##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    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.
  State of Maryland
    
    52-2258674(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)2401 Fountain View, Suite 510
Houston, Texas 77057
    
    77057(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last
report)
 þ o
  ̈  ̈
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



TABLE OF CONTENTS
 Page No.PART I FINANCIAL INFORMATIONItem 1 Financial Statements
    
    3Consolidated Condensed Balance Sheets at September 30, 2009 (unaudited) and
December 31, 2008
    
    3Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2009 and 2008 (unaudited)
    
    4Consolidated
Condensed Statements of Cash Flows for the three and nine months ended September 30, 2009 and 2008 (unaudited)
    
    5Notes to Consolidated Condensed Financial Statements
    
    6Item 2 Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    16Item 4T Controls and Procedures
    
    22PART II OTHER INFORMATIONItem 1 Legal Proceedings
    
    23Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    23Item 6 Exhibits and Reports on Form 8-K
    
    23EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN SPECTRUM REALTY, INC.
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 September 30, 2009
    
    
    December 31, 2008(Unaudited)ASSETSReal estate held for investment
    
    $
    259,571
    
    
    $
    257,786Accumulated depreciation
    
    
    (71,555
    )
    
    
    (61,283
    )Real estate held for investment, net
    
    
    188,016
    
    
    
    196,503Cash and cash equivalents
    
    
    1,974
    
    
    
    2,092Tenant and other receivables, net of allowance for doubtful accounts of
$453 and $371, respectively
    
    
    937
    
    
    
    805Deferred rents receivable
    
    
    2,199
    
    
    
    1,869Deferred tax asset
    
    
    7,182
    
    
    
    3,123Insurance claims receivable
    
    
    
    
    
    
    2,700Investment in management company
    
    
    4,000
    
    
    
    4,000Prepaid and other assets, net
    
    
    13,399
    
    
    
    13,899Total Assets
    
    $
    217,707
    
    
    $
    224,991LIABILITIESLiabilities:Notes payable, including premium of $0 and $19, respectively
    
    $
    199,541
    
    
    $
    202,194Accounts payable
    
    
    5,581
    
    
    
    3,970Liabilities related to insurance claims
    
    
    1,459
    
    
    
    3,200Accrued and other liabilities
    
    
    9,792
    
    
    
    10,970Total Liabilities
    
    
    216,373
    
    
    
    220,334Commitments and Contingencies (Notes 9 and 10):Equity:American Spectrum Realty, Inc. stockholders equity:Preferred stock, $.01 par value; authorized, 25,000,000 shares;
issued and outstanding, 55,172 and 55,172 shares, respectively
    
    
    1
    
    
    
    1Common stock, $.01 par value; authorized, 100,000,000 shares;
issued, 1,644,155 and 1,620,304 shares, respectively; outstanding,
1,409,949 and 1,384,598 shares, respectively
    
    
    16
    
    
    
    16Additional paid-in capital
    
    
    50,567
    
    
    
    48,393Accumulated deficit
    
    
    (50,516
    )
    
    
    (44,200
    )Treasury stock, at cost, 235,706 and 235,706 shares, respectively
    
    
    (3,095
    )
    
    
    (3,095
    )Total American Spectrum Realty, Inc. stockholders (deficit) equity
    
    
    (3,027
    )
    
    
    1,115Noncontrolling interests
    
    
    4,361
    
    
    
    3,542Total Equity
    
    
    1,334
    
    
    
    4,657Total Liabilities and Equity
    
    $
    217,707
    
    
    $
    224,991
  3




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##### Table of Contents



AMERICAN SPECTRUM REALTY, INC.
 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUES:Rental revenue
    
    $
    8,498
    
    
    $
    9,082
    
    
   $
    25,880
    
    
   $
    26,164Third party management and leasing revenue
    
    
    71
    
    
    
    18
    
    
    
    112
    
    
    
    132Interest and other income
    
    
    10
    
    
    
    14
    
    
    
    37
    
    
    
    30Total revenues
    
    
    8,579
    
    
    
    9,114
    
    
    
    26,029
    
    
    
    26,326EXPENSES:Property operating expense
    
    
    4,417
    
    
    
    4,958
    
    
    
    12,681
    
    
    
    12,740Corporate general and administrative
    
    
    1,002
    
    
    
    854
    
    
    
    2,896
    
    
    
    2,735Depreciation and amortization
    
    
    3,773
    
    
    
    3,686
    
    
    
    11,292
    
    
    
    10,474Interest expense
    
    
    3,470
    
    
    
    3,501
    
    
    
    10,265
    
    
    
    9,968Total expenses
    
    
    12,662
    
    
    
    12,999
    
    
    
    37,134
    
    
    
    35,917Loss from continuing operations before
deferred income tax benefit
    
    
    (4,083
    )
    
    
    (3,885
    )
    
    
    (11,105
    )
    
    
    (9,591
    )Deferred income tax benefit
    
    
    1,447
    
    
    
    1,376
    
    
    
    3,933
    
    
    
    3,389Loss from continuing operations
    
    
    (2,636
    )
    
    
    (2,509
    )
    
    
    (7,172
    )
    
    
    (6,202
    )Discontinued operations:Gain from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Gain on sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,141Deferred income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (421
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    725Net loss, including noncontrolling interests
    
    $
    (2,636
    )
    
    $
    (2,509
    )
    
    $
    (7,172
    )
    
    $
    (5,477
    )Plus: Net loss attributable to noncontrolling interests
    
    
    314
    
    
    
    323
    
    
    
    856
    
    
    
    706Net loss attributable to American Spectrum Realty, Inc.
    
    
    (2,322
    )
    
    
    (2,186
    )
    
    
    (6,316
    )
    
    
    (4,771
    )Preferred stock dividend
    
    
    (60
    )
    
    
    
    
    
    
    (180
    )
    
    
    Net loss attributable to American Spectrum Realty, Inc.
common stockholders
    
    $
    (2,382
    )
    
    $
    (2,186
    )
    
    $
    (6,496
    )
    
    $
    (4,771
    )Basic and diluted per share data:Loss from continuing operations attributable to American
Spectrum Realty, Inc. common stockholders
    
    $
    (1.69
    )
    
    $
    (1.59
    )
    
    $
    (4.62
    )
    
    $
    (3.93
    )Income from discontinued operations attributable to American
Spectrum Realty, Inc. common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.46Net loss attributable to American Spectrum Realty, Inc.
common stockholders
    
    $
    (1.69
    )
    
    $
    (1.59
    )
    
    $
    (4.62
    )
    
    $
    (3.47
    )Basic and diluted weighted average shares used
    
    
    1,409,449
    
    
    
    1,376,098
    
    
    
    1,404,716
    
    
    
    1,375,942Amounts attributable to American Spectrum Realty, Inc. common
stockholders:Loss from continuing operations
    
    $
    (2,382
    )
    
    $
    (2,186
    )
    
    $
    (6,496
    )
    
    $
    (5,402
    )Income from discontinuing operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    631Net loss
    
    $
    (2,382
    )
    
    $
    (2,186
    )
    
    $
    (6,496
    )
    
    $
    (4,771
    )
  4




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AMERICAN SPECTRUM REALTY, INC
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 Nine Months Ended September 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net loss applicable to American Spectrum Realty, Inc.
    
    $
    (6,316
    )
    
    $
    (4,771
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    11,292
    
    
    
    10,497Deferred rental income
    
    
    (330
    )
    
    
    (298
    )Noncontrolling interests
    
    
    (856
    )
    
    
    (706
    )Net gain on sale of real estate asset
    
    
    
    
    
    
    (1,141
    )Stock-based compensation expense
    
    
    69
    
    
    
    50Deferred income tax benefit
    
    
    (3,933
    )
    
    
    (2,968
    )Amortization of note payable premium, included in interest expense
    
    
    (19
    )
    
    
    (34
    )Changes in operating assets and liabilities:Increase in tenant and other receivables
    
    
    (132
    )
    
    
    (28
    )Increase in prepaid and other assets
    
    
    (516
    )
    
    
    (2,526
    )Increase in accounts payable
    
    
    1,611
    
    
    
    130(Decrease) increase in accrued and other liabilities
    
    
    (1,448
    )
    
    
    2,302Net cash (used in) provided by operating activities
    
    
    (578
    )
    
    
    507CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds received from sale of real estate asset
    
    
    
    
    
    
    3,014Real estate acquisitions
    
    
    
    
    
    
    (17,250
    )Capital improvements to real estate assets
    
    
    (1,785
    )
    
    
    (3,086
    )Proceeds received related to insurance claims
    
    
    2,700
    
    
    
    Payments for damages related to insurance claims
    
    
    (1,741
    )
    
    
    Net cash used in investing activities:
    
    
    (826
    )
    
    
    (17,322
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from borrowings
    
    
    3,105
    
    
    
    470Proceeds from borrowings  property acquisitions
    
    
    
    
    
    
    16,950Repayment of borrowings  property sales
    
    
    
    
    
    
    (2,218
    )Repayment of borrowings  refinances
    
    
    (1,474
    )
    
    
    (150
    )Repayment of borrowings  scheduled payments
    
    
    (2,215
    )
    
    
    (1,250
    )Repayment of borrowings  other
    
    
    (2,050
    )
    
    
    Proceeds from partial sale of consolidated partnership interests
    
    
    4,000
    
    
    
    Acquisition of minority interest in the operating partnership
    
    
    
    
    
    
    (1
    )Dividend payments to preferred stockholders
    
    
    (80
    )
    
    
    Repurchase of common stock
    
    
    
    
    
    
    (9
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    31Release of restricted cash
    
    
    
    
    
    
    3,565Net cash provided by financing activities:
    
    
    1,286
    
    
    
    17,388(Decrease) increase in cash and cash equivalents
    
    
    (118
    )
    
    
    573Cash and cash equivalents, beginning of period
    
    
    2,092
    
    
    
    847Cash and cash equivalents, end of period
    
    $
    1,974
    
    
    
    1,420SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Conversion of operating partnership units to common stock
    
    $
    314
    
    
    
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    9,975
    
    
    $
    9,593Cash paid for income taxes
    
    
    89
    
    
    
    151
  5




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AMERICAN
SPECTRUM REALTY, INC.
 
 Notes to Consolidated Condensed Financial Statements
 NOTE 1. DESCRIPTION OF BUSINESS
       6




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##### Table of Contents



NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 BASIS OF PRESENTATION
    RECLASSIFICATIONS
  SEGMENT REPORTING
  NEW ACCOUNTING PRONOUNCEMENTS
   7




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8




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STOCK-BASED COMPENSATION
  NONCONTROLLING INTERESTS
 Unit Holders in the Operating Partnership
  Partial Sale of Consolidated Partnership Interests
    NET LOSS PER SHARE
  INCOME TAXES
   9




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NOTE 3. REAL ESTATE
 ACQUISITIONS
 2009
  2008
  DISPOSITIONS
 2009
  2008
  NOTE 4. DISCONTINUED OPERATIONS
  Nine Months Ended September 30,Consolidated Condensed Statements of Operations
    
    2009
    
    
    2008Rental revenue
    
    $
    
    
    
    $
    73Total expenses
    
    
    
    
    
    
    68Income from discontinued operations before gain on
Sale and income tax expense
    
    
    
    
    
    
    5Gain on sale of discontinued operations
    
    
    
    
    
    
    1,141Income tax expense
    
    
    
    
    
    
    (421
    )Income from discontinued operations
    
    $
    
    
    
    $
    725
 10




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NOTE 5. NOTES PAYABLE, NET OF PREMIUM
  September 30, 2009
    
    
    December 31, 2008Collateral (property unless
    
    Maturity
    
    
    Principal
    
    
    Interest
    
    
    Principal
    
    
    Interestotherwise noted)
    
    Date
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateFixed Rate1501 Mockingbird (1)
    
    
    9/30/2009
    
    
    
    297
    
    
    
    6.00
    %
    
    
    300
    
    
    
    6.00
    %6430 Richmond Atrium (1)
    
    
    9/30/2009
    
    
    
    708
    
    
    
    5.50
    %
    
    
    715
    
    
    
    5.50
    %Corporate  Secured
    
    
    2/7/2010
    
    
    
    1,950
    
    
    
    7.50
    %
    
    
    1,950
    
    
    
    7.50
    %Fountain View Place (2)
    
    
    4/29/2010
    
    
    
    1,469
    
    
    
    10.00
    %
    
    
    1,700
    
    
    
    10.00
    %Corporate  Unsecured (3)
    
    
    5/31/2010
    
    
    
    500
    
    
    
    11.00
    %
    
    
    
    
    
    
    Pacific Spectrum (4)
    
    
    6/10/2010
    
    
    
    5,272
    
    
    
    8.02
    %
    
    
    5,341
    
    
    
    8.02
    %1501Mockingbird/6430 Richmond
(5)
    
    
    9/21/2010
    
    
    
    890
    
    
    
    8.75
    %
    
    
    
    
    
    
    Fountain View Place (6)
    
    
    10/29/2010
    
    
    
    
    
    
    
    18.00
    %
    
    
    2,500
    
    
    
    18.00
    %Bristol Bay
    
    
    8/1/2011
    
    
    
    6,926
    
    
    
    7.58
    %
    
    
    7,005
    
    
    
    7.58
    %Technology
    
    
    8/1/2011
    
    
    
    7,161
    
    
    
    7.44
    %
    
    
    7,243
    
    
    
    7.44
    %Creekside
    
    
    12/1/2011
    
    
    
    5,838
    
    
    
    7.17
    %
    
    
    5,907
    
    
    
    7.17
    %16350 Park Ten Place
    
    
    5/11/2012
    
    
    
    4,478
    
    
    
    7.45
    %
    
    
    4,526
    
    
    
    7.45
    %16360 Park Ten Place
    
    
    5/11/2012
    
    
    
    3,508
    
    
    
    7.45
    %
    
    
    3,546
    
    
    
    7.45
    %2855 Mangum
    
    
    5/11/2012
    
    
    
    2,585
    
    
    
    7.45
    %
    
    
    2,613
    
    
    
    7.45
    %2855 Mangum
    
    
    5/11/2012
    
    
    
    1,434
    
    
    
    6.00
    %
    
    
    1,472
    
    
    
    6.00
    %6430 Richmond Atrium
    
    
    5/11/2012
    
    
    
    2,170
    
    
    
    7.45
    %
    
    
    2,193
    
    
    
    7.45
    %Southwest Pointe
    
    
    6/1/2012
    
    
    
    2,721
    
    
    
    7.33
    %
    
    
    2,751
    
    
    
    7.33
    %16350 Park Ten Place
    
    
    8/11/2012
    
    
    
    494
    
    
    
    7.45
    %
    
    
    500
    
    
    
    7.45
    %16360 Park Ten Place
    
    
    8/11/2012
    
    
    
    387
    
    
    
    7.45
    %
    
    
    391
    
    
    
    7.45
    %11500 Northwest Freeway
    
    
    6/1/2014
    
    
    
    4,096
    
    
    
    5.93
    %
    
    
    4,145
    
    
    
    5.93
    %11500 Northwest Freeway
    
    
    6/1/2014
    
    
    
    296
    
    
    
    5.93
    %
    
    
    300
    
    
    
    5.93
    %Morenci
    
    
    7/1/2014
    
    
    
    1,697
    
    
    
    7.25
    %
    
    
    1,524
    
    
    
    6.60
    %5850 San Felipe
    
    
    8/1/2014
    
    
    
    5,113
    
    
    
    5.65
    %
    
    
    5,177
    
    
    
    5.65
    %Northwest Corporate Center
    
    
    8/1/2014
    
    
    
    5,391
    
    
    
    6.26
    %
    
    
    5,451
    
    
    
    6.26
    %14741 Yorktown
    
    
    9/1/2014
    
    
    
    8,600
    
    
    
    5.32
    %
    
    
    8,600
    
    
    
    5.32
    %8100 Washington
    
    
    2/22/2015
    
    
    
    2,205
    
    
    
    5.59
    %
    
    
    2,232
    
    
    
    5.59
    %8300 Bissonnet
    
    
    5/1/2015
    
    
    
    4,545
    
    
    
    5.51
    %
    
    
    4,597
    
    
    
    5.51
    %1501 Mockingbird
    
    
    7/1/2015
    
    
    
    3,252
    
    
    
    5.28
    %
    
    
    3,287
    
    
    
    5.28
    %5450 Northwest Central
    
    
    9/1/2015
    
    
    
    2,642
    
    
    
    5.38
    %
    
    
    2,674
    
    
    
    5.38
    %800/888 Sam Houston Parkway
    
    
    12/29/2015
    
    
    
    4,666
    
    
    
    6.25
    %
    
    
    4,744
    
    
    
    6.25
    %2401 Fountain View
    
    
    3/1/2016
    
    
    
    12,184
    
    
    
    5.82
    %
    
    
    12,316
    
    
    
    5.82
    %12000 Westheimer/2470 Gray Falls
    
    
    1/1/2017
    
    
    
    7,350
    
    
    
    5.70
    %
    
    
    7,350
    
    
    
    5.70
    %6420 Richmond Atrium
    
    
    6/5/2017
    
    
    
    6,382
    
    
    
    5.87
    %
    
    
    6,400
    
    
    
    5.87
    %7700 Irvine Center
    
    
    8/1/2017
    
    
    
    45,000
    
    
    
    5.99
    %
    
    
    45,000
    
    
    
    5.99
    %Fountain View Place
    
    
    4/29/2018
    
    
    
    12,560
    
    
    
    6.50
    %
    
    
    12,670
    
    
    
    6.50
    %Subtotal
    
    
    $
    174,767
    
    
    
    
    
    
    $
    177,120Variable RateCorporate  Unsecured
    
    
    1/12/2010
    
    
    
    1,200
    
    
    
    6.00
    %
    
    
    1,200
    
    
    
    6.00
    %Beltway Industrial (7)
    
    
    5/9/2010
    
    
    
    17,170
    
    
    
    7.00
    %
    
    
    17,170
    
    
    
    7.00
    %Corporate  Unsecured
    
    
    5/31/2010
    
    
    
    500
    
    
    
    6.00
    %
    
    
    500
    
    
    
    6.00
    %Northwest Spectrum
    
    
    4/19/2012
    
    
    
    3,065
    
    
    
    2.90
    %
    
    
    3,210
    
    
    
    4.30
    %Windrose Plaza
    
    
    4/19/2012
    
    
    
    2,839
    
    
    
    2.90
    %
    
    
    2,975
    
    
    
    4.30
    %Subtotal
    
    
    $
    24,774
    
    
    
    
    
    
    $
    25,055Loan Premium
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Total
    
    $
    199,541
    
    
    
    
    
    
    $
    202,194
 
 (1)
    
    Loans were paid in full in October 2009.(2)
    
    In April 2009, the Company made a principal payment of $170,000 on the note and the lender
extended the maturity date of the note to April 29, 2010(3)
    
    In May 2009, the Company obtained a one-year unsecured loan in the amount of $500,000.(4)
    
    In June 2009, the lender extended the maturity date of the note from June 10, 2009 to June
10, 2010. 11




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##### Table of Contents



(5)
    
    In September 2009, the Company obtained a one-year loan in the amount of $890,000.(6)
    
    Loan was paid in September 2009.(7)
    
    The loan contains two one-year extension options. The extension options are contingent upon
satisfaction of certain terms and conditions required by the lender.   NOTE 6. NONCONTROLLING INTERESTS
  Unit Holders in the Operating Partnership
   Partial Sale of Consolidated Partnership Interests
     Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2009Net loss attributable to the Company
    
    $
    (2,322
    )
    
    $
    (6,316
    )Transfers from noncontrolling interestsIncrease in the Companys paid-in capital on
exchange
of OP Units for shares of Common Stock
    
    
    
    
    
    
    314Increase in the Companys paid-in capital on partial
sale of consolidated partnership interests
    
    $
    1,971
    
    
    $
    1,971Net transfers from noncontrolling interests
    
    $
    1,971
    
    
    $
    2,285Change from net loss attributable to the Company on
exchange of OP Units for shares of Common Stock and
partial sale of consolidated partnership interests
    
    $
    (351
    )
    
    $
    (4,031
    )
 12




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##### Table of Contents



NOTE 7. REPURCHASE OF COMMON STOCK
  NOTE 8. STOCK-BASED COMPENSATION
    Stock Options
   Shares
    
    
    Weighted Average
    
    
    AggregateUnder Option
    
    
    Exercise Price
    
    
    Intrinsic ValueOutstanding on January 1, 2009
    
    
    29,375
    
    
    $
    23.93Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding on September 30, 2009
    
    
    29,375
    
    
    $
    23.93
    
    
    $
    127,713Exercisable as of September 30, 2009
    
    
    29,375
    
    
    $
    23.93
    
    
    $
    127,713
 13




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##### Table of Contents



Weighted Average
    
    WeightedRange of
    
    
    
    
    
    Remaining
    
    AverageExercise
    
    Number
    
    Contractual
    
    ExercisePrice
    
    Exercisable
    
    Life
    
    Price$8.10 - $12.20
    
    
    12,500
    
    
    4.5 years
    
    $
    10.66$18.25 - $27.16
    
    
    11,250
    
    
    5.0 years
    
    $
    20.65$60.00 - $60.00
    
    
    5,625
    
    
    2.0 years
    
    $
    60.00
  Weighted AverageGrant DateNonvested Stock Options
    
    Number
    
    Fair ValueNonvested at January 1, 2009
    
    
    1,562
    
    
    $
    10.00Granted
    
    
    
    
    
    
    Vested
    
    
    (1,562
    )
    
    $
    10.00Forfeited
    
    
    
    
    
    
    Nonvested at September 30, 2009
    
    
    
    
    
    $
    
  Restricted Stock
    Weighted AverageNumber of
    
    Grant DateRestricted Stock Awards
    
    Shares
    
    Fair ValueNonvested at January 1, 2009
    
    
    7,087
    
    
    $
    24.10Granted
    
    
    5,750
    
    
    $
    19.34Vested
    
    
    (2,831
    )
    
    $
    23.88Forfeited
    
    
    
    
    
    
    Nonvested at September 30, 2009
    
    
    10,006
    
    
    $
    21.43
  14




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##### Table of Contents



NOTE 9. RELATED PARTY TRANSACTIONS
      NOTE 10. COMMITMENTS AND CONTINGENCIES
    15




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##### Table of Contents



NOTE 11. PREFERRED STOCK
    
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW
      16




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
   Investment in Real Estate Assets
   Building and Improvements
    
    5 to 40 yearsTenant Improvements
    
    Term of the related leaseFurniture and Equipment
    
    3 to 5 years
 Allocation of Purchase Price of Acquired Assets
   17




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##### Table of Contents



Sales of Real Estate Assets
  RESULTS OF OPERATIONS
 Discussion of the three months ended September 30, 2009 and 2008.
  September 30,
    
    September 30,
    
    Variance2009
    
    2008
    
    $
    
    %Rental revenue
    
    $
    8,498,000
    
    
    $
    9,082,000
    
    
    $
    (584,000
    )
    
    
    (6.4
    %)Operating expenses:Property operating expenses
    
    
    4,417,000
    
    
    
    4,958,000
    
    
    
    (541,000
    )
    
    
    (10.9
    %)General and administrative
    
    
    1,002,000
    
    
    
    854,000
    
    
    
    148,000
    
    
    
    17.3
    %Depreciation and amortization
    
    
    3,773,000
    
    
    
    3,686,000
    
    
    
    87,000
    
    
    
    2.4
    %Interest expense
    
    
    3,470,000
    
    
    
    3,501,000
    
    
    
    (31,000
    )
    
    
    (0.9
    %)
 Rental revenue
 Property operating expenses
 General and administrative
 Depreciation and amortization
 Interest expense
 Income taxes.
 18




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##### Table of Contents



Noncontrolling interests.
 Discussion of the nine months ended September 30, 2009 and 2008.
  September 30,
    
    September 30,
    
    Variance2009
    
    2008
    
    $
    
    %Rental revenue
    
    $
    25,880,000
    
    
    $
    26,164,000
    
    
    $
    (284,000
    )
    
    
    (10.9
    %)Operating expenses:Property operating expenses
    
    
    12,681,000
    
    
    
    12,740,000
    
    
    
    (59,000
    )
    
    
    (0.5
    %)General and administrative
    
    
    2,896,000
    
    
    
    2,735,000
    
    
    
    162,000
    
    
    
    5.9
    %Depreciation and amortization
    
    
    11,292,000
    
    
    
    10,474,000
    
    
    
    818,000
    
    
    
    7.8
    %Interest expense
    
    
    10,265,000
    
    
    
    9,968,000
    
    
    
    297,000
    
    
    
    3.0
    %
 Rental revenue
 Property operating expenses
 General and administrative
 Depreciation and amortization
 Interest expense
 19




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##### Table of Contents



Income taxes.
 Noncontrolling interests.
 Discontinued operations
 LIQUIDITY AND CAPITAL RESOURCES
   Nine Months EndedSeptember 30,2009
    
    2008Non-Cash Items:Depreciation and amortization expense
    
    $
    11,292
    
    
    $
    10,497Income tax benefit
    
    
    (3,933
    )
    
    
    (2,968
    )Deferred rental income
    
    
    (330
    )
    
    
    (298
    )Noncontrolling interests
    
    
    (856
    )
    
    
    (706
    )Stock-based compensation expense
    
    
    69
    
    
    
    50Amortization of loan premium
    
    
    (19
    )
    
    
    (34
    )
   20




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##### Table of Contents



FUNDS FROM OPERATIONS
  21




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##### Table of Contents



Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2008Net loss attributable to the Company
    
    $
    (6,316
    )
    
    $
    (4,771
    )Depreciation and amortization from discontinued
operations
    
    
    
    
    
    
    23Net income from discontinued operations
    
    
    
    
    
    
    (725
    )Deferred income tax benefit
    
    
    (3,933
    )
    
    
    (3,389
    )Net loss attributable to noncontrolling interests
    
    
    (856
    )
    
    
    (706
    )Depreciation and amortization
    
    
    11,292
    
    
    
    10,474FFO
    
    $
    187
    
    
    $
    906
 INFLATION
  FORWARD-LOOKING STATEMENTS
  
 ITEM 4T. CONTROLS AND PROCEDURES
   22




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
    
 23




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##### Table of Contents



SIGNATURES
  AMERICAN SPECTRUM REALTY, INC.Date: November 13, 2009
    By:
    /s/ William J. CardenWilliam J. CardenChairman of the Board, President and,
Chief Executive Officer
(Principal Executive Officer)Date: November 13, 2009
    By:
    /s/ G. Anthony EppolitoG. Anthony EppolitoVice President, Chief Financial Officer,
(Principal Financial Officer and Accounting Officer),
Treasurer and Secretary 24




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit Title31.1
    
    Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 25