficiary of a VIE, continuous assessments of whether an enterprise is the primary beneficiary of a VIE, and enhanced disclosures about an enterprise’s involvement with a VIE. The statement is effective January 1, 2010, and is applicable to all entities in which an enterprise has a variable interest. We are currently evaluating the impact SFAS No. 167 will have on our consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of SFAS  No. 162” (“SFAS No. 168”), which makes the FASB Accounting Standards Codification (“Codification”) the single source of authoritative literature for U.S. accounting and reporting standards. The Codification is not meant to change existing GAAP but rather provide a single source for all literature. SFAS No. 168 is effective for the interim period ending September 30, 2009, and will require us to change certain disclosures in our financial statements to reflect Codification references rather than references to FASB Statements, Staff Positions or Emerging Issues Task Force Abstracts. The adoption of SFAS No. 168 will not have a material impact on our consolidated financial statements

 (4)
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) based on a probability weighted cash flow analysis.  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.
 
Apartment Partnerships

The unconsolidated apartment partnerships as of June 30, 2009 and 2008 included Brookside Gardens Limited Partnership (“Brookside”) and Lakeside Apartments Limited Partnership (“Lakeside”) that collectively represent 110 rental units.  We have determined that these two entities are variable interest entities under FIN 46(R).  However, the Company is not required to consolidate the partnerships due to the fact that the Company is not the primary beneficiary and does not bear the majority of the risk of expected losses.  The Company holds an economic interest in Brookside and Lakeside but, as a general partner, we have significant influence over operations of these entities that is disproportionate to our economic ownership.  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 consisting of our net investment, loans and unpaid fees for Brookside of $253,000 and $231,000 and for Lakeside of $147,000 and $165,000 as of June 30, 2009 and December 31, 2008, respectively.  All amounts are fully reserved and, accordingly, there is no carrying value associated with the Company’s investments in these unconsolidated real estate entities for the periods presented.  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.  The Company’s involvement with Brookside and Lakeside has not had a material affect on the Company’s financial position, financial performance and cash flows.

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 a 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.

Land Development/Homebuilding Joint Ventures

In October 2008, the Company entered into an agreement with Surrey Homes, LLC (“Surrey Homes”) to contribute $2,000,000 over the next year in exchange for a 50% ownership interest of the Series A Units.  During the fourth quarter of 2008 and first two quarters of 2009, ACPT contributed $1,500,000 with the remainder to be contributed during the third quarter of 2009.  Surrey Homes’ business model is focused on providing affordable quality homes with the lowest ongoing cost of maintenance through energy efficiency and other green initiatives.  Surrey Homes is establishing itself as a low overhead, lot option home builder.

We have determined that our investment in Surrey Homes is a variable interest entity under FIN 46(R); however, we are not required to consolidate the partnership as the Company is not the primary beneficiary and does not bear the majority of the risk of expected losses.  In accordance with SOP 78-9 and APB No. 18, this investment is accounted for under the equity method, and as of June 30, 2009 and December 31, 2008, represented $1,376,000 and $489,000 of the Company’s investments in unconsolidated real estate entities, respectively.  The Company is exposed to total losses consisting of our cumulative initial investment of $1,500,000.  Other than funding the equity investment, the Company’s involvement in Surrey Homes has not materially affected the Company’s financial position, financial performance and cash flows.
 
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 and homebuilding operation, which are all accounted for as “investments in unconsolidated real estate entities” on the balance sheet.

   
Apartment
   
Commercial
             
   
Properties
   
Property
   
Homebuilding
   
Total
 
   
(in thousands)
 
Summary of Financial Position
                       
  Total Assets
                       
    June 30, 2009
 
$
4,717
   
$
27,128
   
$
3,742
   
$
35,587
 
    December 31, 2008
   
4,781
     
27,005
     
2,478
     
34,264
 
  Total Non-Recourse Debt
                               
    June 30, 2009
   
3,088
     
22,375
     
-
     
25,463
 
    December 31, 2008
   
3,123
     
22,380
     
-
     
25,503
 
  Total Other Liabilities
                               
    June 30, 2009
   
981
     
111
     
29
     
1,121
 
    December 31, 2008
   
960
     
153
     
-
     
1,113
 
  Total Equity
                               
    June 30, 2009
   
648
     
4,642
     
3,276
     
8,566
 
    December 31, 2008
   
698
     
4,472
     
2,478
     
7,648
 
  Company's Investment, net (1)
                               
    June 30, 2009
   
-
     
4,613
     
1,376
     
5,989
 
    December 31, 2008
   
-
     
4,632
     
489
     
5,121
 

                                 
Summary of Operations
                               
  Total Revenue
                               
    Six Months Ended June 30, 2009
   
417
     
1,737
     
24
     
2,178
 
    Six Months Ended June 30, 2008
   
418
     
1,789
     
-
     
2,207
 
    Three Months Ended June 30, 2009
   
207
     
878
     
13
     
1,098
 
    Three Months Ended June 30, 2008
   
210
     
893
     
-
     
1,103
 
  Net Income (Loss)
                               
    Six Months Ended June 30, 2009
   
(50
)
   
876
     
(226
)
   
600
 
    Six Months Ended June 30, 2008
   
(67
)
   
909
     
-
     
842
 
    Three Months Ended June 30, 2009
   
(19
)
   
454
     
(109
)
   
326
 
    Three Months Ended June 30, 2008
   
(32
)
   
453
     
-
     
421
 
  Company's recognition of equity in Earnings (Loss)
                               
    Six Months Ended June 30, 2009
   
-
     
319
     
(113
)
   
206
 
    Six Months Ended June 30, 2008
   
-
     
331
     
-
     
331
 
    Three Months Ended June 30, 2009
   
-
     
168
     
(59
)
   
109
 
    Three Months Ended June 30, 2008
   
-
     
163
     
-
     
163
 
 
Summary of Cash Flows
                               
  Cash flows from operating activities
                               
    Six Months Ended June 30, 2009
   
106
     
949
     
(197
)
   
858
 
    Six Months Ended June 30, 2008
   
49
     
977
     
1
     
1,027
 
    Three Months Ended June 30, 2009
   
45
     
150
     
(110
)
   
85
 
    Three Months Ended June 30, 2008
   
44
     
58
     
7
     
109
 
  Company's share of cash flows from operating activities
                               
    Six Months Ended June 30, 2009
   
1
     
429
     
(99
)
   
331
 
    Six Months Ended June 30, 2008
   
-
     
442
     
1
     
443
 
    Three Months Ended June 30, 2009
   
-
     
67
     
(56
)
   
11
 
    Three Months Ended June 30, 2008
   
-
     
26
     
4
     
30
 
  Operating cash distributions
                               
    Six Months Ended June 30, 2009
           
706
     
-
     
706
 
    Six Months Ended June 30, 2008
   
-
     
773
     
-
     
773
 
    Three Months Ended June 30, 2009
   
-
     
362
     
 -
     
362
 
    Three Months Ended June 30, 2008
   
-
     
386
     
-
     
386
 
  Company's share of operating
                               
  cash distributions
                               
    Six Months Ended June 30, 2009
           
338
     
-
     
338
 
    Six Months Ended June 30, 2008
   
-
     
351
     
-
     
351
 
    Three Months Ended June 30, 2009
   
-
     
164
     
-
     
164
 
    Three Months Ended June 30, 2008
   
-
     
175
     
-
     
175
 

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

 
(5)
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, 2009 and December 31, 2008 (in thousands):

   
Maturity
   
Interest
   
Outstanding as of
 
   
Dates
   
Rates
   
June 30,
   
December 31,
 
   
From/To
   
From/To
   
2009
   
2008
 
               
(Unaudited)
   
(Audited)
 
Recourse Debt
                       
  Community Development  (a)(b)(c)(d)
    08-31-09/03-01-23       3.25%/8%     $ 38,877     $ 39,232  
  General obligations  (e)
    07-01-09/03-13-12    
Non-interest
                 
           
bearing/8.55%
      166       184  
Total Recourse Debt
                    39,043       39,416  
                                 
Non-Recourse Debt  (f)(g)
                               
  Investment Properties  (h)
    12-01-13/07-01-50       4.95%/6.9%       173,736       168,221  
  Held for Sale – Non-Recourse Debt  (i)
    05-01-12/09-13-19       5.3%/10%       111,256       107,899  
Total Non-Recourse Debt
                    284,992       276,120  
    Total Debt
                  $ 324,035     $ 315,536  
 
a.  
As of June 30, 2009, $26,388,000 of the community development recourse debt is owed to Charles County Commissioners and relates to the general obligation bonds issued by the Charles County government, with 15 year amortization of maturities with the earliest in June, 2019, as described in detail under the heading "Financial Commitments" in Note 6.  As of June 30, 2009, the Company has a receivable balance related to the bonds of $2,622,000.
 
b.  
On April 14, 2006, the Company closed a three year, $14,000,000 revolving acquisition and development loan (“the Revolver”) secured by a first lien deed of trust on property located in St. Charles, Maryland.  During the first quarter of 2009, the Company renegotiated the terms of the agreement.  The loan bears interest at Prime plus 1.25% (4.5% at June 30, 2009) and matures on March 31, 2010.  As of June 30, 2009, $3,046,000 was outstanding on the Revolver.

c.  
Land Development Associates, S.E (“LDA”) has a $10,000,000 revolving line of credit facility that bears interest at a fluctuating rate equivalent to the LIBOR Rate plus 225 basis points (3.43% as of June 30, 2009) and matures on August 31, 2009.  The facility is to be used to fund the development of infrastructure of Parque Escorial and Parque El Comandante.  The outstanding balance of this facility on June 30, 2009, was $6,128,000.
 
d.  
On April 2, 2008, the Company secured a two-year, $3,600,000 construction loan for the construction of a commercial restaurant/office building within the O’Donnell Lake Restaurant Park.  The facility is secured by the land along with any improvements constructed and bears interest at Wall Street Journal published Prime Rate (3.25% at June 30, 2009).  At the end of the two-year construction period, the Company may convert the loan to a 5-year permanent loan, amortized over a 30 year period at a fixed interest rate to be determined.  As of June 30, 2009, $3,315,000 was outstanding under this facility leaving $286,000 available to fund completion of the building.


e  
On April 14, 2006, the Company closed a three year, $14,000,000 revolving acquisition and development loan (“the Revolver”) secured by a first lien deed of trust on property located in St. Charles, Maryland.  During the first quarter of 2009, the Company renegotiated the terms of the agreement.  The loan bears interest at Prime plus 1.25% (4.5% at June 30, 2009) and matures on March 31, 2010.  As of June 30, 2009, $3,046,000 was outstanding on the Revolver.

f.  
Land Development Associates, S.E (“LDA”) has a $10,000,000 revolving line of credit facility that bears interest at a fluctuating rate equivalent to the LIBOR Rate plus 225 basis points (3.43% as of June 30, 2009) and matures on August 31, 2009.  The facility is to be used to fund the development of infrastructure of Parque Escorial and Parque El Comandante.  The outstanding balance of this facility on June 30, 2009, was $6,128,000.
 
g.  
On April 2, 2008, the Company secured a two-year, $3,600,000 construction loan for the construction of a commercial restaurant/office building within the O’Donnell Lake Restaurant Park.  The facility is secured by the land along with any improvements constructed and bears interest at Wall Street Journal published Prime Rate (3.25% at June 30, 2009).  At the end of the two-year construction period, the Company may convert the loan to a 5-year permanent loan, amortized over a 30 year period at a fixed interest rate to be determined.  As of June 30, 2009, $3,315,000 was outstanding under this facility leaving $286,000 available to fund completion of the building.

h.  
The general recourse debt outstanding as of June 30, 2009 is made up of various capital leases outstanding within our U.S. and Puerto Rico operations, as well as installment loans for vehicles and other miscellaneous equipment.
 
i.  
The non-recourse debt related to the investment properties is collateralized by the multifamily rental properties and the office building in Parque Escorial.  As of June 30, 2009, approximately $73,089,000 of this debt is secured by the Federal Housing Administration ("FHA") or the Maryland Housing Fund.

j.  
On May 12, 2008, IGP agreed to provide a fixed charge and debt service guarantee related to the Escorial Office Building I, Inc. (“EOB”) mortgage.  The fixed charge and debt service guarantee requires IGP to contribute capital in cash in such amounts required to cause EOB to comply with the related financial covenants.  The guarantee will remain in full force until EOB has complied with the financial covenants for four consecutive quarters.
 
k.  
On January 28, 2009, the Company completed the initial closing of a 6.9 percent, $25,045,000 non-recourse construction loan to fund the construction costs for a new apartment property in St. Charles' Fairway Village.  As of June 30, 2009, the balance on the loan was $6,667,000. 
 
l.  
On June 30, 2009, IGP refinanced the existing mortgage on the Monserrate Associates apartment property.  The new mortgage for $10,920,000 is a 58-month term loan, with an amortization schedule of 25 years, maturing on April 30, 2014.  The loan bears interest at prime plus 300 basis points (6.25% as of June 30, 2009), with a balloon payment of $10,055,000 at the maturity date. 
 
 The Company’s loans contain various financial, cross collateral, cross default, technical and restrictive provisions.  As of June 30, 2009, the Company is in compliance with all but one of its financial covenants and the other provisions of its loan agreements.  As of June 30, 2009, the Company failed to meet the Minimum Net Worth restriction at the ACPT level as tangible net worth was $2,085,000.  The Company has received a waiver of this covenant requirement through March 31, 2010.

 
 (6)
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.  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
 
 
- 18 -

 
guaranteed by letters of credit provided by Lennar Corporation (“Lennar”) as part of a residential lot sales contract for 1,950 lots in Fairway Village.  The Bonds were issued in three installments with the final $6,000,000 installment issued in March 2006.  The Bonds bear interest rates ranging from 4% to 8%, for a blended lifetime rate for total Bonds issued to date of 5.1%, and call for semi-annual interest payments and annual principal payments and mature in 15 years.  Under the terms of Bond repayment agreements between the Company and the County, the Company is obligated to pay interest and principal to the County based 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 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.  The County and the Lennar agreement require ACPT to fund an escrow account from lot sales to be used to repay the principal portion of these Bonds.

In August 2005, the Company signed a memorandum of understanding ("MOU") with the Charles County Commissioners regarding a land donation that is now the site of a minor league baseball stadium and entertainment complex.  Under the terms of the MOU, the Company donated 42 acres of land in St. Charles to the 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.  In return, the County agreed to issue $12,000,000 of general obligation bonds to finance the infrastructure improvements.  In March 2006, $4,000,000 of bonds were issued for this project, with an additional $3,000,000 issued in both March 2007 and March 2008 and $2,000,000 in March 2009.  These bonds bear interest rates ranging from 4.9% to 8%, for a blended rate of 5.3%, call for semi-annual interest payments and annual principal payments, and mature in 15 years.  The terms of the bond repayment agreement are similar to those noted above.  In addition, the County agreed to issue an additional 100 school allocations a year to St. Charles commencing with the issuance of bonds.

During 2006, the Company reached an agreement with the County whereby the Company receives interest payments on any undistributed bond proceeds held in escrow by the County.  The agreement covers the period from July 1, 2005 through the last draw made by the Company.

As of June 30, 2009, ACPT has purchased $15,695,000 of surety bonds for the completion of land development projects with Charles County with maturity dates ranging from July 6, 2009 to September 4, 2010; substantially all of which are for the benefit of the Charles County Commissioners.

Consulting Agreements and Severance Arrangements

ACPT entered into a consulting agreement with Carlos Rodriguez, the former Executive Vice President and Chief Executive Officer for IGP, a wholly owned Puerto Rico subsidiary of ACPT, effective July 1, 2008.  Under the terms of the Consulting Agreement, the Company will pay Mr. Rodriguez $100,000 per year through June 2010.  Payments under this consulting agreement were fully accrued as of December 31, 2008.

On October 1, 2008, Mr. Edwin L. Kelly notified the Company that he would retire as the Company’s President and Chief Operating Officer effective December 1, 2008.  Pursuant to his employment agreement, Mr. Kelly received a severance payment of $1,500,000.  The Company has also agreed to enter into a consulting agreement with Mr. Kelly providing compensation for his services at a rate of $10,000 per month, for an initial term of one year.  Payments under this consulting agreement were fully accrued as of December 31, 2008.
 



Gleneagles Construction Contract
 
On January 28, 2009, the Company completed the initial closing of a 6.9 percent, $25,045,000 non-recourse construction loan to fund the construction costs for a new apartment property in St. Charles' Fairway Village.  As of June 30, 2009, the balance on the loan was $6,667,000.  The Company has entered into a construction contract of $18,291,000 to complete this property.
        
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, 2009, ACPT has guaranteed $38,877,000 of such debt.  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.   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 the Form 10-K for the year ended December 31, 2008.
 
Due to the inherent uncertainties of the judicial process, we are unable to either predict the outcome of or estimate a range of potential loss associated with certain matters discussed above.  While we intend to vigorously defend these matters and believe we have meritorious defenses available to us, there can be no assurance that we will prevail.  If these matters are not resolved in our favor, we believe we are insured for potential losses unless otherwise stated.  Any amounts that exceed our insurance coverage could have a material adverse effect on our financial condition and results of operations.

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 these 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 these ordinary course 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.

 (7)
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 is reflected below (in thousands):

                                                                                                                                             
 
- 20 -

 

 
 CONSOLIDATED STATEMENT OF INCOME:
   
Six Months Ended
June 30,
   
Three Months Ended
 June 30,
 
     
2009
   
2008
   
2009
   
2008
 
Management and Other Fees
                         
  Unconsolidated subsidiaries with third party partners
   (A)
  $ 21     $ 21     $ 11     $ 11  
                                   
Rental Property Revenues
   (B)
  $ -     $ 30     $ -     $ 15  
                                   
Interest and Other Income
                                 
  Unconsolidated real estate entities with third party partners
    $ 5     $ 4     $ 3     $ 2  
                                   
General and Administrative Expense
                                 
  Reserve additions (reductions) and other write-offs-
                                 
    Unconsolidated real estate entities with third party partners
   (A)
  $ 8     $ (9 )   $ 12     $ 13  
    Reimbursement to IBC for ACPT's share of J. Michael Wilson's salary
      212       207       108       103  
  Reimbursement of administrative costs-
                                 
    Affiliates of J. Michael Wilson, Chairman
      (8 )     (10 )     (4 )     (5 )
  Consulting Fees-
                                 
    James J. Wilson, IGC Chairman and Director
  (B1)
    --       100       --       50  
    Thomas J. Shafer, Trustee
  (B2)
    5       30       --       15  
      $ 217     $ 318     $ 116     $ 176  


               
BALANCE SHEET:
   
Balance
 June 30, 
2009
   
Balance December 31, 2008
Other Assets
           
Receivables – All unsecured and due on demand
           
  Unconsolidated subsidiaries
    $ 3     $ 10  
  Affiliate of J. Michael Wilson, Chairman
      10       2  
Total
    $ 13     $ 12  
                   
Additional Paid-in Capital
  (B3)
  $ 821     $ 562  

(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 collectability 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.


 
- 21 -

 
 
 
 
(B)   Other
 
Other transactions with related parties are as follows:
1)  
Represents fees paid to James J. Wilson pursuant to a consulting and retirement agreement.  At Mr. Wilson's request, payments are made to Interstate Waste Technologies, Inc. (“IWT”).
2)  
Represents fees paid to Thomas J. Shafer, a Trustee, pursuant to a consulting agreement.
3)  
A primary shareholder of the Company agreed in principle to provide the Company’s Chief Executive Officer with the economic benefit of 185,550 shares of their common stock as of October 1, 2008 in accordance with the five year vesting schedule.  According to SFAS 123(R), any share-based payments awarded to an employee of the reporting entity by a related party for services provided to the entity are share-based payment transactions under SFAS123(R) unless the transfer is clearly for a purpose other than compensation for services to the reporting entity.  Therefore, in essence, the economic interest holder makes a capital contribution to the reporting entity, and the reporting entity makes a share-based payment to its employee in exchange for services rendered.   The Company recognized $259,000 and $246,000 in compensation expense in the six and three months ended June 30, 2009, respectively, related to this grant.
 
(8)
INCOME TAXES

ACPT’s subsidiaries, ARMC, ALD and ARPT, are subject to federal and state income tax.  ACPT is subject to Puerto Rico income tax on its Puerto Rico source income.

The United States effective tax rates for the six months ended June 30, 2009 and 2008 were 47%and 25%, respectively.  The United States effective tax rates for the three months ended June 30, 2009 and 2008 were (115%)  and 33%, respectively.  The statutory rate is 40%.  The difference in the statutory tax rate and the effective tax rate for the pre-tax loss during the six and three months ended June 30, 2009 was primarily due to accrued taxes and penalties on uncertain tax positions, certain non-deductible compensation expenses and the change in the deferred tax asset valuation allowance.  The difference in the statutory tax rate and the effective tax rate for the pre-tax loss during the six and three months ended June 30, 2008 was primarily due to a relatively small net loss reported, the related benefit for which, was partially offset by accrued taxes and penalties on uncertain tax positions.

The effective tax rates on the Puerto Rico source income for the six months ended June 30, 2009 and 2008 were 25% and 55%, respectively. The effective tax rates on the Puerto Rico source income for the three months ended June 30, 2009 and 2008 were 26% and 49%, respectively.  The statutory rate is 29%.   The difference in the statutory tax rate and the effective tax rate for the pre-tax income during the six and three months ended June 30, 2009, was primarily due to tax exempt income and the change in the deferred tax asset valuation allowance offset in part by deferred items for which no current benefit may be recognized and as a result of the pending sale, a basis adjustment to Company’s investment in the Puerto Rican apartment properties.  The difference in the statutory tax rate and the effective tax rate for the pre-tax loss during the six and three months ended June 30, 2008, was primarily due to tax exempt income offset in part by the double taxation on the earnings of our wholly owned corporate subsidiary, ICP, and deferred items for which no current benefit may be recognized. 

The total amount of unrecognized tax benefits as of June 30, 2009, was $14,204,000.  Included in the balance at June 30, 2009, were $51,000 of tax positions that, if recognized, would affect the effective tax rate.  A reconciliation of the beginning and ending amount of unrecognized tax benefit (in thousands) is as follows:
 
Unrecognized tax benefit at December 31, 2008
  $ 15,543  
Change attributable to tax positions taken during a prior period
    (1,339 )
Change attributable to tax positions taken during the current period
    -  
Decrease attributable to settlements with taxing authorities
    -  
Decrease attributable to lapse of statute of limitations
    -  
Unrecognized tax benefit at June 30, 2009
  $ 14,204  
 
In accordance with our accounting policy, we present accrued interest related to uncertain tax positions as a component of interest expense and accrued penalties as a component of income tax expense on the Consolidated


Statement of Income.  Our Consolidated Statements of Income for the six months ended June 30, 2009 and 2008, included interest expense of $645,000 and $733,000, respectively and penalties of ($26,000) and $38,000, respectively.  Our Consolidated Statements of Income for the three months ended June 30, 2009 and 2008, included interest expense of $309,000 and $398,000, respectively, and penalties of ($18,000) and $14,000, respectively.  Our Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008, included accrued interest of $4,861,000 and $3,149,000, respectively and accrued penalties of $1,088,000 and $1,109,000, respectively.

The Company currently does not have any tax returns under audit by the United States Internal Revenue Service or the Puerto Rico Treasury Department.  However, the tax returns filed in the Unites States for the years ended December 31, 2005 through 2008 remain subject to examination.  For Puerto Rico, the tax returns for the years ended December 31, 2004 through 2008 remain subject to examination.  Within the next twelve months, the Company does not anticipate any payments related to settlement of any tax examinations.  There is a reasonable possibility within the next twelve months the amount of unrecognized tax benefits will decrease by $604,000 when the related statutes of limitations expire and certain payments are recognized as taxable income.

 (9)
HELD FOR SALE ASSETS

A real estate investment held for sale is carried at the lower of its carrying amount or estimated fair value, less the cost of a potential sale.  Depreciation is suspended during the period the property is held for sale.  The Company has binding agreements for three of the five properties (Nottingham, Milford I and II) and has recently re-listed Owings Chase and Prescott Square.  The Company intends to sell all five of these properties and accordingly, believes that held for sale presentation is appropriate.

Also, in the first quarter of 2009, the Company executed a definitive agreement to sell the Puerto Rico apartment properties for $14,300,000.  The definitive agreement is subject to customary closing conditions, including the ability of the purchaser to obtain financing, and we anticipate closing on the sale of these properties in the third quarter of 2009.  The assets, liabilities, and results of operations for IGP comprise the Puerto Rican Real Estate Operating segment.
 
In accordance with SFAS No. 144, the carrying values of the Baltimore and Puerto Rican Properties’ assets and related liabilities have been classified as “held for sale” on the Company’s consolidated balance sheets at June 30, 2009 and December 31, 2008. As of June 30, 2009, the major classes of assets included in assets held for sale are $74,861,000 in investments in real estate, $11,651,000 in restricted cash and escrow balances, and $3,918,000 in deferred charges and other assets.  Liabilities related to assets held for sale includes $111,256,000 in non-recourse debt.
 
In addition, the properties’ results of operations have been classified as “discontinued operations” for all periods presented in the consolidated statements of operations.  The following is a summary of the components of income from discontinued operations for the six and three months ended June 30, 2009 and 2008.




For the six months ended June 30,
 
2009
   
2008
 
Revenues
           
  Rental property revenues
 
$
14,405
   
$
14,057
 
  Management and other fees
   
242
     
240
 
    Total revenues
   
14,647
     
14,297
 
                 
Expenses
               
  Rental property operating expenses
   
6,944
     
7,200
 
  General, administrative, selling, and marketing
   
569
     
978
 
  Write-down of assets
   
839
     
-
 
  Depreciation expense
   
-
     
2,318
 
    Total expenses
   
8,352
     
10,496
 
                 
Operating Income
   
6,295
     
3,801
 
                 
Other expense
               
  Interest expense
   
(3,390
)
   
(3,559
)
Income before provision (benefit) for income taxes
   
2,905
     
    242
 
Provision (benefit) for income taxes
   
617
     
(275
)
Income from discontinued operations
   
  2,288
     
517
 
  Noncontrolling interest in consolidated entities
   
        (986
)
   
(1,198
) 
  Income (loss) from discontinued operations attributable to ACPT
 
    1,302
   
(681
 
For the three months ended June 30,
 
2009
   
2008
 
Revenues
           
  Rental property revenues
 
$
7,238
   
$
7,060
 
  Management and other fees
   
122
     
121
 
    Total revenues
   
7,360
     
7,181
 
                 
Expenses
               
  Rental property operating expenses
   
3,492
     
3,685
 
  General, administrative, selling, and marketing
   
282
     
467
 
  Write-down of assets
   
89
     
-
 
  Depreciation expense
   
-
     
1,168
 
    Total expenses
   
3,863
     
5,320
 
                 
Operating Income
   
3,497
     
1,861
 
                 
Other expense
               
  Interest expense
   
(1,726
)
   
(1,800
)
Income before provision (benefit) for income taxes
   
1,771
     
    61
 
Provision (benefit) for income taxes
   
249
     
(44
)
Income from discontinued operations
   
  1,522
     
105
 
  Noncontrolling interest in consolidated entities
   
        (519
)
   
(467
) 
  Income (loss) from discontinued operations attributable to ACPT
 
    1,003
   
(362




(10)
SEGMENT INFORMATION

In the first six months of 2009, ACPT operated in two principal lines of business: Operating Real Estate and Land Development.  The Operating Real Estate segment is comprised of ACPT’s investments in rental properties and property management services; whereas, the Land Development segment is comprised of ACPT’s community development and homebuilding services.  This represents a change from ACPT’s historical financial reporting practice of evaluating the company solely based on geographical location.  During the fourth quarter of 2008, the Company had a change in senior management.   The chief operating decision maker emphasizes net operating income as a key measurement of segment profit or loss.  Segment net operating income is generally defined as segment revenues less direct segment operating expenses.  Management is now evaluating the Company based on its operating lines of business, Operating Real Estate and Land Development.  While ACPT continues to report operating results on a consolidated basis, it also now reports separately the operating results of its two lines of business.  The Company has reclassified its segment presentation for 2008 to include the results of these segments.  The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Operating Real Estate

The Operating Real Estate segments in the U.S. and Puerto Rico are comprised of investments in rental properties and property management services.  The Operations are managed through ARPT, ARMC, and IGP, a wholly owned subsidiary of IGP Group Corp., which is a wholly owned subsidiary of ACPT.  ARPT and its subsidiaries hold the general and limited partnership interests in our U.S. Operating Real Estate apartment property portfolio.  The apartment properties are individually organized into separate entities.  ARPT's ownership in these entities ranges from 0.1% to 100%.  The U.S. Operating Real Estate operations also include the management of apartment properties in which we have an ownership interest and one apartment property owned by a third party in 2008.  The Company has binding agreements for three of the five properties (Nottingham, Milford I and II) and has recently re-listed Owings Chase and Prescott Square.  The financial impact of these properties has been included as “Held for Sale” and “Discontinued Operations” in the segment disclosures below.

   
For the six months ended
 
U.S. Operating Real Estate:
 
June 30,
2009
   
June 30,
2008
 
             
Operating revenues
 
$
16,727
   
$
16,683
 
Operating expenses
   
7,148
     
7,422
 
Net operating income
   
9,579
     
9,261
 
  Management and other fees, substantially all from related entities
   
47
     
79
 
  General, administrative, selling and marketing
   
(859
)
   
(727
)
  Depreciation
   
(2,331
)
   
(2,529
)
Operating income
   
6,436
     
6,084
 
Other expense
   
(4,196
)
   
(3,868
)
Income before provision for income taxes
   
  2,240
     
2,216
 
Provision for income taxes
   
 327
     
446
 
Income  from continuing operations
   
1,913
     
1,770
 
Discontinued operations
   
(563
)
   
(250)
 
Net income
 
$
1,350
   
$
1,520
 




   
For the three months ended
 
U.S. Operating Real Estate:
 
June 30,
 2009
   
June 30,
2008
 
             
Operating revenues
 
$
8,432
   
$
8,388
 
Operating expenses
   
3,561
     
3,748
 
Net operating income
   
4,871
     
4,640
 
  Management and other fees, substantially all from related entities
   
15
     
41
 
  General, administrative, selling and marketing
   
(477
)
   
(390
)
  Depreciation
   
(1,172
)
   
(1,178
)
Operating income
   
3,237
     
3,113
 
Other expense
   
(2,107
)
   
(1,933
)
Income before provision for income taxes
   
  1,130
     
1,180
 
Provision benefit for income taxes
   
 274
     
(93
Income from continuing operations
   
856
     
1,273
 
Discontinued operations
   
33
     
(106
)
Net income
 
$
889
   
$
1,167
 
 
   
As of
   
As of
 
U.S. Operating Real Estate Balance Sheet:
 
June 30,
2009
   
December 31, 2008
 
ASSETS
           
Investments in real estate, net
 
$
84,261
   
$
75,120
 
                 
Cash and cash equivalents
   
6,351
     
7,008
 
Restricted cash and escrow deposits
   
9,142
     
6,996
 
Deferred tax assets
   
8,928
     
8,743
 
Deferred charges and other assets, net of amortization
   
51,496
     
53,049
 
Property and related assets, held for sale
   
37,720
     
37,498
 
    Total Assets
 
$
197,898
   
$
188,414
 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
           
LIABILITIES
               
Non-recourse debt
 
$
165,385
   
$
159,822
 
Recourse debt
   
251
     
257
 
Other liabilities
   
10,427
     
6,589
 
Accrued income tax liability-current
   
(531
)
   
(1,047
)
Liabilities related to assets held for sale
   
31,230
     
31,310
 
    Total Liabilities
   
206,762
     
196,931
 
    Total Shareholders' Equity
   
(8,864
)
   
(8,517
)
    Total Liabilities and Shareholders' Equity
 
$
197,898
   
$
188,414
 
       
            The Puerto Rican Operating Real Estate operations, via IGP, provides property management services to multifamily rental properties in Puerto Rico in which we have an ownership interest, apartment properties owned by third parties, our commercial properties, and home-owner associations related to our planned communities.  IGP also provides management services for our homebuilding and community development operations. IGP holds the ownership interests in the Puerto Rico Apartments and two commercial properties.  The Puerto Rico apartments are organized into separate partnerships and receive HUD subsidies.  IGP's ownership in these partnerships ranges from 1% to 52.5%.  IGP's ownership in the commercial properties ranges from 28% to 100%.  During the first quarter of 2008, the Company executed a definitive agreement to sell the Puerto Rico apartment properties.  The financial impact of these properties has been included as “Held for Sale” and “Discontinued Operations” in the segment disclosures below.


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