<PAGE>
================================================================================
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                   (Mark One)
                    [X] Quarterly report under Section 13 or 15(d) of the
                                  Securities Exchange Act of 1934

                    For Quarter Ended June 30, 2005 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 0-18261
                            TOWER PROPERTIES COMPANY
                            ------------------------
             (Exact name of registrant as specified in its charter)

        Missouri                                         (43-1529759)
        --------                                         ------------
(State of incorporation)                       (IRS Employer Identification No.)

Suite 100,  911 Main Street,             Kansas City, Missouri             64105
--------------------------------------------------------------------------------
(Address of principal executive offices)                                Zip Code

                                 (816) 421-8255
                                 --------------
              (Registrant's telephone number, including area code)
               ---------------------------------------------------

   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 the
filing requirements for the past 90 days.
Yes X                         No                         .
    ------------------------- ----------------------------

   Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes                           No X                       .
    ------------------------- ----------------------------

   185,053 shares of common stock, $1.00 par value per share, outstanding at
July 31, 2005

================================================================================
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS

                            TOWER PROPERTIES COMPANY
                                 BALANCE SHEETS
                       JUNE 30, 2005 AND DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                                              (UNAUDITED)
                                                                                 2005                           2004
ASSETS                                                                       -------------                  ------------
<S>                                                                          <C>                            <C>
Investment in Commercial Properties:
    Rental Property, Net                                                     $  76,633,133                  $ 79,828,578
    Tenant Leasehold Improvements, Net                                           3,270,520                     7,185,281
    Equipment and Furniture, Net                                                 4,336,082                     5,032,808
    Construction in Progress                                                         9,888                       795,459
                                                                             -------------                  ------------
       Commercial Properties, Net                                               84,249,623                    92,842,126

Real Estate Held for Sale                                                       12,502,182                    11,613,583

Cash and Cash Equivalents (Related Party)                                       11,551,617                        29,794
Investment Securities At Fair Value (Related Party)                              7,235,498                     7,201,051
Receivables (Including Related Party)                                            2,743,602                     2,516,768
Income Taxes Recoverable                                                           568,925                       576,425
Prepaid Expenses and Other Assets                                                1,354,776                     1,111,817
                                                                             -------------                  ------------

          TOTAL ASSETS                                                       $ 120,206,223                  $115,891,564
                                                                             =============                  ============

LIABILITIES AND STOCKHOLDERS' INVESTMENT
Liabilities:

    Mortgage Notes                                                           $  51,086,800                  $ 57,749,654
    Construction Loans (Related Party)                                                  --                     2,400,000
    Real Estate Bond Issue                                                       6,400,000                     6,400,000
    Lines of Credit (Related Party)                                             10,500,000                     5,533,000
    Accounts Payable and Other Liabilities                                       2,983,791                     2,237,543
    Deferred Income Taxes                                                        8,534,614                     5,800,631
                                                                             -------------                  ------------

          Total Liabilities                                                     79,505,205                    80,120,828

Commitments and Contingencies

Stockholders' Investment:
Preferred Stock, No Par Value
  Authorized 60,000 Shares, None Issued                                                 --                            --
   Common Stock, Par Value $1.00
     Authorized 1,000,000 Shares, Issued
        185,430 Shares                                                             185,430                       185,430
  Paid-In Capital                                                               18,930,733                    18,925,812
  Retained Earnings                                                             17,759,018                    12,861,149
  Accumulated Other Comprehensive Income                                         3,886,896                     3,865,883
                                                                             -------------                  ------------
                                                                                40,762,077                    35,838,274

  Less Treasury Stock, At Cost (377 and

    417 shares in 2005 and 2004, respectively)                                    (61,059)                      (67,538)
                                                                             -------------                  ------------
    Total Stockholders' Investment                                              40,701,018                    35,770,736
                                                                             -------------                  ------------

TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT                               $ 120,206,223                  $115,891,564
                                                                             =============                  ============
</TABLE>

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


                                       2
<PAGE>
                            TOWER PROPERTIES COMPANY
                              STATEMENTS OF INCOME
            FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             2005                    2004
                                                                         ------------            -----------
<S>                                                                      <C>                     <C>
REVENUES
Non-Related Party Revenues:
  Rent                                                                   $ 10,013,169            $ 9,575,005
  Management and Service Fee                                                   28,758                    794
  Gain (Loss) on Disposition of Assets                                         71,053               (20,751)
  Interest and Other Income                                                   430,294                 94,048
                                                                         ------------            -----------
     Total Non-Related Party Revenues                                      10,543,274              9,649,096

Related Party Revenues:
  Rent                                                                        494,038                931,564
  Management and Service Fee                                                  537,742                457,415
  Gain on Sale of Real Estate                                               7,542,307                     --
  Interest and Other Income                                                   103,283                 67,418
                                                                         ------------            -----------
     Total Related Party Revenues                                           8,677,370              1,456,397
                                                                         ------------            -----------

          Total Revenues                                                   19,220,644             11,105,493
                                                                         ------------            -----------

OPERATING EXPENSES

  Operating Expenses                                                        2,064,784              2,220,143
  Maintenance and Repairs                                                   2,049,446              2,768,227
  Depreciation and Amortization                                             2,671,640              2,963,171
  Taxes Other than Income                                                     957,208              1,080,571
  General, Administrative and Other                                         1,356,012              1,283,608
                                                                         ------------            -----------
        Total Operating Expenses                                            9,099,090             10,315,720

INTEREST EXPENSE (Including Related Party)                                  2,092,262              2,174,436
                                                                         ------------            -----------
        Income (Loss) Before Provision  (Benefit) for Income Taxes          8,029,292            (1,384,663)

PROVISION (BENEFIT) FOR INCOME TAXES

    Current                                                                        --              (540,016)
    Deferred                                                                3,131,423                     --
                                                                         ------------            -----------
         Total Provision (Benefit) for Income Taxes                         3,131,423              (540,016)

NET INCOME (LOSS)                                                        $  4,897,869            $ (844,647)
                                                                         ============            ==========

Earnings (Loss) Per Share:
  Basic                                                                  $      26.47            $    (4.67)
                                                                         ============            ==========
  Diluted                                                                $      26.47            $    (4.67)
                                                                         ============            ==========
Weighted Average Common Shares Outstanding:
  Basic                                                                       185,013               180,969
                                                                         ============            ==========
  Diluted                                                                     185,013               180,969
                                                                         ============            ==========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       3
<PAGE>
                            TOWER PROPERTIES COMPANY
                              STATEMENTS OF INCOME
           FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       2005              2004
                                                                                    -----------      -----------
<S>                                                                                 <C>              <C>
REVENUES
Non-Related Party Revenues:
  Rent                                                                              $ 4,800,539      $ 4,966,988
  Management and Service Fee                                                             18,133              256
  Loss on Disposition of Assets                                                         (6,269)               --
  Interest and Other Income                                                              78,921           66,715
                                                                                    -----------      -----------
     Total Non-Related Party Revenues                                                 4,891,324        5,033,959

Related Party Revenues:
  Rent                                                                                  242,789          482,223
  Management and Service Fee                                                            286,955          219,906
  Interest and Other Income                                                              67,429           33,589
                                                                                    -----------      -----------
     Total Related Party Revenues                                                       597,173          735,718
                                                                                    -----------      -----------

          Total Revenues                                                              5,488,497        5,769,677
                                                                                    -----------      -----------

OPERATING EXPENSES

  Operating Expenses                                                                    996,711        1,112,513
  Maintenance and Repairs                                                               932,710        1,378,634
  Depreciation and Amortization                                                       1,211,029        1,515,546
  Taxes Other than Income                                                               453,207          597,699
  General, Administrative and Other                                                     611,286          580,352
                                                                                    -----------      -----------
        Total Operating Expenses                                                      4,204,943        5,184,744

INTEREST EXPENSE (Including Related Party)                                              999,328        1,100,015
                                                                                    -----------      -----------

        Income (Loss) Before Provision (Benefit) for Income Taxes                       284,226        (515,082)

PROVISION (BENEFIT) FOR INCOME TAXES

    Current                                                                                  --        (200,881)
    Deferred                                                                            110,844               --
                                                                                    -----------      -----------
         Total Provision (Benefit) for Income Taxes                                     110,844        (200,881)

NET INCOME (LOSS)                                                                   $   173,382      $ (314,201)
                                                                                    ===========      ==========

Earnings (Loss) Per Share:
  Basic                                                                             $      0.94      $    (1.70)
                                                                                    ===========      ==========
  Diluted                                                                           $      0.94      $    (1.70)
                                                                                    ===========      ==========
Weighted Average Common Shares Outstanding:
  Basic                                                                                 185,013         184,925
                                                                                    ===========      ==========
  Diluted                                                                               185,013         184,925
                                                                                    ===========      ==========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       4
<PAGE>
                            TOWER PROPERTIES COMPANY
                       STATEMENTS OF COMPREHENSIVE INCOME
       FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           Six Months Ended                Three Months Ended
                                                                        6/30/2005       6/30/2004         6/30/2005       6/30/2004
                                                                      ------------    -------------     -----------    -------------
<S>                                                                   <C>             <C>               <C>            <C>
 NET INCOME (LOSS)                                                    $  4,897,869    $   (844,647)     $   173,382    $   (314,201)

 Unrealized holding gains (losses) on marketable
 equity securities, net of tax expense (benefit) of
 $13,434 and ($163,670), respectively for the six month periods and
 $123,711 and ($93,830), respectively for the three month periods           21,013        (255,996)         193,497        (146,760)
                                                                      ------------    -------------     -----------    -------------

 COMPREHENSIVE INCOME (LOSS)                                          $  4,918,882    $ (1,100,643)     $   366,879    $   (460,961)
                                                                      ============    =============     ===========    =============
</TABLE>

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


                                       5
<PAGE>
                            TOWER PROPERTIES COMPANY
                             STATEMENTS OF CASH FLOW
            FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                     2005            2004
                                                                               --------------   ------------
<S>                                                                            <C>              <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income (Loss)                                                           $    4,897,869   $  (844,647)
   Adjustments to Reconcile Net Income (Loss) to Net Cash
     Provided by Operating Activities:
       Depreciation                                                                 1,937,729      2,192,735
       Amortization                                                                   733,911        770,436
       (Gain) Loss on Sale of Assets                                              (7,613,360)         20,751
       Treasury Stock Issued to Directors                                              11,400         10,125
     Change in Balance Sheet Accounts, Net:
       Receivables                                                                  (226,834)       (41,309)
       Prepaid Expenses and Other Assets                                            (307,054)        151,557
       Accounts Payable and Other Liabilities                                         746,248        504,377
       Deferred Income Taxes                                                        2,720,549      1,400,000
       Income Taxes Recoverable                                                         7,500    (2,021,103)
       Tax Benefit from Stock Options Exercise                                             --         84,240
                                                                               --------------   ------------
 Net Cash Provided by Operating Activities                                          2,907,958      2,227,162
                                                                               --------------   ------------

 CASH FLOWS FROM INVESTING ACTIVITIES:

   Proceeds from Disposition of Assets                                             19,073,239             --
   Purchases of Equipment & Furniture                                               (817,528)      (231,117)
   Purchases of Rental Property                                                   (4,944,814)      (241,996)
   Purchases of Tenant Leasehold Improvements                                       (303,672)    (1,986,057)
   Purchases of Real Estate Held for Sale                                           (274,282)             --
                                                                               --------------   ------------
 Net Cash Provided by (Used In) Investing Activities                               12,732,943    (2,459,170)
                                                                               --------------   ------------

 CASH FLOWS FROM FINANCING ACTIVITIES:

   Principal Payments on Mortgage Notes                                           (6,662,854)    (3,993,261)
   Principal Payments on Construction Loans                                       (2,400,000)   (10,250,000)
   Proceeds from Long Term Borrowings                                                      --     17,000,000
   Net Change in Lines of Credit                                                    4,967,000    (3,910,000)
   Proceeds from Exercise of Stock Options                                                 --      1,328,000
   Deferred Loan Costs                                                               (23,224)      (226,731)
                                                                               --------------   ------------
 Net Cash Used in Financing Activities                                            (4,119,078)       (51,992)
                                                                               --------------   ------------

 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              11,521,823      (284,000)

 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        29,794        321,517
                                                                               --------------   ------------
 CASH AND CASH EQUIVALENTS, END OF PERIOD                                      $   11,551,617     $   37,517
                                                                               ==============     ==========
</TABLE>

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


                                       6
<PAGE>
                            TOWER PROPERTIES COMPANY
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (UNAUDITED)

1. The financial statements included herein have been prepared by Tower
Properties Company (the Company), and in the opinion of management, present a
fair statement of the results for the interim periods. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP") have been condensed or omitted, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. These condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K as of and for the year ended December 31, 2004
to provide a description of the accounting policies which have been continued
without change, and for additional information about the Company's financial
condition.

   The Company is primarily engaged in owning, developing, leasing and managing
real property located in Johnson County, Kansas, and Clay, St. Louis and Jackson
Counties in Missouri. Substantially all of the improved real estate owned by the
Company consists of office buildings, apartment complexes, a warehouse, a
warehouse/office facility, automobile parking lots and garages, and land held
for future sale or development. The Company has not pursued a policy of
acquiring real estate on a speculative basis for future sale, although some real
estate owned by the Company may be sold at some future time.

2. Interest paid during the six months of 2005 and 2004, amounted to $2,102,778
and $2,130,728, respectively. Of those amounts, interest paid to a related party
was $105,879 and $269,364 for the six months ended June 30, 2005 and 2004,
respectively. Income taxes paid, net of tax refunds, during the six months ended
June 30, 2005 and 2004 amounted to $387,500 and $7,500, respectively.

3. Interest of $4,822 and $7,399 was capitalized during the six months ended
June 30, 2005 and 2004, respectively. Interest of $4,822 and $5,671 was
capitalized during the three months ended June 30, 2005 and 2004, respectively.

4. Under SFAS No. 115, the investment in Commerce Bancshares, Inc. common stock
is classified as "available for sale", and is recorded at fair value. The
unrealized gain at June 30, 2005 of $6,371,961 net of tax effects of $2,485,065,
or $3,886,896 is reflected as a separate component of stockholders' investment.
There was an increase in the net unrealized holding gain for the six months
ended June 30, 2005 of $21,013, net of deferred taxes and an increase in the net
unrealized holding gain of $193,497, net of deferred taxes, for the three months
ended June 30, 2005.


                                       7
<PAGE>
5.    SALES AND ACQUISITION OF PROPERTIES:

On February 1, 2005, the Company sold the 9221 Quivira Building in Overland
Park, Kansas, which was classified on the December 31, 2004 balance sheet as
real estate held for sale. The sales price was $1,110,000 which resulted in a
net gain of $77,000.

On February 28, 2005, the Company sold the 811 Main Building and Garage in
Kansas City, Missouri, which was classified on the December 31, 2004 balance
sheet as real estate held for sale, to Commerce Bank, N.A. The sales price was
$10,750,000. On March 24, 2005, the Company sold the 9th and Walnut Garage in
Kansas City, Missouri, which was classified on the December 31, 2004 balance
sheet as real estate held for sale, to Commerce Bank, N.A. The sales price was
$7,250,000. The sales of the 811 Main Building and Garage and the 9th and Walnut
Garage to Commerce Bank, N.A., a related party, had a total combined sales price
of $18,000,000 and resulted in a total combined net gain of $7,542,000.

On March 2, 2005, the Company purchased two 2-story office buildings, known as
One and Two Liberty Plaza, totaling approximately 54,000 sq. ft. and surrounding
surface parking lots in Liberty, Missouri for cash of approximately $5,500,000
and entered into a net operating lease with a tenant that expires in 2015.

The following unaudited pro forma summary combines the results of operations of
the Company as if the sales of 9221 Quivira Building, 811 Main Building and
Garage, 9th and Walnut Garage, and the purchase of One and Two Liberty Plaza
(discussed in footnote No. 5 above) had occurred at the beginning of 2004.

<TABLE>
<CAPTION>
                                                            Unaudited                      Unaudited
                                                     ------------------------       -----------------------
                                                         Six Months Ended              Three Months Ended
                                                     ------------------------       -----------------------
                                                     6/30/2005      6/30/2004       6/30/2005     6/30/2004
                                                     ---------      ---------       ---------     ---------
<S>                                                 <C>             <C>             <C>           <C>
       Total Revenue                                11,240,704      9,665,606       5,488,497     5,039,082
       Net Income (Loss)                               469,575      (863,617)         198,690     (337,701)
       Basic and Diluted Earnings (Loss) Per
       Share                                              2.54         (4.77)            1.08        (1.83)
</TABLE>

This pro forma information does not purport to be indicative of the results that
actually would have been obtained if the operations had been combined during the
period and is not intended to be a projection of future results.

6.    REAL ESTATE HELD FOR SALE

The Company's real estate held for sale is recorded at cost which does not
exceed its estimated realizable value. Revenue is recorded on the sale of real
estate when title passes to the buyer and the earnings process is complete.
Included in Real Estate Held for Sale at June 30, 2005 is the commercial office
building at 911 Main, Kansas City, Missouri ("Commerce Tower") which met the
criteria to be recorded as Real Estate Held for Sale in accordance with SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Included
in Real Estate Held for Sale at December 31, 2004 were the 9221 Quivira office
building, the 811 Main building and


                                       8
<PAGE>
parking garage, and the 9th and Walnut parking garage, all of which met the
criteria to be recorded as Real Estate Held for Sale in accordance with SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and all
were sold in the first quarter of 2005.

7.    COMMITMENTS AND CONTINGENCIES

      Congress passed the Americans With Disabilities Act (the Act) of 1990
which became effective January 26, 1992. The Act contains provisions for
building owners to provide persons with disabilities with accommodations and
access equal to, or similar to, that available to the general public. Management
cannot estimate the eventual impact of the Act on the financial condition or
results of operations of the Company since certain provisions of the Act are
open to interpretation. The Company is implementing the requirements of the Act
that are readily achievable and will not constitute an undue burden on the
Company.

      Due to governmental regulations regarding asbestos and the uncertainty
surrounding the advantages and disadvantages of asbestos removal, the Company
will continue to monitor the status of asbestos in its commercial office
buildings and will take appropriate action when required. The cost to remove all
asbestos from properties owned by the Company cannot be determined; however,
these removal costs could have a significant adverse impact on the future
operations and liquidity of the Company.

      On May 20, 2005 the Company entered into a contract to acquire the 10955
Lowell office building in Overland Park, KS. for $12,500,000, which represented
a commitment at June 30, 2005. After an adjustment in the purchase price
following the Company's due diligence, on July 1, 2005 the Company acquired the
10955 Lowell office building for $12,350,000, which was funded with cash and a
new $9,000,000 mortgage loan.

      On June 21, 2005, the Company signed a commitment letter to finance a
15-year $9,000,000 loan at 5.18% with State Farm. The loan was subsequently
funded on July 1, 2005 concurrent with the closing of the purchase of the 10955
Lowell office building.

8.    EARNINGS (LOSS) PER SHARE

      Basic earnings (loss) per share is based upon the weighted average common
shares outstanding during each period. Diluted earnings (loss) per share is
based upon the weighted average common and dilutive common equivalent shares
outstanding during each period. The Company did not have any dilutive securities
outstanding for the six months ended June 30, 2005 and the three months ended
June 30, 2004. For the six months ended June 30, 2004 basic and diluted earnings
per share are the same because of the net loss for the period. The weighted
average common shares outstanding were 185,013 and 180,969 for the six months
ended June 30, 2005 and 2004, respectively and 185,013 and 184,925 for the three
months ended June 30, 2005 and 2004, respectively.


                                       9
<PAGE>
9.    BUSINESS SEGMENTS:

The Company groups its operations into four business segments: commercial
office, apartments, parking and industrial. The Company's business segments are
separate business units that offer different real estate services. The
accounting policies for each segment are the same as those described in the
summary of significant accounting policies. Beginning in the third quarter of
the year ended December 31, 2004, the Company reflected an additional business
segment, the industrial operations. Previously, the industrial operations were
included as part of Corporate, Other and Eliminations. The 2004 amounts below
were reclassified to reflect the industrial operations separately.

Following is information for each segment for the six months ended June 30, 2005
and 2004:

<TABLE>
<CAPTION>
                                          ------------------------------------------------------------------------------------------
                                                                                June 30, 2005
                                          ------------------------------------------------------------------------------------------
                                            COMMERCIAL                                               CORP., OTHER
                                              OFFICE      APARTMENTS      PARKING     INDUSTRIAL    & ELIMINATIONS       TOTAL
                                          ------------------------------------------------------------------------------------------
<S>                                       <C>             <C>             <C>         <C>           <C>                  <C>
REVENUE FROM EXTERNAL CUSTOMERS              $ 5,804,691     3,952,147       242,312       512,394           31,730       10,543,274

REVENUE FROM RELATED PARTY                     7,284,247            --       779,729            --          613,394        8,677,370

INTEREST EXPENSE                                 805,019       975,525        41,933       158,085          111,700        2,092,262

DEPRECIATION AND AMORTIZATION                  1,162,134     1,235,940        28,657       215,011           29,898        2,671,640

SEGMENT INCOME (LOSS) BEFORE TAX               7,900,918     (660,766)       671,504        73,220           44,416        8,029,292

CAPITAL EXPENDITURES BY SEGMENT                6,130,018       193,929         1,814            --           14,535        6,340,296

IDENTIFIABLE SEGMENT ASSETS                   50,392,213    38,969,986     3,876,819     6,939,030       20,028,175      120,206,223
</TABLE>


<TABLE>
<CAPTION>
                                          ------------------------------------------------------------------------------------------
                                                                                June 30, 2004
                                          ------------------------------------------------------------------------------------------
                                            COMMERCIAL                                               CORP., OTHER
                                              OFFICE      APARTMENTS      PARKING     INDUSTRIAL    & ELIMINATIONS       TOTAL
                                          ------------------------------------------------------------------------------------------
<S>                                       <C>             <C>             <C>         <C>            <C>                 <C>
REVENUE FROM EXTERNAL CUSTOMERS              $ 5,530,358     3,315,867       481,129       321,434              308        9,649,096

REVENUE FROM RELATED PARTY                       725,864            --       205,700            --          524,833        1,456,397

INTEREST EXPENSE                                 949,394       920,004        77,350       166,484           61,204        2,174,436

DEPRECIATION AND AMORTIZATION                  1,265,410     1,306,821       153,129       183,674           54,137        2,963,171

SEGMENT INCOME (LOSS) BEFORE TAX                 295,559   (1,510,900)       (8,566)     (309,699)          148,943      (1,384,663)

CAPITAL EXPENDITURES BY SEGMENT                1,530,509       274,244        72,290       430,320          151,807        2,459,170

IDENTIFIABLE SEGMENT ASSETS                   47,244,666    41,082,981    12,241,859     7,118,725        9,674,739      117,362,970
</TABLE>


                                       10
<PAGE>
Following is information for each segment for the three months ended June 30,
2005 and 2004:

<TABLE>
<CAPTION>
                                          ------------------------------------------------------------------------------------------
                                                                                   June 30, 2005
                                          ------------------------------------------------------------------------------------------
                                             COMMERCIAL                                              CORP., OTHER
                                               OFFICE      APARTMENTS     PARKING     INDUSTRIAL    & ELIMINATIONS         TOTAL
                                          ------------------------------------------------------------------------------------------
<S>                                       <C>              <C>            <C>         <C>           <C>                 <C>
REVENUE FROM EXTERNAL CUSTOMERS               $ 2,600,798    1,967,529        45,925       256,197            20,875       4,891,324

REVENUE FROM RELATED PARTY                        167,570           --       102,850            --           326,753         597,173

INTEREST EXPENSE                                  392,172      484,721            --        78,497            43,938         999,328

DEPRECIATION AND AMORTIZATION                     443,248      630,232        12,411       108,481            16,657       1,211,029

SEGMENT INCOME (LOSS) BEFORE TAX                  521,225    (359,590)        31,515        33,805            57,271         284,226

CAPITAL EXPENDITURES BY SEGMENT                   244,130      124,491            --            --             3,419         372,040

IDENTIFIABLE SEGMENT ASSETS                    50,392,213   38,969,986     3,876,819     6,939,030        20,028,175     120,206,223
</TABLE>


<TABLE>
<CAPTION>
                                          ------------------------------------------------------------------------------------------
                                                                                   June 30, 2004
                                          ------------------------------------------------------------------------------------------
                                             COMMERCIAL                                              CORP., OTHER
                                               OFFICE      APARTMENTS     PARKING     INDUSTRIAL    & ELIMINATIONS         TOTAL
                                          ------------------------------------------------------------------------------------------
<S>                                       <C>              <C>            <C>         <C>           <C>                 <C>
REVENUE FROM EXTERNAL CUSTOMERS               $ 2,861,744    1,738,926       258,318       173,325             1,646       5,033,959

REVENUE FROM RELATED PARTY                        379,373           --       102,850            --           253,495         735,718

INTEREST EXPENSE                                  471,586      478,805        35,513        82,737            31,374       1,100,015

DEPRECIATION AND AMORTIZATION                     653,224      648,234        80,310        98,022            35,756       1,515,546

SEGMENT INCOME (LOSS) BEFORE TAX                  227,963    (617,679)       (7,981)      (86,218)          (31,167)       (515,082)

CAPITAL EXPENDITURES BY SEGMENT                 1,001,681      124,099            --       366,147           150,473       1,642,400

IDENTIFIABLE SEGMENT ASSETS                    47,244,666   41,082,981    12,241,859     7,118,725         9,674,739     117,362,970
</TABLE>


                                       11
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal assets consist of real estate holdings which are not
liquid assets. Real estate holdings include office buildings, apartment
complexes, a warehouse, a warehouse/office facility, automobile parking lots,
and garages and land held for future sale or development. The principal source
of funds generated internally is income from operations. The principal source of
external funds is long-term debt and two lines of credit with Commerce Bank,
N.A. The lines of credit consist of a $10,500,000 loan ("Commerce Tower Loan")
and a $13,500,000 loan ("Line of Credit"). These lines of credit were initiated
on May 16, 2005 and replaced an $18,500,000 line of credit with Commerce Bank,
NA. The combined collateral associated with the two new lines of credit is the
same collateral that was previously associated with the $18,500,000 line of
credit. The $10,500,000 Commerce Tower Loan is collateralized by a negative
pledge of rents from the Commerce Tower Building. At June 30, 2005, the full
$10,500,000 was outstanding under the Commerce Tower Loan. The Line of Credit is
collateralized by 143,533 shares of Commerce Bancshares, Inc. common stock and
certain real estate owned in Downtown Kansas City, MO. The $13,500,000 Line of
Credit has been utilized by issuing a $6,656,000 letter of credit to back a low
rate Industrial Revenue Bond and a $65,000 letter of credit required by the
Company's mortgage on the Hillsborough apartment complex. At June 30, 2005, the
Company had no outstanding borrowings on the Line of Credit. The Company had
$6,779,000 available under the Line of Credit at June 30, 2005. Both the
Commerce Tower Loan and the Line of Credit have been extended at market rates
and terms and management believes the Company could obtain similar financing
arrangements if the Company's relationship with Commerce Bank, N.A. did not
exist. The Company does not utilize off-balance sheet financing or leasing
transactions.

CASH PROVIDED BY OPERATING ACTIVITIES for the six months ended June 30, 2005 was
$2,908,000, compared to $2,227,000 for the six months ended June 30, 2004. The
$681,000 increase in cash provided by operating activities is mainly due to
improved cash flow from operations (defined as net income plus depreciation and
amortization) at the Commerce Tower Building ($421,000), 9909 Lakeview Warehouse
($266,000), Oakbrook Apartments ($188,000), and the New Mark Phases I-IV
Apartments ($126,000), less a $409,000 combined decrease in cash flow from
operations from the 811 Main Building and Garage and the 9th and Walnut Garage,
which were sold on February 28, 2005 and March 24, 2005, respectively, plus
$110,000 in cash flow from operations from the One and Two Liberty Plaza
buildings which were purchased on March 2, 2005. Included in the increase from
the Commerce Tower Building is a $315,000 lease buyout from a tenant in January
2005.

INVESTING ACTIVITIES PROVIDED $12,733,000 of cash in the six months ended June
30, 2005 as $19,073,000 of proceeds after commissions and closing costs were
received upon the sales of: a) 9221 Quivira office building on February 1, 2005
for $1,092,000, b) 811 Main Building and Garage on February 28,2005 for
$10,739,000, and c) 9th and Walnut Garage on March 24, 2005 for $7,242,000,
which were partially offset by capital expenditures of $6,340,000. The largest


                                       12
<PAGE>
capital expenditure was the purchase of two 2-story office buildings in Liberty,
MO on March 2, 2005 for $5,500,000.

FINANCING ACTIVITIES utilized $4,119,000 in the six months ended June 30, 2005.
Activity in 2005 included $5,348,000 of mortgage notes pay offs upon the sales
of properties and $1,315,000 of normal monthly payments on other mortgage notes
totaling $6,663,000 of principal payments on Mortgage Notes. On February 1,
2005, upon the sale of the 9221 Quivira office building, the Company paid off a
mortgage note that had an outstanding balance of $853,000. On February 28, 2005,
upon the sale of the 811 Main Building and Garage, the Company paid off a
mortgage note that had an outstanding balance of $4,495,000 and paid a 4.5%
prepayment penalty of $202,000.

Activity in 2005 also includes $2,400,000 of principal payments on Construction
Loans. On March 24, 2005, upon the sale of the 9th and Walnut Garage, the
Company paid off the $2,400,000 construction loan with Commerce Bank, N.A.

The Commerce Tower Loan, which originated on May 16, 2005, had an outstanding
balance of $10,500,000 at June 30, 2005.

The $13,500,000 Line of Credit had no outstanding balance at June 30, 2005,
while the previous $18,500,000 line of credit had an outstanding balance of
$5,533,000 at December 31, 2004. When comparing these loans the decrease is due
to the $5,623,000 of net cash received in connection with the sales of 9221
Quivira office building, 811 Main Building and Garage, and the 9th and Walnut
Garage along with the purchase of One and Two Liberty Plaza buildings in
Liberty, Missouri. The sales proceeds of $19,073,000 were used to pay off
mortgage and construction loans of $7,748,000 and to pay a pre-payment penalty
of $202,000, leaving net cash received from the three sales of $11,123,000. Of
that amount, $5,500,000 was utilized to purchase One and Two Liberty Plaza in
Liberty, Missouri, with the remaining $5,623,000 utilized primarily to pay-down
the previous line of credit.

Management believes that the Company's current combination of liquidity, capital
resources and borrowing capabilities will be adequate for its existing
operations during fiscal 2005. The Company did not experience liquidity problems
during the six months ended June 30, 2005. The Company does not anticipate any
deficiencies in meeting its liquidity needs. The cash on hand and the
availability of $6,779,000 under the $13,500,000 Line of Credit along with cash
provided from operations will give the Company adequate resources to meet the
Company's cash requirements during 2005. If necessary, the Company has adequate
resources to collateralize additional financing. The Company had cash on hand of
$11,522,000 at June 30, 2005.

The Company's revenues are primarily based on lease contracts, none of which are
deemed to be materially at risk.


                                       13
<PAGE>
CONTRACTUAL CASH OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

On May 20, 2005 the Company entered into a contract to acquire the 10955 Lowell
office building in Overland Park, KS. for $12,500,000, which represented a
commitment at June 30, 2005. After an adjustment in the purchase price following
the Company's due diligence, on July 1, 2005 the Company acquired the 10955
Lowell office building for $12,350,000, which was funded with cash and a new
$9,000,000 mortgage loan.

There have been no other material changes to the Registrant's contractual cash
obligations and other commercial commitments from amounts disclosed in its
Annual Report on Form 10-K for the year ended December 31, 2004, except for the
$7,748,000 of loan payoffs, discussed above, associated with the sales of the
9221 Quivira office building, 811 Main Building and Garage and the 9th and
Walnut Garage, which are no longer contractual cash obligations at June 30,
2005.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

The Company derives its revenue primarily from two sources: 1) rent from leases
of real property, and 2) management and service fees from real property leased
and managed. Rental revenue is recognized on a straight-line basis over the term
of individual non-cancellable operating leases. The recognition of scheduled
rent increases on a straight-line basis results in the recognition of
receivables from tenants. Such receivables were $1,992,000 and $1,691,000 at
June 30, 2005 and December 31, 2004, respectively. Lease agreements generally do
not provide for contingent rents. If amounts are received from tenants upon
early termination of leases, the amounts are recorded when received as a
reduction of lease receivables to the extent there is an associated
straight-line rent receivable, with the remainder recorded as income. Management
and service fees are recognized as a percentage of revenues on managed
properties as earned over the terms of the related management agreements.

Impairment of Long-Lived Assets

The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". The Company assesses the carrying value of its long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount of the underlying asset may not be recoverable. Certain factors that may
occur and indicate that an impairment exists include, but are not limited to:
significant underperformance relative to expected projected future operating
results; significant changes in the manner of the use of the assets; and
significant adverse industry or market economic trends. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeded its estimated future cash
flows, an impairment charge would be recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the asset. Assets to be
disposed of are separately presented in the balance sheet as held for sale and
reported at the lower of the carrying amount or fair value less costs to sell,
and are no longer depreciated.


                                       14
<PAGE>
Cost Capitalization

The Company evaluates major expenditures for capitalization. Those which improve
or extend the useful life of the property are capitalized. Depreciation is based
upon the expected useful lives, generally forty years for buildings, fifteen
years for land improvements, seven years for furniture and fixtures, five years
for equipment and three years for software. Maintenance and repairs are charged
to expense as incurred.

RELATED PARTY TRANSACTIONS:

The Company has a variety of related party transactions with Commerce
Bancshares, Inc. and its subsidiaries (Commerce). The Company had the following
transactions with Commerce:
   -  Rentals - The Company leases space to Commerce Bank and its affiliates.
      Total rental income derived from these leases for the six months ended
      June 30, 2005 and 2004 was $494,038 and $931,564, respectively. Total
      rental income for the three months ended June 30, 2005 and 2004 was
      $242,789 and $482,223, respectively. The rental income of $494,038 for the
      six months ended June 30, 2005 is a net amount and includes a $102,182
      write-off of a straight-line rent receivable associated with a lease with
      Commerce Bank as a tenant of 811 Main which was recorded when the 811 Main
      Building and Garage was sold on February 28, 2005. Such leases contain
      lease rates and other provisions similar to those of leases with unrelated
      parties.
   -  Management and Service fees - The Company manages certain properties owned
      by Commerce under property management agreements. In addition, the Company
      has been overseeing the construction of an office building in Wichita,
      Kansas owned by Commerce. Total fees earned under these property and
      construction management agreements were $467,234 and $437,290 for the six
      months ended June 30, 2005 and 2004, respectively. Total fees earned for
      property and construction management agreements were $250,410 and $217,110
      for the three months ended June 30, 2005 and 2004, respectively. The
      Company earns lease commissions on property owned by or rented by Commerce
      under a listing agreement. Total fees earned under these lease commission
      arrangements were $70,148 and $19,825 for the six months ended June 30,
      2005 and 2004, respectively. Total fees earned for lease commission
      arrangements were $36,305 and $2,616 for the three months ended June 30,
      2005 and 2004, respectively. The Company may also earn income from
      consulting fee services. Total fees earned for consulting services were
      $360 and $300 for the six months ended June 30, 2005 and 2004,
      respectively. Total fees earned for consulting services were $240 and $180
      for the three months ended June 30, 2005 and 2004, respectively. The
      Company provides similar services to unrelated parties and revenues earned
      under these arrangements are similar to those earned from other unrelated
      parties.
   -  Gain on Sale of Real Estate - On February 28, 2005, the Company sold the
      811 Main Building and Garage in Kansas City, Missouri, which was
      classified on the December 31, 2004 balance sheet as real estate held for
      sale, to Commerce Bank, N.A. The sales price was $10,750,000. On March 24,
      2005, the Company sold the 9th and Walnut Garage in Kansas City, Missouri,
      which was classified on the December 31, 2004 balance sheet as real estate
      held for sale, to Commerce Bank, N.A. The sales price was $7,250,000. The


                                       15
<PAGE>
      sales of the 811 Main Building and Garage and the 9th and Walnut Garage to
      Commerce Bank, N.A., a related party, had a total combined sales price of
      $18,000,000 and resulted in a combined net gain of $7,542,307. The sales
      were made at market rates and management believes the Company could have
      obtained similar contract terms if the Company's relationship with
      Commerce Bank, N.A. did not exist.
   -  Interest and other income - The Company owned 143,533 shares of Commerce
      Bancshares, Inc. common stock at June 30, 2005. The Company received
      dividend income from ownership of Commerce Bancshares common stock of
      $68,896 for the six months ended June 30, 2005 and $34,448 for the three
      months ended June 30, 2005. The Company owned 136,699 shares at June 30,
      2004 and received dividend income of $62,882 for the six months ended June
      30, 2004 and $31,441 for the three months ended June 30, 2004. In
      addition, excess funds are deposited in Commerce Bank, N.A. Interest
      income earned on such deposits aggregated $34,387 and $4,536 for the six
      months ended June 30, 2005 and June 30, 2004, respectively, and $32,981
      and $2,148 for the three months ended June 30, 2005 and June 30, 2004,
      respectively. The Company believes that the rates of interest paid by
      Commerce Bank, N.A. and dividends paid by Commerce Bancshares are similar
      to those paid to other depositors and stockholders.
   -  Interest expense - The Company had an $18,500,000 line of credit with
      Commerce Bank, N.A., which was replaced on May 16, 2005 by two lines of
      credit (a $10,500,000 line "Commerce Tower Loan" and a $13,500,000 line
      "Line of Credit") with Commerce Bank, N.A. All these loans carry a
      variable interest rate equal to one and one half percent (1 1/2%) in
      excess of the Fed Funds rate. At June 30, 2005, the $10,500,000 Commerce
      Tower Loan was fully drawn, and the interest rate was 4.85%. This line
      requires monthly interest payments and expires June 1, 2006. The Company
      intends to pay off this line of credit when the Commerce Tower Building is
      sold. The collateral for this line of credit is a negative pledge and
      assignment of rents from the Commerce Tower Building. At June 30, 2005,
      $6,779,000 was available under the $13,500,000 Line of Credit, and the
      interest rate would calculate to be 4.85%. This line requires monthly
      interest payments and expires June 1, 2006. The Company intends to renew
      this line of credit with Commerce upon expiration. The Company pledged its
      shares of Commerce common stock and certain real estate owned in Downtown
      Kansas City, MO. as collateral for the Line of Credit. Interest expense
      for these loans, including letter of credit fees, was $107,544 and
      $120,271 for the six months ended June 30, 2005 and 2004, respectively.
      Interest expense for these loans, including letter of credit fees, for the
      three months ended June 30, 2005 and 2004 was $54,875 and 50,772,
      respectively. The weighted average short term borrowing rate on these
      lines of credit was 4.13% for the six months ended June 30, 2005. The
      Company believes that both the Commerce Tower Loan and the Line of Credit
      have been extended at market rates and that the interest expense paid is
      similar to that paid by other customers of Commerce Bank.
   -  The Company had a $2,400,000 construction loan with Commerce Bank, N.A.
      for the 9th and Walnut Garage with variable interest rate equal to the
      London Interbank Offered Rate (LIBOR) plus 1.75%. On March 24, 2005 the
      Company paid the loan in full. The loan required monthly interest payments
      and would have matured on May 1, 2006. Interest expense for this loan was
      $23,532 and $34,651 for the six months ended June 30, 2005 and June 30,
      2004, respectively. Interest expense for this loan was $17,320 for the
      three


                                       16
<PAGE>
      months ended June 30, 2004. The Company also had a $10,250,000
      construction loan with Commerce Bank, N.A. for the development of the
      Oakbrook apartments with a variable interest rate equal to the LIBOR plus
      1.75%. On May 14, 2004 the Company paid the loan in full. The loan
      required monthly interest payments and would have matured February 18,
      2006. Interest expense for this loan for the six months ended June 30,
      2004 was $108,827 and for the three months ended June 30, 2004 was
      $34,808. The Company believes that the rate of interest paid on these
      construction loans was similar to that paid by other customers of Commerce
      Bank, N.A.
   -  Included in receivables at June 30, 2005 and 2004 are amounts due from
      Commerce of $288,186 and $462,993, respectively.

RESULTS OF OPERATIONS

                         SIX MONTHS ENDED JUNE 30, 2005
                COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 2004

Results for the six months ended June 30, 2005 reflect net income of $4,898,000,
while the comparable six months of 2004 had a net loss of ($845,000). Pre-tax
income in 2005 is $8,029,000, which is $9,414,000 greater than the pre-tax loss
in 2004 of ($1,385,000). The increase in pre-tax results is derived from a
$8,115,000 increase in Total Revenues and a decrease in expenses (excluding the
Provision for Income Taxes) of $1,299,000.

The $8,115,000 increase in Total Revenues is the result of several factors,
including an increase of $372,000 in Interest and Other Income (mostly
Non-Related Party), an increase of $7,634,000 in Gain on Sale of Real Estate
(Non-Related Party and Related Party), and an increase in Management and Service
Fee Income (Non-Related Party and Related Party) of $109,000. Total Rent income
in 2005 is the same as 2004 as the increase in Non-Related Party income of
$166,000 is offset by the decrease in Related Party income.

Interest and Other Income increased by $372,000 mostly due to the fact that 2005
included $315,000 of revenue from a lease buyout in January 2005 from a tenant
in the Commerce Tower and $41,000 from a lease buyout in June 2005 from a tenant
in the Barkley office building.

The Gain on Sale of Real Estate increased by $7,634,000 mainly due to the
$7,619,000 of gains recorded from three transactions in 2005. On February 1,
2005, the Company sold the 9221 Quivira Building in Overland Park, Kansas for a
net gain of $77,000. On February 28, 2005, the Company sold the 811 Main
Building and Garage in Kansas City, Missouri to Commerce Bank, N.A., a related
party, and on March 24, 2005, the Company also sold the 9th and Walnut Garage in
Kansas City, Missouri to Commerce Bank, N.A. which resulted in a total combined
net gain of $7,542,000. All three of these properties sold in 2005 were
classified on the December 31, 2004 balance sheet as Real Estate Held for Sale.


                                       17
<PAGE>
The Management and Service Fee Income increased by $109,000 partially due to
increases in property and construction management and lease commissions earned
from Commerce Bank of $33,000 and $50,000, respectively. Also, in 2005 the
Company began a construction management consulting arrangement with a customer
building a new hotel near the Plaza in Kansas City, MO, and as a result $29,000
of income has been earned in 2005.

Total Rent income activity includes the following:

   a) Income from the Commerce Tower is up by $89,000 as average occupancy in
      2005 is 77% compared to 70% in 2004.
   b) The 9909 Lakeview Warehouse, which was vacant until June 2004, has rental
      income in 2005 that exceeds 2004 by $189,000.
   c) Income from the UMB office building in St. Louis is up by $142,000 as
      average occupancy in 2005 is 100% compared to 79% in 2004.
   d) Income from the Barkley office building is up by $40,000 as average
      occupancy in 2005 is 100% compared to 94% in 2004.
   e) Income at the apartment complexes is $621,000 greater in 2005 than 2004 as
      all apartment complexes have experienced increased income. The largest
      increases were at the Oakbrook apartments at New Mark, which were not
      completed until late 2003, where rental income in 2005 exceeds 2004 by
      $427,000 and from the New Mark Phases I-IV apartments where income is up
      by $110,000 as occupancy in 2005 is 91% compared to 84% in 2004.
   f) Income from the One and Two Liberty Plaza office buildings of $158,000 in
      2005 represents the rent recorded since the property was purchased on
      March 2, 2005.
   g) Income from the 811 Main Building and Garage is $1,188,000 less in 2005
      than 2004 because the property was sold on February 28, 2005. Only 2
      months rent is recorded in 2005 and associated with the sale, the Company
      in 2005 wrote off as a reduction in rent $102,000 of a straight-line rent
      receivable.

Expenses decreased $1,299,000 (excluding the Provision for Income Taxes) versus
the prior year.

Operating expenses decreased by $155,000 mostly because the expenses from the
811 Main Building and Garage are $132,000 less in 2005 than 2004 as the property
was sold on February 28, 2005. Salaries and benefits associated with 811 Main
decreased by $44,000 and utilities expense decreased by $88,000.

Maintenance and Repairs expense has decreased by $719,000. The largest factors
associated with the decrease include: a) repairs at the 811 Main Building and
Garage are $345,000 less in 2005 than 2004 mainly due to the fact that the
property was sold on February 28, 2005 and therefore the expense in 2005 is for
only two months, b) repairs at the Commerce Tower office building are $281,000
less in 2005 than 2004 due to fewer "make ready" repairs associated with major
tenant improvements in 2005 than in 2004, c) 2004 included roof and skylight
repairs in preparation for a new tenant of $115,000 at the 9909 Lakeview
Warehouse, d) snow removal costs in 2004 exceeded 2005 by $45,000, e) "make
ready" repairs associated with increased leasing of the New


                                       18
<PAGE>
Mark Phase I & II apartments in 2004 explains why repairs for that complex in
2004 exceeded 2005 by $97,000, and f) repairs at the Oakbrook apartments in 2005
exceeded 2004 by $80,000.

Depreciation and Amortization expense has decreased by $292,000. The largest
factors associated with the decrease include: a) depreciation and amortization
expense associated with the Commerce Tower office building was suspended on
March 31, 2005 when it met the criteria to be recorded as Real Estate Held for
Sale in accordance with SFAS No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets". Therefore, only three months of expense have been
recorded in 2005 resulting in $182,000 less depreciation and amortization in
2005 than in 2004, b) the 9th and Walnut Garage, which was sold on March 24,
2005, has $106,000 less expense in 2005 than in 2004, and c) 2005 includes the
write-off of $54,000 of amortization that represents the unamortized portion of
loan costs associated with three loans paid off in 2005 while 2004 had a
comparable write-off of $42,000 associated with the loan refinanced for the
Peppertree apartments.

Taxes Other than Income expense has decreased by $123,000 in large part due to
the fact that property taxes at the 811 Main Building and Garage and the 9th and
Walnut Garage are $66,000 and $24,000 less in 2005 than 2004, respectively,
because the 2005 expense is for only a partial year as the properties were sold
on February 28, 2005 and March 24, 2005, respectively.

General Administrative and Other expenses increased by $72,000 as 2005 includes
$202,000 for a prepayment penalty (calculated at 4.5% of the loan balance) due
when the loan for the 811 Main Building and Garage was paid in full while 2004
includes $136,000 for a prepayment penalty (calculated at 5% of the loan
balance) when the loan for the Peppertree apartments was refinanced. There has
been a decrease in property and liability insurance expense of $118,000 mostly
due to improved rates. Also, in 2005 the Company has incurred $152,000 of
expense from professional fees associated with the Board of Directors actively
considering the possibility of authorizing the Company to initiate a transaction
to purchase shares of Company common stock from the holders of less than 100
shares, or the holders of a lower number of shares to be determined, with the
goal of causing the number of record holders to be less than 300 (a so called
"going private transaction"). A going private transaction would eliminate
requirements that the Company file reports with the U. S. Securities Exchange
Commission and most of the other requirements imposed on the Company by the
Sarbanes-Oxley Act of 2002. The Board of Directors believes that a going private
transaction would have the potential to produce significant cost savings to the
Company, as well as to allow management to devote greater time and attention to
running the business. The Board of Directors has appointed a special committee
of independent directors to represent the interests of the Company's
shareholders who are not affiliated with the Company's directors, executive
officers or beneficial owners of 10% or more of the Company's outstanding shares
(the "Unaffiliated Shareholders") in connection with any going private
transaction which may be initiated by the Company, in order to ensure that such
transaction is procedurally and substantially fair to the Unaffiliated
Shareholders. The special committee is authorized to negotiate with the Company
the price, terms and conditions of any such transaction or other alternative
transactions deemed by the special committee to be fair to the Unaffiliated
Shareholders. The special committee has engaged independent legal counsel and
financial advisors to assist it in evaluating any such transaction. The Board of
Directors has made


                                       19
<PAGE>
no decision as to the manner or timing of seeking to go private, and has not
determined the price that might be offered for shares of Company common stock.
No negotiations have taken place between the Board and the special committee
concerning the price, terms and conditions of any such transaction. Accordingly,
there can be no assurance that the Company will proceed with such a transaction
and no reliance should be placed on the possibility that any such transaction
would be initiated or consummated.

The Provision for Income Taxes of $3,131,000 in 2005 is recorded as deferred
income taxes because the amount will not be due currently. The gain recognition
for tax purposes on the February 28, 2005 sale of the 811 Main Building and
Garage will be deferred through a Section 1031 tax-free exchange. The subsequent
March 2, 2005 purchase of One and Two Liberty Plaza office buildings was one
step in the tax-free exchange process. The Company made a subsequent acquisition
of the 10955 Lowell office building on July 1, 2005 to complete the full 1031
tax-free exchange.

                        THREE MONTHS ENDED JUNE 30, 2005
               COMPARED WITH THE THREE MONTHS ENDED JUNE 30, 2004

Results for the three months ended June 30, 2005 reflect net income of $173,000,
while the comparable three months of 2004 had a net loss of ($314,000). Pre-tax
income in 2005 is $284,000, which is $799,000 greater than the pre-tax loss in
2004 of ($515,000). The increase in pre-tax results is derived from a $281,000
decrease in Total Revenues, which was more than offset by a decrease in expenses
(excluding the Provision for Income Taxes) of $1,080,000.

The $281,000 decrease in Total Revenues is the net of several factors, including
a decrease in Total Rent income (both Non-Related Party and Related Party) of
$406,000, which is offset slightly by increases of $85,000 in Management and
Service Fee Income (mostly Related Party) and $46,000 in Interest and Other
Income (both Non-Related Party and Related Party).

The $85,000 increase in Management and Service Fee income is partially due to
increases in property and construction management and lease commissions earned
from Commerce Bank of $33,000 and $34,000, respectively. Also, in 2005 the
Company recorded $17,000 of construction management fees associated with a new
hotel being built by a customer near the Plaza in Kansas City, MO.

There was a $46,000 increase in Interest and Other Income. Included in 2005 is a
$41,000 lease buyout in June 2005 from a tenant in the Barkley office building,
while 2004 included $38,000 of income from tax increment financing at the 9th &
Walnut Garage. Related Party Interest Income in 2005 is $31,000 greater than
2004 because in 2005 there were significant amounts of excess cash from sales of
properties invested in overnight accounts, while in 2004 little cash was
invested in overnight accounts.


                                       20
<PAGE>
The decrease of $406,000 in Total Rent income includes the following:

   a) Income from the UMB office building in St. Louis is up by $73,000 as
      average occupancy in 2005 is 100% compared to 82% in 2004.
   b) The 9909 Lakeview Warehouse, which was vacant until mid-June 2004, has
      rental income in 2005 that exceeds 2004 by $82,000.
   c) The Oakbrook apartments at New Mark, which were not completed until late
      2003, generated rental income in 2005 that exceeds 2004 by $148,000.
   d) Income from the One and Two Liberty Plaza office buildings, which were
      purchased on March 2, 2005, was $118,000.
   e) Income from the 811 Main Building and Garage is $787,000 less in 2005 than
      2004 because there is no rent recorded in 2005 as the property was sold on
      February 28, 2005.

Expenses decreased $1,080,000 (excluding the Provision for Income Taxes) versus
the prior year.

Operating expenses decreased by $116,000 mostly because the expenses from the
811 Main Building and Garage are $90,000 less in 2005 than 2004 as the property
was sold on February 28, 2005. Salaries and benefits associated with 811 Main
decreased by $31,000 and utilities expense decreased by $59,000.

Maintenance and Repairs expense has decreased by $446,000. The largest factors
associated with the decrease include: a) repairs at the 811 Main Building and
Garage are $220,000 less in 2005 than 2004 mainly due to the fact that the
property was sold on February 28, 2005 and therefore there is no expense in
2005, b) repairs at the Commerce Tower office building are $230,000 less in 2005
than 2004 due to fewer "make ready" repairs associated with major tenant
improvements in 2005 than in 2004, c) snow removal costs in 2004 exceeded 2005
by $45,000, d) "make ready" repairs associated with increased leasing of the New
Mark Phase I & II apartments in 2004 explains why repairs for that complex in
2004 exceeded 2005 by $29,000, and e) repairs at the Oakbrook apartments in 2005
exceeded 2004 by $31,000.

Depreciation and Amortization expense has decreased by $304,000. The largest
factors associated with the decrease include: a) depreciation and amortization
expense associated with the Commerce Tower office building was suspended on
March 31, 2005 when it met the criteria to be recorded as Real Estate Held for
Sale in accordance with SFAS No. 144 "Accounting for the Impairment of Disposal
of Long-Lived Assets". Therefore, no expense has been recorded in 2005, which
explains why depreciation and amortization in 2005 is $244,000 less than in
2004, and b) the 9th and Walnut Garage, which sold on March 24, 2005, has
$59,000 less expense in 2005 than in 2004.

Taxes Other than Income expense has decreased by $144,000 in large part due to
the fact that property taxes at the 811 Main Building and Garage and the 9th and
Walnut Garage are $49,000 and $35,000 less in 2005 than 2004, respectively,
because there is no 2005 expense as the properties were sold on February 28,
2005 and March 24, 2005, respectively. Also, property tax expense booked in 2004
for the Oakbrook apartments at New Mark exceeds the 2005 expense by $53,000
because the 2004 expense includes accruals based upon an initial tax assessment
value


                                       21
<PAGE>
that was later adjusted downward. Note, the 2004 amount recorded in the quarter
ended June 30, 2004 was later adjusted by reducing the expense for the quarter
ended September 30, 2004.

General Administrative and Other expenses increased by $31,000 due mainly to the
net of two factors. In 2005 the Company has incurred $117,000 of expense from
professional fees associated with the Board of Directors actively considering
the possibility of authorizing the Company to initiate a transaction to purchase
shares of Company common stock from the holders of less than 100 shares, or the
holders of a lower number of shares to be determined, with the goal of causing
the number of record holders to be less than 300 (a so called "going private
transaction"). Partially offsetting this increase there has been a decrease in
property and liability insurance expense of $87,000 mostly due to improved
rates.

Interest expense decreased by $101,000 because the average outstanding debt in
2004 is greater than 2005, basically due to the debt payoffs in 2005 totaling
$7,748,000 related to the sales of properties which reduced the outstanding debt
in 2005.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE
         ABOUT MARKET RISK

The Company is exposed to various market risks, including equity investment
prices and interest rates.

The Company has a significant amount of fixed rate debt and believes that the
fair value risk is best quantified by considering prepayment penalties
associated with the debt. Most prepayment penalties are based upon the
difference between the debt's fixed rate and the Treasury note rate that most
closely corresponds with the remaining life of the mortgage. The estimated
aggregate prepayment penalty on such debt was $8,635,000 at June 30, 2005.

The Company had $16,900,000 of variable rate debt as of June 30, 2005. A 100
basis point change in each debt series benchmark would impact net income on an
annual basis by approximately $103,000. This debt is not hedged.

The Company owned 143,533 shares of common stock of Commerce Bancshares, Inc.
with a fair value of $7,235,000 as of June 30, 2005. This investment is not
hedged and is exposed to the risk of changing market prices. The Company
classifies these securities as "available-for-sale" for accounting purposes and
marks them to market on the balance sheet at the end of each period. Management
estimates that its investments will generally be consistent with trends and
movements of the overall stock market excluding any unusual situations. An
immediate 10% change in the market price of the securities would have a $441,000
effect on comprehensive income.

ITEM 4.  CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, the Company has evaluated the
effectiveness of the design and operation


                                       22
<PAGE>
of the Company's disclosure controls and procedures as of June 30, 2005 (the
"Evaluation Date"). Based on such evaluation, the Company's Chief Executive
Officer and Chief Financial Officer have concluded that, as of the Evaluation
Date, these controls and procedures are effective. There have been no
significant changes in the Company's internal control over financial reporting
during the Company's quarter ended June 30, 2005, that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.

PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
         None.

ITEM 2.  CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER
         PURCHASES OF EQUITY SECURITIES
         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
         None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On May 11, 2005, the Company held its annual meeting of stockholders to
elect two directors of the Company to serve until the annual stockholders
meeting in 2008 and to transact such other business as may properly come before
the meeting or any adjournment thereof. The results of the meeting were as
follows:

         James M. Kemper, Jr. was elected to serve as a director of the Company
with 166,386 votes for and 6,829 votes withheld.

         William E. Quirk was elected to serve as a director of the Company with
170,456 votes for and 2,759 votes withheld.

ITEM 5.  OTHER INFORMATION
         None

ITEM 6.  EXHIBITS

         (a) Exhibits

         Exhibit 10(a) - Real Estate Purchase Contract dated May 20, 2005 with
         10955 Lowell Investors LLC providing for the purchase of an office
         building commonly known as Building 20, 10955 Lowell, Overland Park,
         Kansas.


                                       23
<PAGE>
         Exhibit 31.1 - Certification of the Chief Executive Officer pursuant to
         Rule 13a-14(a) under the Securities Exchange Act of 1934

         Exhibit 31.2 - Certification of the Chief Financial Officer pursuant to
         Rule 13a-14(a) under the Securities Exchange Act of 1934

         Exhibit 32.1 - Certification of the Chief Executive Officer pursuant to
         18 U.S.C. Section 1350

         Exhibit 32.2 - Certification of the Chief Financial Officer pursuant to
         18 U.S.C. Section 1350


                                       24
<PAGE>
SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

TOWER PROPERTIES COMPANY


/s/ Thomas R. Willard
---------------------
Thomas R. Willard
President and Chief Executive Officer

/s/ Stanley J. Weber
--------------------
Stanley J. Weber
Chief Financial Officer

Date:  August 12, 2005


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