##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  FORM 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   COMMISSION FILE
    NUMBER 001-16785
  American Spectrum Realty,
    Inc.
 (Exact name of Registrant as
    specified in its charter)
  State of Maryland

52-2258674(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)5850 San Felipe,
    Suite 450
    Houston, Texas(Address of principal
    executive offices)

77057(Zip Code)   (713) 706-6200
 (Registrants telephone
    number, including area code)
  Securities registered under Section 12(b) of the Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $.01 par value

American Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K o
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE:




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##### 



TABLE OF
    CONTENTS
  
  PageNo.PART IItem 1

Business


3Item 1A

Risk
    Factors


6Item 1B

Unresolved Staff
    Comments


8Item 2

Properties


9Item 3

Legal
    Proceedings


12Item 4

Submission of
    Matters to a Vote of Security Holders


12PART IIItem 5

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


13Item 6

Selected Financial
    Data


15Item 7

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


16Item 7A

Quantitative and
    Qualitative Disclosure About Market Risk


25Item 8

Financial
    Statements and Supplementary Data


25Item 9

Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure


25Item 9A

Controls and
    Procedures


26Item 9B

Other
    Information


26PART IIIItem 10

Directors,
    Executive Officers and Corporate Governance


26Item 11

Executive
    Compensation


26Item 12

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


26Item 13

Certain
    Relationships and Related Transactions, and Director
    Independence


26Item 14

Principal
    Accountant Fees and Services


26PART IVItem 15

Exhibits, Financial
    Statement Schedules and Reports on
    Form 8-K


27Significant SubsidiariesConsent of Hein & Associates, LLPConsent of BDO Seidman, LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906   2




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##### Table of Contents



PART I  ITEM 1.
    BUSINESS  General
    Description of Business
      one-for-four
       3




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Business
    Objectives and Strategy
      Opportunities to Acquire Undervalued and Undermanaged
    Properties.
  Competitive Advantages.
  
    strong local market expertise;
    long-standing relationships with tenants, real estate brokers,
    institutions and other owners of real estate in each local
    market;
    fully integrated real estate operations which allow quick
    response to acquisition opportunities;
    access to capital markets at competitive rates as a public
    company;
    ability to acquire properties in exchange for ASR shares or OP
    Units which may make it a more attractive purchaser when
    compared to purchasers who are not similarly structured or are
    unable to make similar use of equity to purchase properties.  Property Management Strategies.
  Managing and Monitoring Investments.
  Competition
   4




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Employees
  on-site
  Environmental
    Matters
        Insurance
   5




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Capital
    Expenditures
    Acquisitions
      Dispositions
    ITEM 1A.
    RISK
    FACTORS  The
    Companys high level of debt increases its risk of default
    and may have a negative impact on the results of operations.
    This could adversely affect the Companys ability to make
    distributions and the market price of its Common
    Stock.
    The
    Company may need to refinance mortgage loans and sell properties
    to meet its obligations.
   6




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and/or
  There
    are risks inherent in the Companys acquisition and
    development strategy. The Company may not make profitable
    investments.
    The
    Company has a history of losses. The Company cannot assure the
    stockholders that it will become profitable in the
    future.
    Real
    property investments entail risk. The Companys properties
    may not be profitable, may not result in distributions
    and/or may
    depreciate.
  Properties acquired by the
    Company: and/or
  The
    Company may not be able to enter into favorable leases upon the
    expiration of current leases and on current vacant
    space.
    The
    Company may invest in joint ventures, which adds another layer
    of risk to its business.
    tenants-in-common
 7




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##### Table of Contents



tenancy-in-common,
  The
    Company could incur unforeseen environmental
    liabilities.
    The
    Company faces intense competition in all of its
    markets.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS   8




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ITEM 2.
    PROPERTIES  The
    Location and Type of the Companys Properties
  and/or
  Total Gross


Percent ofLeasable


Gross


Rented





Rent perArea


Leasable Area


Square


Annualized


SquareProperty/State

Type

(Square Feet)


Occupied(1)


Feet


Net Rent(2)


Foot(3)(In thousands)Arizona/California
    Region7700 Building, CA

Office


208,825



90%



187,340


$
5,292


$
28.25Bristol Bay, CA

Office


50,073



87%



43,745



1,083



24.75Creekside Office, CA

Office


47,810



97%



46,409



1,175



25.32Pacific Spectrum, AZ

Office


71,025



95%



67,822



1,007



14.85Arizona/California Region Total




377,733



91%



345,316



8,557



24.78Upper Midwest RegionNorthwest Corporate Center, MO

Office


86,449



85%



73,419



1,210



16.48Morenci Professional Park, IN

Industrial


105,600



86%



91,200



520



5.71Upper Midwest Region Total




192,049



86%



164,619



1,730



10.51Carolina RegionColumbia, SC

Shopping Center


58,783



90%



52,771


$
281


$
5.33Carolina Region Total




58,783



90%



52,771



281



5.33Texas Region888 Sam Houston Parkway, TX

Office


45,625



90%



41,267


$
572


$
13.85800 Sam Houston Parkway, TX

Office


42,653



93%



39,519



507



12.8311500 Northwest Freeway, TX

Office


81,438



88%



71,488



1,029



14.395450 Northwest Central, TX

Office


56,350



98%



55,153



815



14.775850 San Felipe, TX

Office


102,141



90%



92,096



1,460



15.858100 Washington, TX

Office


44,060



100%



44,060



543



12.328300 Bissonnet, TX

Office


90,904



84%



76,171



897



11.7812000 Westheimer, TX

Office


57,933



97%



56,258



855



15.1916350 Park Ten Place, TX

Office


72,777



90%



65,341



1,016



15.5516360 Park Ten Place, TX

Office


68,334



95%



64,640



993



15.362401 Fountainview, TX

Office


174,223



88%



153,659



2,563



16.682470 Gray Falls Drive, TX

Office


41,273



88%



36,387



499



13.712855 Mangum, TX

Office


71,854



76%



54,288



763



14.0614741 Yorktown, TX

Office


93,912



100%



93,912



850



9.051501 Mockingbird, TX

Office


70,255



98%



68,674



888



12.946420 Richmond Atrium, TX

Office


77,622



89%



68,909



977



14.186430 Richmond Atrium, TX

Office


44,852



77%



34,555



481



13.93Southwest Pointe, TX

Industrial


101,156



91%



92,278



625



6.77Technology, TX

Industrial


118,413



86%



102,153



571



5.59Texas Region Total




1,455,775



90%



1,310,808



16,904



12.90Total/Weighted Average




2,084,340



90%



1,873,514


$
27,472


$
14.66     (1)
    
    Includes gross leasable area for leases that have been executed
    and have commenced as of December 31, 2006.(2)
    
    Represents base rent at December 31, 2006 for occupied
    square footage.(3)
    
    Represents Annualized Net Rent divided by Rented Square Feet. 9




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##### Table of Contents



Office
    Properties
        OFFICE
    PROPERTIES
  LEASE
    EXPIRATIONS
  Rented Square


Annual Base


Percentage of TotalNumber of


Footage Subject


Rent Under


Annual Base RentExpiring


to Expiring


Expiring


Represented byExpiration  Year

Leases


Leases


Leases


Expiring Leases(1)(In thousands)2007(2)


335



446,732


$
6,348



25
%2008


176



264,232



4,131



16
%2009


134



272,797



4,667



19
%2010


55



212,588



4,509



18
%2011


36



129,654



2,459



10
%Thereafter


15



228,447



3,016



12
%Total


751



1,554,450
(3)

$
25,130
(4)


100
%     (1)
    
    Annual base rent expiring during each period, divided by total
    annual base rent (both adjusted for contractual increases).(2)
    
    Includes leases that have initial terms of less than one year.(3)
    
    This figure is based on square footage actually occupied (which
    excludes vacant space), which accounts for the difference
    between this figure and total gross leasable area (which
    includes vacant space).(4)
    
    This figure is based on square footage actually occupied and
    incorporates contractual rent increases arising after 2006, and
    thus differs from annualized net rent in the preceding table,
    which is based on 2006 rents.  Industrial
    Properties
   10




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INDUSTRIAL
    PROPERTIES
  LEASE
    EXPIRATIONS
  Rented Square


Annual Base


Percentage of TotalNumber of


Footage Subject


Rent Under


Annual Base RentExpiring


to Expiring


Expiring


Represented byExpiration Year

Leases


Leases


Leases


Expiring Leases(1)(In thousands)2007(2)


32



138,367


$
924



45
%2008


25



70,591



685



33
%2009


12



40,324



238



12
%2010


2



6,594



39



2
%2011


6



13,437



87



4
%Thereafter


1



10,000



94



4
%Total


78



279,313
(3)

$
2,067
(4)


100
%     (1)
    
    Annual base rent expiring during each period, divided by total
    annual base rent (both adjusted for contractual increases).(2)
    
    Includes leases that have initial terms of less than one year.(3)
    
    This figure is based on square footage actually occupied (which
    excludes vacant space), which accounts for the difference
    between this figure and total gross leasable area (which
    includes vacant space).(4)
    
    This figure is based on square footage actually leased and
    incorporates contractual rent increases arising after 2006, and
    thus differs from annualized net rent in the table under
    The Location and Type of the Companys
    Properties, which is based on 2006 rents.  Shopping
    Center Property
   11




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SHOPPING
    CENTER PROPERTY
  LEASE
    EXPIRATIONS
  Rented Square


Annual Base


Percentage of TotalNumber of


Footage Subject


Rent Under


Annual Base RentExpiring


to Expiring


Expiring


Represented byExpiration Year

Leases


Leases


Leases


Expiring Leases(1)(In thousands)2007(2)


1



3,000


$
46



12
%2008


2



24,300



120



32
%2009


2



15,238



107



28
%2010


1



2,400



39



10
%2011


1



6,000



50



13
%Thereafter


1



1,833



17



5
%Total


8



52,771
(3)

$
379
(4)


100
%     (1)
    
    Annual base rent expiring during each period, divided by total
    annual base rent (both adjusted for contractual increases).(2)
    
    Includes leases that have initial terms of less than one year.(3)
    
    This figure is based on square footage actually occupied (which
    excludes vacant space), which accounts for the difference
    between this figure and total gross leasable area (which
    includes vacant space).(4)
    
    This figure is based on square footage actually occupied and
    incorporates contractual rent increases arising after 2006, and
    thus differs from annualized net rent in the table under
    The Location and Type of the Companys
    Properties, which is based on 2006 rents.  ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   12




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
    Common StockHigh


Low2006First Quarter

$
19.00


$
13.90Second Quarter


24.25



16.40Third Quarter


24.90



21.05Fourth Quarter


24.99



20.252005First Quarter

$
9.63


$
7.80Second Quarter


9.75



7.50Third Quarter


11.40



8.25Fourth Quarter


16.91



10.00   Holders
    Distributions
    th
  Company
    Purchases of Equity Securities
  Maximum Number (orTotal Number of


Approximate Dollar(1)Total





Shares Purchased as


Value) of Shares ThatNumber of





Part of Publicly


May Yet Be PurchasedShares


Average Price


Announced Plans or


Under the Plans orPeriod

Purchased


Paid per Share


Programs(2)


Programs(2)October 1-31, 2006





$








November 1-30, 2006














December 1-31, 2006


219



21.15







Total


219


$
21.15







     (1)
    
    Shares purchased in private transaction.(2)
    
    See Note 11  Repurchase of Common
    Stock  in the Consolidated Financial Statements  Company
    Sales of Equity Securities
   13




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##### Table of Contents



Number of SecuritiesRemaining AvailableNumber of Securities

Weighted Average

for Future Issuanceto be Issued

Per Share

Under Equity CompensationUpon Exercise of

Exercise Price of

Plan (Excluding SecuritiesOutstanding Options

Outstanding Options

Reflected in First Column)35,938


$
23.17



118,876     Performance
    Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
    Among American Spectrum Realty, Inc., The AMEX Composite
    Index
    And The NAREIT Equity Index
  
  *
    
    $100 invested on 12/31/01 in stock or index-including
    reinvestment of dividends.
    Fiscal year ending December 31. 14




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA      2006


2005


2004


2003


2002(Dollars in thousands, except for per share data)OPERATING DATA:Total revenues

$
26,047


$
20,269


$
19,733


$
17,513


$
16,198Property operating expense


11,935



8,716



7,113



6,419



5,808General and administrative


3,468



3,703



4,438



6,801



8,586Depreciation and amortization


11,020



8,464



7,534



6,444



5,720Interest expense


9,850



8,824



9,273



7,843



7,267Litigation settlement


















1,200Impairment of real estate asset


















472Deferred income tax benefit
    (expense)


3,893



3,360



2,222



(278
)


5,591Net loss from continuing operations


(4,377
)


(5,409
)


(5,705
)


(8,293
)


(6,245
)Income (loss) from discontinued
    operations


10,911



3,143



(3,402
)


(6,055
)


(885
)Net income (loss)


6,534



(2,266
)


(9,107
)


(14,348
)


(7,130
)Basic and diluted per share
    data:(1)Net loss from continuing operations

$
(3.16
)

$
(3.71
)

$
(3.68
)

$
(5.59
)

$
(4.52
)Income (loss) from discontinued
    operations


7.87



2.15



(2.19
)


(4.08
)


(0.64
)Net income (loss)


4.71



(1.56
)


(5.87
)


(9.67
)


(5.16
)Dividends per share


N/A



N/A



N/A



N/A



2.00BALANCE SHEET DATA:Real estate held for investment,
    net

$
172,813


$
126,711


$
130,630


$
126,234


$
116,607Total assets


190,182



169,185



187,545



208,003



253,557Total long term debt


155,036



114,543



113,230



109,228



93,960Stockholders and
    partners equity


15,339



9,014



11,427



20,435



30,857OTHER DATA:Cash flow provided by (used in):Operating activities

$
97


$
(1,471
)

$
(2,628
)

$
(3,468
)

$
446Investing activities


31,230



5,202



5,540



27,518



(3,566
)Financing activities


(30,461
)


(4,020
)


(5,260
)


(21,901
)


1,624     (1)
    
    The net loss data was based upon the weighted average shares of
    1,386,328 for 2006, 1,457,079 for 2005, 1,551,189 for 2004,
    1,483,675 for 2003, and 1,381,860 for 2002. 15




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  OVERVIEW
            CRITICAL
    ACCOUNTING POLICIES
      
    Certain leases provide for tenant occupancy during periods for
    which no rent is due or where minimum rent payments increase
    during the term of the lease. The Company records rental income
    for the full term of each lease on a straight-line basis.
    Accordingly, a receivable, if deemed collectible, is recorded
    from tenants equal to the excess of the amount that would have
    been collected on a straight-line basis over the amount
    collected 16




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and currently due (Deferred Rent Receivable). When a property is
    acquired, the term of existing leases is considered to commence
    as of the acquisition date for purposes of this calculation.  
    Many of the Companys leases provide for Common Area
    Maintenance (CAM)/Escalations (ESC) as
    the additional tenant revenue amounts due to the Company in
    addition to base rent. CAM/ESC represents increases in certain
    property operating expenses (as defined in each respective lease
    agreement) over the actual operating expense of the property in
    the base year. The base year is stated in the lease agreement;
    typically, the year in which the lease commenced. Generally,
    each tenant is responsible for his prorated share of increases
    in operating expenses. Tenants are billed an estimated CAM/ESC
    charge based on the budgeted operating expenses for the year.
    Within 90 days after the end of each fiscal year, a
    reconciliation and true up billing of CAM/ESC charges is
    performed based on actual operating expenses.
    Rental properties are stated at cost, net of accumulated
    depreciation, unless circumstances indicate that cost, net of
    accumulated depreciation, cannot be recovered, in which case the
    carrying value of the property is reduced to estimated fair
    value. Estimated fair value (i) is based upon the
    Companys plans for the continued operation of each
    property and (ii) is computed using estimated sales price,
    as determined by prevailing market values for comparable
    properties
    and/or the
    use of capitalization rates multiplied by annualized net
    operating income based upon the age, construction and use of the
    building. The fulfillment of the Companys plans related to
    each of its properties is dependent upon, among other things,
    the presence of economic conditions which will enable the
    Company to continue to hold and operate the properties prior to
    their eventual sale. Due to uncertainties inherent in the
    valuation process and in the economy, the actual results of
    operating and disposing of the Companys properties could
    be materially different than current expectations.
    Gains on property sales are accounted for in accordance with the
    provisions of SFAS No. 66, Accounting for Sales
    of Real Estate. Gains are recognized in full when real
    estate is sold, provided (i) the gain is determinable, that
    is, the collectibility of the sales price is reasonably assured
    or the amount that will not be collectible can be estimated, and
    (ii) the earnings process is virtually complete, that is,
    the Company is not obligated to perform significant activities
    after the sale to earn the gain. Losses on property sales are
    recognized immediately.  RESULTS
    OF OPERATIONS
  Comparison
    of the year ended December 31, 2006 to the year ended
    December 31, 2005
    Variance2006


2005


$$


%Rental revenue

$
25,546,000


$
19,919,000



5,627,000



28.2
%Operating expenses:Property operating expenses


11,935,000



8,716,000



3,219,000



36.9
%General and administrative


3,468,000



3,703,000



(235,000
)


(6.3
)%Depreciation and amortization


11,020,000



8,464,000



2,556,000



30.2
%Interest expense


9,850,000



8,824,000



1,026,000



11.6
%   Rental revenue.
  Property operating expenses.
 17




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General and administrative.
  Depreciation and amortization.
  Interest expense.
  Income taxes.
  Minority interest.
  Gain (loss) on extinguishment of debt.
  Discontinued operations.
    18




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Year Ended


Year EndedDecember 31, 2006


December 31, 2005Rental revenue

$
381


$
6,927Total expenses


446



9,037Net loss from discontinued
    operations before gain on sale and share of minority interest


(65
)


(2,110
)Gain on sale of discontinued
    operations


22,349



7,895Income tax expense


(9,698
)


(2,198
)Minority interest from
    discontinued operations


(1,675
)


(444
)Net income from discontinued
    operations

$
10,911


$
3,143   Gain on sale of discontinued operations.
  Comparison
    of the year ended December 31, 2005 to the year ended
    December 31, 2004
    Variance2005


2004


$$


%Rental revenue

$
19,919,000


$
19,498,000



421,000



2.2
%Operating expenses:Property operating expenses


8,716,000



7,113,000



1,603,000



22.5
%General and administrative


3,703,000



4,438,000



(735,000
)


(16.6
)%Depreciation and amortization


8,464,000



7,534,000



930,000



12.3
%Interest expense


8,824,000



9,273,000



(449,000
)


(4.8
%)   Rental revenue.
  Property operating expenses.
  General and administrative.
 19




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##### Table of Contents



Depreciation and amortization.
  Interest expense.
  Income taxes.
  Minority interest.
  Loss on extinguishment of debt.
  Discontinued operations.
    Year Ended


Year EndedDecember 31,


December 31,2005


2004Rental revenue

$
6,927


$
8,848Total expenses


9,037



11,422Net loss from discontinued
    operations before gain on sale and share of minority interest


(2,110
)


(2,574
)Gain (loss) on sale of
    discontinued operations


7,895



(2,298
)Income tax (expense) benefit


(2,198
)


985Minority interest from
    discontinued operations


(444
)


485Net income (loss) from
    discontinued operations

$
3,143


$
(3,402
)  20




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##### Table of Contents



Gain on sale of discontinued operations.
  LIQUIDITY
    AND CAPITAL RESOURCES
      Years Ended December 31,2006


2005


2004Non-Cash Charges:Depreciation and amortization

$
11,094


$
11,190


$
10,946Deferred compensation expense


51



55



101Minority interest


1,001







Deferred income tax expense


5,805







Non-Cash Items:Deferred income tax benefit






(1,162
)


(3,207
)Deferred rental income


(291
)


(137
)


(520
)Minority interest






(320
)


(1,299
)Interest on receivable from
    principal stockholders






(39
)


(66
)Amortization of loan premiums


(440
)


(459
)


(564
)Amortization of note receivable
    discount










(58
)Mark-to-market
    adjustments on interest rate protection agreements










(65
)      21




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22




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23




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CONTRACTUAL
    OBLIGATIONS
    Payment Due by PeriodLess Than








More ThanTotal


1 year


1-3 Years


3-5 Years


5 YearsLong-term debt(1)

$
153,576


$
1,850


$
19,710


$
56,055


$
75,961Interest costs on longterm debt(1)


58,443



10,564



20,516



14,423



12,940Capital expenditures(2)


1,569



1,569











Consulting


26



18



8







Total

$
213,614


$
14,001


$
40,234


$
70,478


$
88,901     (1)
    
    See Note 7  Notes Payable  of
    the Consolidated Financial Statements.(2)
    
    Represents estimated cost of commitments for tenant improvements
    and lease commissions related to the leasing of space to new or
    renewing tenants.  INFLATION
    FORWARD-LOOKING
    STATEMENTS
  Form 10-K Form 10-K.
 24




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK  INTEREST
    RATES
            Expected Maturity Date2007


2008


2009


2010


2011


Thereafter


Loan Premiums


Total


Fair Value(Dollars in thousands)Secured Fixed

$
1,813


$
1,840


$
15,713


$
33,235


$
22,820


$
75,961


$
1,460


$
152,842


$
152,842Average interest rate


6.86
%


6.86
%


6.86
%


6.89
%


6.37
%


6.09
%






6.72
%Secured Variable

$
37


$
1,957


$



$



$



$



$



$
1,994


$
1,994Average interest rate


8.07
%


8.07
%






















8.07
%Unsecured Variable

$



$
200


$



$



$



$



$



$
200


$
200Average interest rate






9.25
%






















9.25
%       ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K. Form 8-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE     25




---



##### Table of Contents



Regulation S-K.
  ITEM 9A.
    CONTROLS
    AND PROCEDURES      ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   26




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
    FORM 8-K  Page No.(a)



(1)


Financial StatementsReports of
    Independent Registered Public Accounting Firms


28Consolidated
    Balance Sheets at December 31, 2006 and 2005


30Consolidated
    Statements of Operations for the years ended December 31,
    2006, 2005 and 2004


31Consolidated
    Statements of Stockholders Equity for the years ended
    December 31, 2006, 2005 and 2004


32Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, 2005, and 2004


33Notes to
    Consolidated Financial Statements


34(2)


Financial Statement SchedulesSchedule II 
    Valuation and Qualifying Accounts


58Schedule III 
    Real Estate and Accumulated Depreciation


59(3)


Exhibits to Financial StatementsThe Exhibit Index attached
    hereto is hereby incorporated by reference to this Item


64On November 2, 2006, a report
    on
    Form 8-K
    was filed with respect to Item 2.02.On November 13, 2006, a
    report on
    Form 8-K
    was filed with respect to Item 8.01.On December 14, 2006, a
    report on
    Form 8-K
    was filed with respect to Item 8.01.(b)






Exhibits  27




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  
            28




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
              
    29




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
 CONSOLIDATED
    BALANCE SHEETS  December 31,


December 31,2006


2005(Dollars in thousands,except share amounts)ASSETSReal estate held for investment

$
211,109


$
154,826Accumulated depreciation


(38,296
)


(28,115
)Real estate held for investment,
    net


172,813



126,711Real estate held for sale






22,272Cash and cash equivalents


1,166



300Tenant and other receivables, net
    of allowance for doubtful accounts of $243 and $135, respectively


470



455Deferred rents receivable


1,536



1,245Deferred tax asset






53Deposits held in escrow for
    tax-deferred exchanges






5,210Investment in management company


4,000



4,000Prepaid and other assets, net


10,197



8,939Total Assets

$
190,182


$
169,185LIABILITIES AND
    STOCKHOLDERS EQUITYLiabilities:Notes payable, including premiums
    of $1,460 and $1,900, respectively

$
155,036


$
114,543Notes payable, litigation
    settlement






4,877Liabilities related to real estate
    held for sale






27,953Accounts payable


2,461



2,194Deferred tax liability


5,752



Accrued and other liabilities
    (including $0 and $331, respectively, to related parties)


5,549



5,468Total Liabilities


168,798



155,035Minority interest


6,045



5,136Stockholders Equity:Preferred stock, $.01 par
    value; authorized, 25,000,000 shares, none issued and
    outstanding






Common stock, $.01 par value;
    authorized, 100,000,000 shares; issued, 1,606,179 and
    1,598,615 shares, respectively; outstanding, 1,379,429 and
    1,390,214 shares, respectively


16



16Additional paid-in capital


46,553



46,367Accumulated deficit


(28,355
)


(34,889
)Treasury stock, at cost, 226,750
    and 208,401 shares, respectively


(2,875
)


(2,480
)Total Stockholders Equity


15,339



9,014Total Liabilities and
    Stockholders Equity

$
190,182


$
169,185    30




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##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Years Ended December 31,2006


2005


2004(Dollars in thousands, except per share amounts)REVENUES:Rental revenue

$
25,546


$
19,919


$
19,498Interest and other income


501



350



235Total revenues


26,047



20,269



19,733EXPENSES:Property operating expense


11,935



8,716



7,113General and administrative


3,468



3,703



4,438Depreciation and amortization


11,020



8,464



7,534Interest expense


9,850



8,824



9,273Total expenses


36,273



29,707



28,358OTHER INCOME (LOSS):Net gain (loss) on extinguishment
    of debt


1,282



(95
)


(116
)Total other gain (loss)


1,282



(95
)


(116
)Loss from continuing operations
    before deferred income tax benefit and minority interest


(8,944
)


(9,533
)


(8,741
)Deferred income tax benefit


3,893



3,360



2,222Loss from continuing operations
    before minority interest


(5,051
)


(6,173
)


(6,519
)Minority interest (share from
    continuing operations)


674



764



814Loss from continuing operations


(4,377
)


(5,409
)


(5,705
)Discontinued operations:Loss from operations


(65
)


(2,110
)


(2,574
)Gain (loss) on sale of
    discontinued operations


22,349



7,895



(2,298
)Income tax (expense) benefit


(9,698
)


(2,198
)


985Minority interest


(1,675
)


(444
)


485Income (loss) from discontinued
    operations


10,911



3,143



(3,402
)Net income (loss)

$
6,534


$
(2,266
)

$
(9,107
)Basic and diluted per share data:Loss from continuing operations

$
(3.16
)

$
(3.71
)

$
(3.68
)Income (loss) from discontinued
    operations


7.87



2.15



(2.19
)Net income (loss)

$
4.71


$
(1.56
)

$
(5.87
)Basic and diluted weighted average
    shares used


1,386,328



1,457,079



1,551,189    31




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##### Table of Contents



AMERICAN
    SPECTRUM REALTY INC.
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  ReceivableAdditional








fromCommon


Common


Paid-In


Accumulated


Deferred


Principal


Treasury


TotalShares


Stock


Capital


Deficit


Compensation


Stockholders


Stock


Equity(In thousands, except share amounts)Balance, December 31, 2003


1,578,224


$
16


$
45,742


$
(23,516
)

$
(195
)

$
(1,191
)

$
(421
)


20,435Issuance of common stock


10,000







71



















71Conversion of operating partnership
    units to common stock


8,936







218



















218Common stock repurchase


























(532
)


(532
)Restricted stock forfeited


















39







(39
)


Amortization of deferred
    compensation


















101











101Payments on receivable from
    principal stockholders






















241







241Net loss














(9,107
)














(9,107
)Balance, December 31, 2004


1,597,160



16



46,031



(32,623
)


(55
)


(950
)


(992
)


11,427Conversion of operating partnership
    units to common stock


1,455







36



















36Common stock repurchase










300















(1,488
)


(1,188
)Amortization of deferred
    compensation


















55











55Payments on receivable from
    principal stockholders






















950







950Net loss














(2,266
)














(2,266
)Balance, December 31, 2005


1,598,615



16



46,367



(34,889
)










(2,480
)


9,014Conversion of operating partnership
    units to common stock


1,940







63



















63Common stock repurchase


























(395
)


(395
)Acquisition of minority interest in
    the operating partnership










9



















9Exercise of stock options


5,624







63



















63Stock-based compensation










51



















51Net income














6,534















6,534Balance, December 31, 2006


1,606,179


$
16


$
46,553


$
(28,355
)

$



$



$
(2,875
)

$
15,339    32




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##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Years Ended December 31,2006


2005


2004(Dollars in thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income (loss)

$
6,534


$
(2,266
)

$
(9,107
)Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating activities:Depreciation and amortization


11,094



11,190



10,946Net (gain) loss on sales of real
    estate assets


(22,349
)


(7,895
)


2,298(Gain) loss on extinguishment of
    debt


(1,282
)


95



729Deferred income taxes


5,805



(1,162
)


(3,207
)Deferred rental income


(291
)


(137
)


(520
)Minority interest


1,001



(320
)


(1,299
)Mark to market adjustments on swap
    agreements










(65
)Stock-based compensation expense


51



55



101Interest on receivable from
    principal stockholders






(39
)


(66
)Amortization of note payable
    premiums, included in interest expense


(440
)


(459
)


(564
)Amortization of note receivable
    discount, included in interest income










(58
)Changes in operating assets and
    liabilities:Decrease (increase) in tenant and
    other receivables


156



44



(272
)Increase (decrease) in accounts
    payable


50



915



(217
)Increase in prepaid and other assets


(1,355
)


(2,136
)


(1,765
)Increase in accrued and other
    liabilities


1,123



644



438Net cash provided by (used in)
    operating activities:


97



(1,471
)


(2,628
)CASH FLOWS FROM INVESTING
    ACTIVITIES:Capital improvements to real estate
    assets


(4,933
)


(4,886
)


(4,516
)Real estate acquisition










(138
)Proceeds received from sales of
    real estate assets


36,163



15,298



11,357Deposits held in escrow for future
    acquisitions






(5,210
)


(1,191
)Collections on mortgage loan
    receivable










28Net cash provided by investing
    activities:


31,230



5,202



5,540CASH FLOWS FROM FINANCING
    ACTIVITIES:Proceeds from
    borrowings  refinances


13,088



31,053



19,976Proceeds from
    borrowings  other










1,133Repayment of borrowings 
    property sales


(26,165
)


(5,570
)


(7,041
)Repayment of borrowings 
    refinances


(10,438
)


(21,811
)


(15,796
)Repayment of borrowings 
    scheduled payments


(1,717
)


(2,072
)


(2,859
)Repayment of borrowings from
    principal stockholder and director






(532
)


Note payments to former limited
    partners










(141
)Repurchase of common stock


(395
)


(1,403
)


(532
)Note payments on litigation
    settlement


(4,877
)


(4,635
)


Collection of receivable from
    principal stockholders






950



Proceeds from exercise of stock
    options


63







Acquisition of minority interest in
    the operating partnership


(20
)






Net cash used in financing
    activities:


(30,461
)


(4,020
)


(5,260
)Increase (decrease) in cash


866



(289
)


(2,348
)Cash and cash equivalents,
    beginning of year


300



589



2,937Cash and cash equivalents, end of
    year

$
1,166


$
300


$
589SUPPLEMENTAL DISCLOSURES OF CASH
    FLOW INFORMATION:Cash paid for interest

$
10,056


$
11,252


$
11,628Cash paid for income taxes


145



91



268SUPPLEMENTAL DISCLOSURE OF
    NON-CASH INVESTING AND FINANCING ACTIVITIES:Debt assumed in connection with
    acquisitions of real estate assets

$
16,914


$



$
4,384Borrowings in connection with
    acquisitions of real estate assets


23,846







Note receivable settled through
    acquisition of real estate asset










1,722Financing settled through
    divestitures






11,238



Conversion of operating partnership
    units into common stock


63



36



218Financing in connection with the
    repurchase of common stock






85



Financing in connection with the
    cancellation of participating profits agreement






10



Issuance of common stock in
    acquisition of real estate asset










71Payable to principal shareholders
    offset against receivable from principal shareholders










241    33




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##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes
    to Consolidated Financial Statements
  NOTE 1.
    DESCRIPTION
    OF BUSINESS  GENERAL
        NOTE 2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  BASIS OF
    PRESENTATION
      RECLASSIFICATIONS
    one-for-four
 34




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    USE OF
    ESTIMATES
    NEW
    ACCOUNTING PRONOUNCEMENTS
        REAL
    ESTATE
  and/or
    Building and Improvements

5 to 40 yearsTenant Improvements

Term of the related leaseFurniture and Equipment

3 to 5 years  35




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  CASH
    EQUIVALENTS
    FAIR
    VALUE OF FINANCIAL INSTRUMENTS
    DERIVATIVE
    FINANCIAL INSTRUMENTS
      DEFERRED
    FINANCING AND OTHER FEES
    STOCK-BASED
    COMPENSATION
  Share-Based Payment Accounting for Stock-Based
    Compensation grant-date Accounting for Stock Issued to
    Employees.
 36




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   MINORITY
    INTEREST
    RENTAL
    REVENUE
          NET
    INCOME (LOSS) PER SHARE
  Earnings Per Share,
  INCOME
    TAXES
   37




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    SEGMENTS
    ALLOWANCE
    FOR DOUBTFUL ACCOUNTS
    NOTE 3.
    REAL
    ESTATE    Buildings and





Accumulated


Net RecordedLand


Improvements


Total Cost


Depreciation


Value2006:Office properties

$
44,152


$
146,955


$
191,107


$
33,256


$
157,851Industrial properties


3,170



14,031



17,201



4,076



13,125Shopping center property


1,050



1,460



2,510



704



1,806Other






291



291



260



31Total

$
48,372


$
162,737


$
211,109


$
38,296


$
172,8132005:Office properties

$
29,444


$
105,760


$
135,204


$
24,021


$
111,183Industrial properties


3,170



13,977



17,147



3,287



13,860Shopping center property


1,050



1,161



2,211



576



1,635Other






264



264



231



33Total

$
33,664


$
121,162


$
154,826


$
28,115


$
126,711  38




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  ACQUISITIONS
  2006.
      2005.
    DISPOSITIONS
  2006.
    2005.
        INTANGIBLE
    ASSETS PURCHASED
  in-place
 39




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      FUTURE
    MINIMUM RENTS
    Future MinimumYear Ending December 31,

Rents2007

$
24,9802008


19,9682009


15,0432010


10,1252011


6,311Thereafter


8,090$
84,517   NOTE 4.
    DISCONTINUED
    OPERATIONS  Real
    estate assets held for sale.
      December 31,Condensed Consolidated Balance Sheet

2005Real estate

$
19,984Other


2,288Real estate assets held for sale

$
22,272Notes payable, net

$
26,186Accounts payable


755Accrued and other liabilities


1,012Liabilities related to real estate
    held for sale

$
27,953  40




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Net
    income (loss) from discontinued operations.
          Year Ended December 31,Condensed Consolidated Statements of Operations

2006


2005


2004Rental revenue

$
381


$
6,927


$
8,848Total expenses(1)


(446
)


(9,037
)


(10,809
)Loss on early extinguishment of
    debt










(613
)Loss from discontinued operations
    before net gain (loss) on sale and income tax (expense) benefit


(65
)


(2,110
)


(2,574
)Gain (loss) on sale of
    discontinued operations


22,349



7,895



(2,298
)Income tax (expense) benefit


(9,698
)


(2,198
)


985Minority interest from
    discontinued operations


(1,675
)


(444
)


485Income (loss) from discontinued
    operations

$
10,911


$
3,143


$
(3,402
)     (1)
    
    Includes interest expense of $76, $2,671 and $3,156 for the
    years ended December 31, 2006, 2005 and 2004, respectively.
    Mortgage debt related to each of the Companys properties
    included in discontinued operations was individually secured. As
    such, interest expense was based on each propertys
    respective loan.  NOTE 5.
    INVESTMENT
    IN MANAGEMENT COMPANY       41




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##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   NOTE 6.
    RELATED
    PARTY TRANSACTIONS              and/or
 42




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  NOTE 7.
    NOTES PAYABLE    2006


2005Maturity


Principal


Interest


Principal


InterestProperty (Unless Otherwise Noted)

Date


Balance


Rate


Balance


RateFixed RatePacific Spectrum


6/10/2009


$
5,500



8.02
%

$
5,571



8.02
%1501 Mockingbird


6/30/2009



308



6.00
%






6430 Richmond Atrium


6/30/2009



736



5.50
%






6420 Richmond Atrium


7/1/2009



6,342



5.50
%






Morenci Professional Park


12/1/2009



1,704



6.60
%


1,786



6.60
%7700 Building


7/10/2010



33,147



8.50
%


33,498



8.50
%Columbia


7/1/2011



2,242



7.15
%


2,756



10.50
%Bristol Bay


8/1/2011



7,192



7.58
%


7,276



7.58
%Technology


8/1/2011



7,443



7.44
%


7,533



7.44
%Creekside


12/1/2011



6,074



7.17
%


6,149



7.17
%16350 Park Ten Place


5/11/2012



4,642



7.45
%


4,694



7.45
%16360 Park Ten Place


5/11/2012



3,637



7.45
%


3,678



7.45
%2855 Mangum


5/11/2012



2,680



7.45
%






2855 Mangum


5/11/2012



1,586



6.00
%






6430 Richmond Atrium


5/11/2012



2,249



7.45
%






Southwest Pointe


6/1/2012



2,822



7.33
%


2,855



7.33
%16350 Park Ten Place


5/11/2012



512



7.45
%


518



7.45
%16360 Park Ten Place


8/11/2012



402



7.45
%


406



7.45
%11500 Northwest Freeway


6/1/2014



4,267



5.93
%


4,323



5.93
%11500 Northwest Freeway


6/1/2014



308



5.93
%


312



5.93
%5850 San Felipe


8/1/2014



5,342



5.65
%


5,415



5.65
%Northwest Corporate Center


8/1/2014



5,599



6.26
%


5,667



6.26
%14741 Yorktown


9/1/2014



8,600



5.32
%






8100 Washington


2/22/2015



2,298



5.59
%


2,329



5.59
%8300 Bissonnet


5/1/2015



4,724



5.51
%


4,758



5.51
%1501 Mockingbird


7/1/2015



3,350



5.28
%






5450 Northwest Central


9/1/2015



2,754



5.38
%


2,791



5.38
%800 Sam Houston Parkway


12/29/2015



2,466



6.25
%


2,200



6.25
%888 Sam Houston Parkway


12/29/2015



2,466



6.25
%


2,200



6.25
%2401 Fountainview


3/1/2016



12,640



5.82
%






12000 Westheimer


1/1/2017



4,250



5.70
%


3,542



6.80
%Gray Falls


1/1/2017



3,100



5.70
%






Corporate  Secured


N/A











2,000



6.83
%Corporate  Unsecured


N/A











60



7.15
%Subtotal


$
151,382






$
112,317Variable RateColumbia


N/A











31



9.50
%Corporate  Unsecured


N/A











95



8.25
%Corporate  Unsecured


5/31/2008



200



9.25
%


200



8.25
%Corporate  Secured


10/1/2008



1,994



8.07
%






Subtotal


$
2,194






$
326Loan Premiums






1,460







1,900Total


$
155,036






$
114,543  43




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
                      short-term
    short-term
 44




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
               45




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Year Ending December 31,2007

$
1,8502008


3,9972009


15,7132010


33,2352011


22,820Thereafter


75,961Subtotal


153,576Premiums (net of accumulated
    amortization of $2,320)


1,460Total

$
155,036   NOTE 8.
    NOTES PAYABLE,
    LITIGATION SETTLEMENT               46




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   NOTE 9.
    NET GAIN
    (LOSS) ON EARLY EXTINGUISHMENT OF DEBT          NOTE 10.
    MINORITY
    INTEREST            NOTE 11.
    REPURCHASE
    OF COMMON STOCK     47




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
           price-per-share
  NOTE 12.
    INCOME
    TAXES    2006


2005


2004Current expense (benefit):Federal










State










Deferred expense (benefit):Federal

$
(2,257
)

$
(3,006
)

$
(1,989
)State


(265
)


(354
)


(233
)$
(2,522
)

$
(3,360
)

$
(2,222
)      48




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
     December 31,


December 31,


December 31,2006


2005


2004Expected income tax benefit at
    statutory federal rate

$
(3,041
)

$
(3,241
)

$
(3,747
)State income tax benefit


(358
)


(381
)


Income not taxable


(130
)


(174
)


(478
)Charges not deductible


6



24



39Minority interest


(603
)


162



578Losses with no current benefit










1,386Adjustments to
    true-up
    prior year


233



238



Other, net






12



Income tax (benefit) expense

$
(3,893
)

$
(3,360
)

$
(2,222
)     December 31,


December 31,2006


2005Deferred tax assets:Net operating losses

$
3,651


$
4,704Allowance for bad debts


92



68Capitalized lease costs


86



181Less: Valuation allowance






Total deferred tax asset


3,829



4,953Deferred tax liabilities:Built-in gains


(8,978
)


(4,260
)Straight-line rents receivable


(583
)


(640
)Stock Compensation


(20
)


Total deferred tax liabilities


(9,581
)


(4,900
)Net deferred tax (liability) asset

$
(5,752
)

$
53     NOTE 13.
    NET
    INCOME (LOSS) PER SHARE   49




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Years Ended December 31,2006


2005


2004Loss from continuing operations

$
(4,377
)

$
(5,409
)

$
(5,705
)Discontinued operations:Loss from discontinued operations


(65
)


(2,110
)


(2,574
)Gain (loss) on sale of
    discontinued operations


22,349



7,895



(2,298
)Income tax (expense) benefit


(9,698
)


(2,198
)


985Minority interest


(1,675
)


(444
)


485Income (loss) from discontinued
    operations


10,911



3,143



(3,402
)Net income (loss)

$
6,534


$
(2,266
)

$
(9,107
)Basic and diluted per share data:Loss from continuing operations

$
(3.16
)

$
(3.71
)

$
(3.68
)Income (loss) from discontinued
    operations


7.87



2.15



(2.19
)Net income (loss)

$
4.71


$
(1.56
)

$
(5.87
)Basic weighted average shares used


1,386,328



1,457,079



1,551,189   NOTE 14.
    STOCK
    OPTION AND RESTRICTED SHARE PLANS       50




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Pro
    Forma Information under SFAS No. 123
    Year Ended


Year EndedDecember 31,


December 31,2005


2004Net loss, as reported

$
(2,266
)

$
(9,107
)Deduct: Employee compensation
    expense for stock option grants under fair value method, net of
    related tax effects


(63
)


(145
)Pro forma net loss

$
(2,329
)

$
(9,252
)Per share data:Basic and diluted, as reported

$
(1.56
)

$
(5.87
)Basic and diluted, pro-forma

$
(1.60
)

$
(5.96
)   Stock
    Options
  10-year
  6-year
  10-year 10-year 10-year
   51




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Shares


WeightedUnder


Average


Average IntrinsicOption


Exercise Price


ValueOutstanding on January 1, 2003


47,375


$
41.68Granted(1)


8,750


$
12.20Outstanding on December 31,
    2003


56,125


$
37.08Granted(1)


6,250


$
11.16Forfeited


(28,750
)

$
43.54Outstanding on December 31,
    2004


33,625


$
26.76Granted(1)


6,250


$
8.10Outstanding on December 31,
    2005


39,875


$
23.84Granted(1)


7,500


$
18.25Forfeited


(5,813
)

$
32.97Exercised


(5,624
)

$
11.23


$
58,479Outstanding on December 31,
    2006


35,938


$
23.17


$
241,520Exercisable as of
    December 31, 2006


26,564


$
26.19


$
156,556     (1)
    
    The exercise price of the stock options granted was equal to the
    fair market value on the date of grant.    Weighted Average

WeightedRemaining

AverageNumber


Contractual

ExerciseRange of Exercise Price

Outstanding


Life

Price$ 8.10 - $12.20


14,688


7.0 years

$
10.58$18.25 - $27.16


15,625


6.2 years

$
21.74$60.00 - $60.00


5,625


4.8 years

$
60.00     WeightedAverageNumber


ExerciseRange of Exercise Price

Exercisable


Price$ 8.10 - $12.20


10,938


$
11.08$18.25 - $27.16


10,000


$
23.70$60.00 - $60.00


5,625


$
60.00     WeightedAverageGrant DateNonvested Stock Options

Stock Options


Fair ValueNonvested at January 1, 2006


10,000


$
10.69Granted


7,500



10.10Vested


(7,188
)


7.49Forfeited


(938
)


9.12Nonvested at December 31, 2006


9,374


$
8.48  52




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Restricted
    Stock
    NOTE 15.
    COMMITMENTS
    AND CONTINGENCIES      NOTE 16.
    SEGMENT
    INFORMATION   53




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Shopping





PropertyOffice


Industrial


Center


Other


Total2006Rental revenue

$
23,175


$
2,007


$
346


$
18


$
25,546Property operating expenses


11,137



680



109



9



11,935Net operating income (NOI)

$
12,038


$
1,327


$
237


$
9


$
13,611Real estate assets, net

$
157,851


$
13,125


$
1,806


$
31


$
172,8132005Rental revenue

$
17,397


$
2,241


$
281


$



$
19,919Property operating expenses


7,917



687



76



36



8,716Net operating income (NOI)

$
9,480


$
1,554


$
205


$
(36
)

$
11,203Real estate assets, net

$
111,183


$
13,860


$
1,635


$
33


$
126,7112004Rental revenue

$
16,861


$
2,348


$
289


$



$
19,498Property operating expenses


6,483



528



67



35



7,113Net operating income (NOI)

$
10,378


$
1,820


$
222


$
(35
)

$
12,385Real estate assets, net

$
114,258


$
14,618


$
1,704


$
50


$
130,630  54




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2006


2005


2004REVENUESTotal revenues for reportable
    segments

$
25,546


$
19,919


$
19,498Other revenues


501



350



235Total consolidated revenues

$
26,047


$
20,269


$
19,733NET INCOMENOI for reportable segments

$
13,611


$
11,203


$
12,385Unallocated amounts:Interest and other income


501



350



235General and administrative expenses


(3,468
)


(3,703
)


(4,438
)Depreciation and amortization


(11,020
)


(8,464
)


(7,534
)Interest expense


(9,850
)


(8,824
)


(9,273
)Net gain (loss) on extinguishment
    of debt


1,282



(95
)


(116
)Loss from operations before
    deferred income tax benefit, minority interest and discontinued
    operations


(8,944
)


(9,533
)


(8,741
)Deferred income tax benefit


3,893



3,360



2,222Minority interest


674



764



814Income (loss) from discontinued
    operations


10,911



3,143



(3,402
)Net income (loss)

$
6,534


$
(2,266
)

$
(9,107
)ASSETSTotal assets for reportable
    segments

$
172,813


$
126,711


$
130,630Real estate held for sale






22,272



43,198Cash and cash equivalents


1,166



300



589Tenant and other receivables, net


470



455



539Deferred rent receivable


1,536



1,245



1,138Deferred tax asset






53



Investment in management company


4,000



4,000



4,000Deposits held in escrow for
    tax-deferred exchanges






5,210



Prepaid and other assets, net


10,197



8,939



7,451Total consolidated assets

$
190,182


$
169,185


$
187,545  55




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  NOTE 17.
    UNAUDITED
    QUARTERLY RESULTS OF OPERATIONS    Quarter EndedMarch 31,


June 30,


Sept 30,


Dec 31,2006


2006


2006


2006REVENUES:Rental revenue

$
5,577


$
6,140


$
6,832


$
6,997Interest and other income


74



74



26



327Total revenues


5,651



6,214



6,858



7,324EXPENSES:Operating expenses


3,416



3,858



4,100



4,029Depreciation and amortization


2,461



2,766



2,871



2,922Interest expense


2,185



2,369



2,657



2,639Total expenses


8,062



8,993



9,628



9,590OTHER INCOME (LOSS):Net gain (loss) on extinguishment
    of debt






1,849







(567
)Total other income (loss)






1,849







(567
)Loss before deferred income tax
    benefit and minority interest


(2,411
)


(930
)


(2,770
)


(2,833
)Deferred income tax benefit






1,218



1,019



1,656Net (loss) income before minority
    interest


(2,411
)


288



(1,751
)


(1,177
)Minority interest


321



(38
)


234



157(Loss) income from continuing
    operations


(2,090
)


250



(1,517
)


(1,020
)Income (loss) from discontinued
    operations


19,316



(7,103
)






(1,302
)Net income (loss)

$
17,226


$
(6,853
)

$
(1,517
)

$
(2,322
)Basic and diluted per share data:(Loss) income from continuing
    operations

$
(1.50
)

$
0.18


$
(1.10
)

$
(0.74
)Income (loss) from discontinued
    operations


13.87



(5.11
)






(0.94
)Net income (loss)

$
12.37


$
(4.93
)

$
(1.10
)

$
(1.68
)  56




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Quarter EndedMarch 31,


June 30,


Sept 30,


Dec 31,2005


2005


2005


2005REVENUES:Rental revenue

$
4,967


$
4,910


$
5,051


$
4,991Interest and other income


49



208



80



13Total revenues


5,016



5,118



5,131



5,004EXPENSES:Operating expenses


2,882



2,965



3,341



3,231Depreciation and amortization


2,032



2,078



2,132



2,222Interest expense


2,248



2,183



2,209



2,184Total expenses


7,162



7,226



7,682



7,637OTHER INCOME LOSS:Loss on extinguishment of debt














(95
)Total other loss














(95
)Net loss before deferred income
    tax expense and minority interest


(2,146
)


(2,108
)


(2,551
)


(2,728
)Deferred income tax benefit














3,360Net (loss) income before minority
    interest


(2,146
)


(2,108
)


(2,551
)


632Minority interest


268



267



328



(99
)Net (loss) income from continuing
    operations


(1,878
)


(1,841
)


(2,223
)


533Income (loss) from discontinued
    operations


1,679



(432
)


890



1,006Net (loss) income

$
(199
)

$
(2,273
)

$
(1,333
)

$
1,539Basic and diluted per share data:Net (loss) income from continuing
    operations

$
(1.25
)

$
(1.25
)

$
(1.54
)

$
0.38Income (loss) from discontinued
    operations


1.12



(0.29
)


0.62



0.71Net (loss) income

$
(0.13
)

$
(1.54
)

$
(0.92
)

$
1.09  57




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS
  Column A

Column B


Column C


Column D


Column EAdditionsBalance at


Charged to





BalanceBeginning of


Costs and





at EndDescription

Year(1)


Expenses


Deductions


of Year(Dollars in thousands)Year Ended December 31,
    2006
    Allowance for loss on real estate held for investment

$
472


$



$



$
472Year Ended December 31,
    2005
    Allowance for loss on real estate held for investment

$
472


$



$



$
472Year Ended December 31,
    2004
    Allowance for loss on real estate held for investment

$
472


$



$



$
472     (1)
    
    Valuation allowance of $472 on Columbia NE (the Companys
    shopping center property) established in 2002 as the estimated
    fair market value declined below book value. 58




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  SCHEDULE III 
    REAL ESTATE AND ACCUMULATED DEPRECIATION
 DECEMBER 31,
    2006
  Column A

Column B


Column C


Column D


Column ECost capitalized


Gross Amount Carried atInitial Cost to Company(1)


Subsequent to


December 31, 2006 (4)Buildings and


Acquisition (3)





Buildings andDescription

Encumbrances


Land


Improvements


Improvements


Land


Improvements


Total(Dollars in thousands)Office Properties:San Felipe, TX

$
5,342


$
2,290


$
4,290


$
856


$
2,290


$
5,146


$
7,436Creekside, CA


6,074



2,790



6,460



501



2,790



6,961



9,751Bristol Bay, CA


7,192



1,620



7,880



554



1,620



8,434



10,0547700 Building, CA


33,147



9,150



40,390



2,991



9,150



43,381



52,531Northwest Corporate Center, MO


5,599



1,550



5,230



1,587



1,550



6,817



8,36716350 Park Ten, TX


5,154



1,174



5,324



427



1,174



5,751



6,92516360 Park Ten, TX


4,039



900



4,192



613



900



4,805



5,705800 Sam Houston Parkway, TX


2,466



1,000



1,121



473



1,000



1,594



2,594888 Sam Houston Parkway, TX


2,466



500



892



343



500



1,235



1,7355450 Northwest Central, TX


2,754



854



2,622



336



854



2,958



3,81212000 Westheimer, TX


4,250



1,878



2,432



1,130



1,878



3,562



5,4408100 Washington, TX


2,298



600



2,317



65



600



2,382



2,9828300 Bissonnet, TX


4,724



1,400



3,990



188



1,400



4,178



5,578Pacific Spectrum, AZ


5,500



1,460



6,880



1,373



1,460



8,253



9,71311500 NW Freeway, TX


4,575



2,278



3,621



378



2,278



3,999



6,27714741 Yorktown, TX


8,600



2,375



9,504



3



2,375



9,507



11,8822855 Mangum, TX


4,266



2,134



3,300



87



2,134



3,387



5,5212470 Gray Falls Drive, TX


3,100



670



1,956



230



670



2,186



2,8562401 Fountainview, TX


12,640



3,500



13,451



171



3,500



13,622



17,1221501 Mockingbird, TX


3,658



1,000



3,583







1,000



3,583



4,5836420 Richmond Atrium, TX


6,342



3,384



3,039



52



3,384



3,091



6,4756430 Richmond Atrium, TX


2,985



1,645



2,116



7



1,645



2,123



3,768Office Total

$
137,171


$
44,152


$
134,590


$
12,365


$
44,152


$
146,955


$
191,107Industrial Properties:Southwest Point, TX


2,822



1,800



1,530



347



1,800



1,877



3,677Morenci Professional Park, IN


1,704



790



2,680



61



790



2,741



3,531Technology, TX


7,443



580



9,360



53



580



9,413



9,993Industrial Total

$
11,969


$
3,170


$
13,570


$
461


$
3,170


$
14,031


$
17,201Shopping Center Property:Columbia NE, SC(2)


2,242



1,050



1,530



402



1,050



1,460



2,510Shopping Center Total

$
2,242


$
1,050


$
1,530


$
402


$
1,050


$
1,460


$
2,510Other:American Spectrum Realty


2,194







138



153







291



291Other Total

$
2,194


$



$
138


$
153


$



$
291


$
291Combined Total

$
153,576


$
48,372


$
149,828


$
13,381


$
48,372


$
162,737


$
211,109  59




---



##### Table of Contents



AMERICAN
    SPECTRUM REALTY, INC.
  SCHEDULE III 
    REAL ESTATE AND ACCUMULATED DEPRECIATION
 DECEMBER 31,
    2006
  Column A

Column F


Column G


Column H


Column ILife on WhichDepreciation inLatest IncomeAccumulated


Date of


Date


StatementsDescription

Depreciation


Construction


Acquired


is Computed(Dollars inthousands)Office Properties:San Felipe, TX


1,461



1977



2001



5-40Creekside, CA


2,180



1984



2001



5-40Bristol Bay, CA


2,494



1988



2001



5-407700 Building CA


13,664



1989



2001



5-40Northwest Corporate Center, MO


2,171



1983-1987



2001



5-4016350 Park Ten, TX


1,625



1979



2002



5-4016360 Park Ten, TX


1,341



1981



2002



5-40800 Sam Houston Parkway, TX


316



1980



2004



5-40888 Sam Houston Parkway, TX


376



1979



2002



5-405450 Northwest Central, TX


671



1979



2003



5-4012000 Westheimer, TX


660



1981



2003



5-408100 Washington, TX


494



1980



2003



5-408300 Bissonnet, TX


814



1981



2003



5-40Pacific Spectrum, AZ


2,673



1986



2001



5-4011500 NW Freeway, TX


563



1983



2004



5-4014741 Yorktown, TX


434



1996



2006



5-402855 Mangum, TX


168



1979



2006



5-402470 Gray Falls Drive, TX


140



1983



2006



5-402401 Fountainview, TX


743



1980



2006



5-401501 Mockingbird, TX


105



1981



2006



5-406420 Richmond Atrium, TX


97



1979



2006



5-406430 Richmond Atrium, TX


66



1974



2006



5-40Office Total

$
33,256Industrial Properties:Southwest Point, TX


713



1972



2001



5-40Morenci Professional Park, IN


843



1975-1979



2001



5-40Technology, TX


2,520



1986



2001



5-40Industrial Total

$
4,076Shopping Center Property:Columbia NE, SC(2)


704



1991



2001



5-25Shopping Center Total

$
704Other:American Spectrum Realty-FF&E


260











3-5Other Total

$
260Combined Total

$
38,296     (1)
    
    Initial cost and date acquired, where applicable.(2)
    
    Valuation allowance of $472 established in 2002 as the estimated
    fair market value declined below book value.(3)
    
    Costs capitalized are offset by retirements and write-offs.(4)
    
    The aggregate cost for federal income tax purposes is $99,215. 60




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##### Table of Contents



AMERICAN
    SPECTRUM REALTY INC.
  SCHEDULE III 
    REAL ESTATE AND ACCUMULATED DEPRECIATION
 December 31,
    2006
    2006


2005


2004(Dollars in thousands)Rental Property:Balance at beginning of year

$
154,826


$
150,769


$
139,152Additions during year:Property acquisitions and additions


56,532



4,118



11,640Retirements


(249
)


(61
)


(23
)Balance at end of year

$
211,109


$
154,826


$
150,769Accumulated
    Depreciation:Balance at beginning of year

$
28,115


$
20,139


$
12,918Additions during year:Depreciation


10,430



8,037



7,244Retirements


(249
)


(61
)


(23
)Balance at end of year

$
38,296


$
28,115


$
20,139  61




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##### Table of Contents



SIGNATURES
    AMERICAN
    SPECTRUM REALTY INC
    Date: March 14, 2007
    /s/  William
    J. Carden       Date: March 14, 2007
    /s/  G.
    Anthony Eppolito       Date: March 14, 2007
    /s/  Timothy
    R. Brown     Date: March 14, 2007
    /s/  William
    W. Geary, Jr.     Date: March 14, 2007
    /s/  Presley
    E. Werlein, III     Date: March 14, 2007
    /s/  John.
    N. Galardi     Date: March 14, 2007
    /s/  John
    F. Itzel    62




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Exhibit Title3
.1

Form of Amended and Restated
    Articles of Incorporation of the Company(1)3
.2

Bylaws of the Company(1)3
.3

Amended and Restated Bylaws of the
    Company are incorporated herein by reference to
    Exhibit 3.01 to the Companys
    Form 10-Q
    for the quarter ended June 30, 2002.3
.4

Articles of Amendment of the
    Company are incorporated herein by reference to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2003.3
.5

Articles of Amendment of the
    Company are incorporated herein by reference to Exhibit 3.3
    to the Companys
    Form 10-Q
    for the quarter ended March 31, 2006.4
.1

Form of Stock Certificate(1)10
.1

Form of Agreement and Plan of
    Merger of Sierra-Pacific Development Fund(1)10
.2

Form of Agreement and Plan of
    Merger of Sierra-Pacific Development Fund II(1)10
.3

Form of Agreement and Plan of
    Merger of Sierra-Pacific Development Fund III(1)10
.4

Form of Agreement and Plan of
    Merger of Sierra Pacific Pension Investors 84(1)10
.5

Form of Agreement and Plan of
    Merger of Sierra Pacific Institutional Properties V(1)10
.6

Form of Agreement and Plan of
    Merger of Nooney Income Fund Ltd., L.P.(1)10
.7

Form of Agreement and Plan of
    Merger of Nooney Income Fund Ltd., L.P.(1)10
.8

Form of Agreement and Plan of
    Merger of Nooney Real Property Investors  Two, L.P.(1)10
.9

Omnibus Stock Incentive Plan(1)10
.10

Agreement of Limited Partnership
    of American Spectrum Realty Operating Partnership, L.P.(1)10
.11

Agreement and Plan of Merger,
    dated August 6, 2000, between the Company and CGS
    Properties (Mkt./Col.), L.P.(1)10
.12

Agreement and Plan of Merger,
    dated August 6, 2000, between the Company and
    Creekside/Riverside, L.L.C.(1)10
.13

Agreement and Plan of Merger,
    dated August 6, 2000, between the Company and McDonnell
    Associates, L.L.C.(1)10
.14

Agreement and Plan of Merger,
    dated August 6, 2000, between the Company and Pacific
    Spectrum, L.L.C.(1)10
.15

Agreement and Plan of Merger,
    dated August 6, 2000, between the Company and Pasadena
    Autumn Ridge L.P.(1)10
.16

Agreement and Plan of Merger,
    dated August 6, 2000, between the Company and Seventy
    Seven, L.L.C.(1)10
.17

Agreement and Plan of Merger,
    dated August 6, 2000, between the Company and Villa Redondo
    L.L.C.(1)10
.18

Agreement and Plan of Merger,
    dated August 6, 2000, between the Company and Third Coast
    L.L.C.(1)10
.19

Agreement and Plan of
    Contribution, dated August 6, 2000, between the Company and
    No.-So., Inc.(1)10
.20

Form of Restricted Stock
    Agreement(1)10
.21

Form of Stock Option Agreement
    (Incentive Stock Options)(1)10
.22

Form of Stock Option Agreement
    (Directors)(1)10
.23

Form of Stock Option Agreement
    (Non-Qualified Options)(1)10
.24

Form of Indenture Relating to
    Notes(1)10
.25

Contribution Agreement, dated
    May 31, 2000, between the Company and CGS Real Estate
    Company, Inc.(1)10
.26

Contribution Agreement, dated
    May 31, 2000, between the Company and American Spectrum
    Real Estate Services, Inc.(1)10
.27

Agreement and Plan of Merger,
    dated May 31, 2001, between the Company and Lindbergh
    Boulevard Partners (Lindbergh), L.P.(1)10
.28

Agreement and Plan of Merger,
    dated May 31, 2001, between the Company and Nooney Rider
    Trail L.L.C.(1)10
.29

Agreement and Plan of Merger,
    dated May 31, 2001, between the Company and Back Bay
    L.L.C.(1)10
.30

Contribution Agreement, dated
    May 31, 2001, between American Spectrum Realty Management,
    Inc. and CGS Real Estate Company, Inc., American
    Spectrum  Midwest, American Spectrum 
    Arizona, American Spectrum  California and American
    Spectrum  Texas, Inc.(1)10
.31

Amendment of Agreement Plan of
    Merger between the Company and Villa Redondo L.L.C. is
    incorporated herein by reference to the Companys Annual
    Report on
    Form 10-K
    for the year ended December 31, 2001 63




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##### Table of Contents



ExhibitNo.

Exhibit Title10
.32

Amendment of Agreement Plan of
    Merger between the Company and Pasadena Autumn Ridge, L.P. is
    incorporated herein by reference to the Companys Annual
    Report on
    Form 10-K
    for the year ended December 31, 200110
.33

Amendment of Agreement Plan of
    Merger between the Company and Third Coast L.L.C. is
    incorporated herein by reference to the Companys Annual
    Report on
    Form 10-K
    for the year ended December 31, 200110
.34

Registration Rights
    Agreement between the Company, the Operating Partnership, and
    other parties is incorporated herein by reference to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 200110
.35

Employment Agreement dated
    October 15, 2001 between the Company and Harry A. Mizrahi
    is incorporated herein by reference to Exhibit 10.01 to the
    Companys
    Form 10-Q
    for the quarter ended March 31, 200210
.36

Employment Agreement dated
    April 3, 2002 between the Company and Paul E. Perkins is
    incorporated herein by reference to Exhibit 10.02 to the
    Companys
    Form 10-Q
    for the quarter ended March 31, 200210
.37

Employment Agreement dated
    April 16, 2002 between the Company and Patricia A. Nooney
    is incorporated herein by reference to Exhibit 10.03 to the
    Companys
    Form 10-Q
    for the quarter ended March 31, 200210
.38

Employment Agreement dated
    September 1, 2002 between the Company and Thomas N. Thurber
    is incorporated herein by reference to Exhibit 10.04 to the
    Companys
    Form 1-Q
    for the quarter ended June 30, 2002 (Exhibits pursuant to
    the Agreement have not been filed by the Company, who hereby
    undertakes to file such exhibits upon the request of the SEC)10
.39

Employment Agreement dated
    October 15, 2001 between the Company and William J. Carden
    is incorporated herein by reference to Exhibit 10.5 to the
    Companys
    Form 10-Q
    for the quarter ended September 30, 200210
.40

Letter Agreement dated
    February 25, 2003 between the Company and William J. Carden
    and John N. Galardi is incorporated herein by reference to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 200210
.41

Letter Agreement dated
    February 25, 2003 between the Company and CGS Real Estate
    Company, Inc. is incorporated herein by reference to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 200210
.42

Letter Agreement dated
    February 25, 2003 between the Company and William J. Carden
    and John N. Galardi is incorporated herein by reference to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 200210
.43

Amendment No. 1 to Employment
    Agreement dated October 6, 2003 between the Company and
    Patricia A. Nooney incorporated herein by reference to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 200321


Significant Subsidiaries of the
    Company23
.1

Hein & Associates, LLP
    Consent 
    Form 10-K23
.2

BDO Seidman, LLP
    Consent 
    Form 10-K31
.1

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act31
.2

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act32
.1

Certification of Chief Executive
    Officer pursuant to 18 U.S.C. Section 1350 as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 200232
.2

Certification of Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350 as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     (1)
    
    Incorporated herein by reference to the Companys
    Registration Statement on
    Form S-4
    (Registration
    No. 333-43686),
    which became effective August 8, 2001. 64