##### 



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, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 Commission file number: 1-32699
 REPUBLIC PROPERTY TRUST
  Maryland
(State or other jurisdiction of 
incorporation or organization)
    
    20-3241867
(I.R.S. Employer
Identification No.)
 1280 Maryland Avenue, S.W., Suite 280
Washington, D.C.
(Address of principal executive offices)
    
    20024
(Zip Code)
 (202) 863-0300   None
   þ o
  o o þ
  o þ
  Class
    
    Outstanding at November 1, 2006Common Shares of beneficial interest,
$0.01 par value per share
    
    26,076,321 shares




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##### 



TABLE OF CONTENTS
 Page No.PART I FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    2Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4. Controls and Procedures
    
    
    16PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults Upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    19
 Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
  
    
    Our ability to borrow on favorable terms;
    
    General economic and business conditions, which we believe
will, among other things, affect office property demand and
rents, tenant creditworthiness, interest rates and
financing availability;
    
    Adverse changes in the real estate markets including, among
other things, increased competition with other companies;
    
    Risks related to real estate acquisition and development,
including, among other things, risks that the development
projects may not be completed on schedule, that tenants may
not take occupancy or pay rent or that the development or
operating costs may be greater than anticipated;
    
    Our ability to satisfy and operate effectively under
federal income tax rules relating to real estate investment
trusts and partnerships;
    
    Risks associated with the leasing and operation of office
properties, including risks that we may not be able to
lease available space at favorable rental rates or in
anticipated time frames, that tenants will not take
occupancy or pay rent in accordance with their leases, or
that operating costs may be greater than anticipated;
    
    Our ability to pay our distributions at their current rate;
    
    Governmental actions and initiatives;
    
    Environmental requirements;
    
    The impact of potential management changes;
    
    Our ability to acquire the option properties; and
    
    Those risks described in the section entitled Risk
Factors in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2005, our Quarterly Reports on Form
10-Q for the periods ended March 31, 2006 and June 30, 2006
and elsewhere in this report.
  1




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##### 



PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements
 Republic Property Trust
Condensed Consolidated Balance Sheets
As of September 30, 2006 and December 31, 2005
 September 30, 2006
    
    
    December 31, 2005(Dollars in thousands)
    
    (Unaudited)
    
    
    (Audited)ASSETSInvestment in real estate:Land
    
    $
    102,100
    
    
    $
    83,600Commercial office buildings and improvements
    
    
    485,281
    
    
    
    384,490587,381
    
    
    
    468,090Less: accumulated depreciation and amortization
    
    
    (32,372
    )
    
    
    (19,486
    )555,009
    
    
    
    448,604Cash and cash equivalents
    
    
    9,314
    
    
    
    23,127Marketable securities
    
    
    
    
    
    
    10,004Restricted cash
    
    
    6,454
    
    
    
    9,386Rents and other receivables
    
    
    6,780
    
    
    
    5,301Prepaid expenses and other assets
    
    
    25,089
    
    
    
    23,975Total Assets
    
    $
    602,646
    
    
    $
    520,397LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Mortgage notes payable
    
    $
    345,176
    
    
    $
    231,894Line of credit payable
    
    
    
    
    
    
    Intangible lease liabilities
    
    
    21,649
    
    
    
    20,886Taxes payable
    
    
    642
    
    
    
    16,604Accounts payable and accrued liabilities
    
    
    9,573
    
    
    
    15,127Acquisition payables
    
    
    
    
    
    
    7,204Tenant security deposits
    
    
    2,452
    
    
    
    2,267Advance rents
    
    
    1,273
    
    
    
    1,005Total liabilities
    
    
    380,765
    
    
    
    294,987Minority interest  operating partnership
    
    
    26,670
    
    
    
    28,080Shareholders EquityPreferred shares of beneficial interest, par
value $0.01, 40 million shares authorized, none
issued and outstanding in 2006 or 2005
    
    
    
    
    
    
    Common shares of beneficial interest, par value
$0.01, 200 million shares authorized, 26.1
million and 25.0 million shares issued and
outstanding in 2006 and 2005, respectively
    
    
    261
    
    
    
    250Additional paid-in capital
    
    
    219,847
    
    
    
    208,814Accumulated deficit
    
    
    (24,897
    )
    
    
    (11,734
    )Total Shareholders Equity
    
    
    195,211
    
    
    
    197,330Total Liabilities and Shareholders Equity
    
    $
    602,646
    
    
    $
    520,397
  2




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##### 



Republic Property Trust (The Company) and RKB Washington Property Fund I L.P. (The Predecessor)
Consolidated Statements of Operations  Unaudited
 The
    
    
    
    
    
    
    TheThe Company
    
    
    Predecessor
    
    
    The Company
    
    
    PredecessorThree months ended September 30,
    
    
    Nine months ended September 30,(Dollars in thousands except per share amounts)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue:Rental income
    
    $
    15,229
    
    
    $
    8,900
    
    
    $
    42,493
    
    
    $
    26,410Management and development fees and
associated reimbursements
    
    
    1,147
    
    
    
    
    
    
    
    6,371
    
    
    
    Total operating revenue
    
    
    16,376
    
    
    
    8,900
    
    
    
    48,864
    
    
    
    26,410Expenses:Real estate taxes
    
    
    1,418
    
    
    
    758
    
    
    
    4,020
    
    
    
    2,299Property operating costs
    
    
    3,106
    
    
    
    1,765
    
    
    
    8,126
    
    
    
    5,008Depreciation and amortization
    
    
    5,587
    
    
    
    2,724
    
    
    
    15,464
    
    
    
    8,188Management fees
    
    
    
    
    
    
    793
    
    
    
    
    
    
    
    2,318Cost of management and development fees
and associated reimbursements
    
    
    910
    
    
    
    
    
    
    
    4,847
    
    
    
    General and administrative
    
    
    2,434
    
    
    
    85
    
    
    
    7,064
    
    
    
    293Total operating expenses
    
    
    13,455
    
    
    
    6,125
    
    
    
    39,521
    
    
    
    18,106Operating income
    
    
    2,921
    
    
    
    2,775
    
    
    
    9,343
    
    
    
    8,304Other income and expense:Interest income
    
    
    146
    
    
    
    54
    
    
    
    608
    
    
    
    120Interest expense
    
    
    (4,896
    )
    
    
    (4,793
    )
    
    
    (11,913
    )
    
    
    (13,871
    )Total other income and expense
    
    
    (4,750
    )
    
    
    (4,739
    )
    
    
    (11,305
    )
    
    
    (13,751
    )Loss before minority interest
    
    
    (1,829
    )
    
    
    (1,964
    )
    
    
    (1,962
    )
    
    
    (5,447
    )Minority interest
    
    
    220
    
    
    
    
    
    
    
    236
    
    
    
    Net loss
    
    $
    (1,609
    )
    
    $
    (1,964
    )
    
    $
    (1,726
    )
    
    $
    (5,447
    )Basic and diluted loss per common share
    
    $
    (0.06
    )
    
    
    
    
    
    $
    (0.07
    )Weighted average common shares
outstanding basic and diluted (in
millions)
    
    
    26.0
    
    
    
    
    
    
    
    26.0Distributions declared per common share
    
    $
    0.206
    
    
    
    
    
    
    $
    0.439
  3




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##### 



Republic Property Trust (The Company) and RKB Washington Property Fund I L.P. (The Predecessor)
Consolidated Statements of Cash Flows  Unaudited
 TheCompany
    
    
    The PredecessorNine Months ended September 30,(Dollars in thousands)
    
    2006
    
    
    2005Operating activities:Net loss
    
    $
    (1,726
    )
    
    $
    (5,447
    )Adjustments to reconcile net loss to net cash provided by operating activities:Minority interest
    
    
    (236
    )
    
    
    Stock awards
    
    
    124
    
    
    
    Depreciation and amortization
    
    
    15,464
    
    
    
    8,188Amortization of net lease intangibles
    
    
    (1,201
    )
    
    
    464Amortization of loan costs
    
    
    403
    
    
    
    1,690Other
    
    
    300
    
    
    
    Changes in operating assets and liabilities:Rents and other receivables
    
    
    (1,479
    )
    
    
    (1,291
    )Prepaid expenses and other assets
    
    
    (1,174
    )
    
    
    (1,954
    )Accounts payable and accrued expenses
    
    
    431
    
    
    
    2,302Advance rents
    
    
    268
    
    
    
    552Tenant security deposits
    
    
    185
    
    
    
    169Net cash provided by operating activities
    
    
    11,359
    
    
    
    4,673Investing activitiesInvestment in real estate and intangibles
    
    
    (123,282
    )
    
    
    Purchase of property and equipment
    
    
    (4,941
    )
    
    
    (402
    )Sale of marketable securities, net
    
    
    10,004
    
    
    
    Net cash used in investing activities
    
    
    (118,219
    )
    
    
    (402
    )Financing activitiesNet proceeds of sale of common stock
    
    
    11,396
    
    
    
    Payment of initial public offering costs
    
    
    (4,018
    )
    
    
    (366
    )Payment of tax liability assumed in formation transactions
    
    
    (15,212
    )
    
    
    Issuance of debt
    
    
    146,400
    
    
    
    1,299Line of credit, net
    
    
    
    
    
    
    Principal repayments of debt
    
    
    (33,418
    )
    
    
    (6,394
    )Deferred financing costs
    
    
    (2,033
    )
    
    
    Decrease in restricted cash
    
    
    2,932
    
    
    
    244Distributions paid to shareholders
    
    
    (11,437
    )
    
    
    Distributions paid to unitholders
    
    
    (1,563
    )
    
    
    Contributions from partners
    
    
    
    
    
    
    12,732Distributions to partners
    
    
    
    
    
    
    (6,744
    )Net cash provided by financing activities
    
    
    93,047
    
    
    
    771Net (decrease) increase in cash and cash equivalents
    
    
    (13,813
    )
    
    
    5,042Cash and cash equivalents at beginning of period
    
    
    23,127
    
    
    
    2,075Cash and cash equivalents at end of period
    
    $
    9,314
    
    
    $
    7,117Supplemental disclosure of cash flow informationCash paid during the period for interest
    
    $
    10,530
    
    
    $
    11,191
  4




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##### 



Republic Property Trust (The Company) and RKB Washington Property Fund I L.P. (The Predecessor)
Notes to Consolidated Financial Statements  Unaudited
For the Nine Months Ended September 30, 2006 and 2005
 1. Organization and Description of Business
      2. Basis of Presentation
  3. Earnings Per Share
  4. Comprehensive Income
  5




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##### 



Republic Property Trust (The Company) and RKB Washington Property Fund I L.P. (The Predecessor)
Notes to Consolidated Financial Statements  Unaudited
For the Nine Months Ended September 30, 2006 and 2005
 5. Distributions Declared
  6. Shareholders Equity
  7. Taxes payable
   8. WillowWood I&II Acquisition
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    16,376
    
    
    $
    10,496
    
    
    $
    51,470
    
    
    $
    31,138Net loss
    
    $
    (1,609
    )
    
    $
    (2,799
    )
    
    $
    (2,869
    )
    
    $
    (7,903
    )Diluted loss per share
    
    $
    (0.06
    )
    
    
    
    
    
    $
    (0.11
    )
  6




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##### 



Republic Property Trust (The Company) and RKB Washington Property Fund I L.P. (The Predecessor)
Notes to Consolidated Financial Statements  Unaudited
For the Nine Months Ended September 30, 2006 and 2005
 9. Republic Park 8 Acquisition
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    16,911
    
    
    $
    9,579
    
    
    $
    50,845
    
    
    $
    28,396Net loss
    
    $
    (2,253
    )
    
    $
    (2,717
    )
    
    $
    (3,981
    )
    
    $
    (7,557
    )Diluted loss per share
    
    $
    (0.09
    )
    
    
    
    
    
    $
    (0.15
    )
  10. Commitments and Contingencies
 Legal Matters
  11. Republic Park Loan Closing
  12. Line of Credit
   7




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##### 



Republic Property Trust (The Company) and RKB Washington Property Fund I L.P. (The Predecessor)
Notes to Consolidated Financial Statements  Unaudited
For the Nine Months Ended September 30, 2006 and 2005
 13. City Center Project in West Palm Beach  Professional Services Agreement
    14. Subsequent Events
  (i)
    
    the filing of federal criminal fraud and corruption charges, which charges arose from activities
that were unrelated to Republic Property Trust or any of its affiliates, against Raymond Liberti, a
city commissioner in West Palm Beach, Florida (the City) and his subsequent resignation as a commissioner of the City;(ii)
    
    the Citys mayors public statements that Republic Properties Corporation, a private corporation wholly
owned by Richard L. Kramer (our Chairman of the Board of Trustees) and Steven A. Grigg
(our Vice Chairman of the Board of Trustees and President and Chief Development Officer), had executed a
consulting agreement with Raymond Liberti;(iii)
    
    our learning that Republic Property Trust may have benefited from certain votes cast by Mr. Liberti while
he was a paid consultant of Republic Properties Corporation;(iv)
    
    certain discussions with the Citys
representatives relating to the Professional Services Agreement  (the PSA), the agreement under which
we were providing fee-based development services to the City to design, develop and construct the City Center at
West Palm Beach (the Project); and(v)
    
    our understanding that a Florida state grand jury is reviewing the Citys procurement process.
   
    
    We have no further involvement in the Project;
    
    Republic WPB LLC, a subsidiary of our operating partnership, conveyed all of its rights under the
PSA, and the CRA accepted all of such rights and assumed all of our obligations and liabilities under such agreement;
    
    We and the CRA expressly and unconditionally released each other from any and all claims,
demands, suits, or causes of actions, of any kind or nature relating to the Project, including,
but not limited to, those arising out of or related to the PSA; and
    
    We agreed to execute mutual releases with each of our architect, general contractor and certain of our subcontractors.
 8




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##### 



Republic Property Trust (The Company) and RKB Washington Property Fund I L.P. (The Predecessor)
Notes to Consolidated Financial Statements  Unaudited
For the Nine Months Ended September 30, 2006 and 2005
 
     9




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 .
 Critical Accounting Policies
   Accounting for Uncertainty in Income
Taxes
 Comparison of three months ended September 30, 2006 to three months ended September 30, 2005
 ChangesResultingfromSeptember 30,
    
    
    September 30,
    
    
    
    
    
    
    Additional
    
    
    Remaining(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    Variance
    
    
    Properties
    
    
    VarianceRevenueRental income
    
    $
    13,701
    
    
    $
    7,846
    
    
    $
    5,855
    
    
    $
    4,941
    
    
    $
    914Tenant reimbursements
    
    
    1,307
    
    
    
    905
    
    
    
    402
    
    
    
    481
    
    
    
    (79
    )Management and development fees
    
    
    1,147
    
    
    
    
    
    
    
    1,147
    
    
    
    
    
    
    
    1,147Other
    
    
    221
    
    
    
    149
    
    
    
    72
    
    
    
    97
    
    
    
    (25
    )Total revenue
    
    
    16,376
    
    
    
    8,900
    
    
    
    7,476
    
    
    
    5,519
    
    
    
    1,957ExpensesReal estate taxes
    
    
    1,418
    
    
    
    758
    
    
    
    660
    
    
    
    543
    
    
    
    117Property operating costs
    
    
    3,106
    
    
    
    1,765
    
    
    
    1,341
    
    
    
    1,108
    
    
    
    233Depreciation and amortization
    
    
    5,587
    
    
    
    2,724
    
    
    
    2,863
    
    
    
    2,548
    
    
    
    315Management fees
    
    
    
    
    
    
    793
    
    
    
    (793
    )
    
    
    
    
    
    
    (793
    )Cost of management and development fees
    
    
    910
    
    
    
    
    
    
    
    910
    
    
    
    
    
    
    
    910General and administrative
    
    
    2,434
    
    
    
    85
    
    
    
    2,349
    
    
    
    
    
    
    
    2,349Total operating expenses
    
    
    13,455
    
    
    
    6,125
    
    
    
    7,330
    
    
    
    4,199
    
    
    
    3,131Interest income and expense, minority interestInterest income
    
    
    146
    
    
    
    54
    
    
    
    92
    
    
    
    16
    
    
    
    76Interest expense
    
    
    (4,896
    )
    
    
    (4,793
    )
    
    
    (103
    )
    
    
    (2,234
    )
    
    
    2,131Minority interest
    
    
    220
    
    
    
    
    
    
    
    220
    
    
    
    108
    
    
    
    112Net income (loss)
    
    $
    (1,609
    )
    
    $
    (1,964
    )
    
    $
    355
    
    
    $
    (790
    )
    
    $
    1,145
  10




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##### 




    
    Rental income Increased rental income is primarily
attributable to our Presidents Park properties which were
48.9% occupied at July 1, 2005 and 69.5% occupied at
September 30, 2006 and contributed $0.9 million in
increased revenue. The remaining properties (Corporate
Pointe IV, Pender, Lakeside I&II, WillowWood III&IV,
Corporate Oaks and Republic Park 1-7) were 96.3% occupied
at July 1, 2005 and 95.2% occupied at September 30, 2006.
At Presidents Park, 183,000 square feet remains vacant as
of September 30, 2006, of which 150,000 square feet remains
in shell condition. We believe that it may take
approximately six months from the date a lease is executed
to build out shell space and prepare it for occupancy.
    
    Management and development fees We earned management and
development fees from the various management and
development agreements with related parties that were
contributed to us in connection with the IPO and formation
transactions.Management and development fees earned in the 2006 period
consist of $0.8 million of management fees and payroll
reimbursements and $0.3 million of development fees.
    
    Real estate taxes Real estate taxes increased due to increased tax assessments at two of our properties.
    
    Property operating costs Property operating costs increased primarily due to increased occupancy at
Presidents Park, in addition to higher utility and maintenance costs at our other properties.
    
    Depreciation and amortization Depreciation and amortization increased as a result of the amortization
of the intangible assets for our third-party management and development agreements and depreciation
associated with the recent tenant improvements at Presidents Park.
    
    Management fees Management fees expense represents fees paid by our Predecessor prior to our IPO. These
agreements were terminated on December 19, 2005.
    
    Cost of management and development fees Cost of management and development fees include costs
associated with providing the services under our management and development agreements. Costs related to
providing services under our management and development agreements amounted to $0.9 million for the
period presented. These costs include direct and other attributable payroll costs.
    
    General and administrative General and administrative expense is not directly comparable since the
costs of our administrative function were not borne by our predecessor. General and administrative costs
include costs of our administrative function generally and the costs associated with operating as a
public company. Also reflected in general and administrative expense for the quarter ended September 30,
2006 is approximately $0.5 million of legal and professional fees related to the West Palm Beach internal
inquiry and negotiation of the assignment agreement and mutual release with the West Palm Beach Community
Redevelopment Agency, acting for itself and on behalf of the City of West Palm Beach (together, CRA).
    
    Interest income Interest income increased as a result of higher cash balances.
    
    Interest expense Interest expense decreased due to the repayment of approximately $124 million of our
Predecessors debt using proceeds from our IPO. We expect interest expense in subsequent periods to
increase given higher debt levels primarily due to the financing of our recent acquisitions.
 11




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##### 



Comparison of nine months ended September 30, 2006 to nine months ended September 30, 2005
 ChangesResultingfromSeptember 30,
    
    
    September 30,
    
    
    
    
    
    
    Additional
    
    
    Remaining(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    Variance
    
    
    Properties
    
    
    VarianceRevenueRental income
    
    $
    37,819
    
    
    $
    23,368
    
    
    $
    14,451
    
    
    $
    11,837
    
    
    $
    2,614Tenant reimbursements
    
    
    4,158
    
    
    
    2,703
    
    
    
    1,455
    
    
    
    1,513
    
    
    
    (58
    )Management and development fees
    
    
    6,371
    
    
    
    
    
    
    
    6,371
    
    
    
    
    
    
    
    6,371Other
    
    
    516
    
    
    
    339
    
    
    
    177
    
    
    
    121
    
    
    
    56Total revenue
    
    
    48,864
    
    
    
    26,410
    
    
    
    22,454
    
    
    
    13,471
    
    
    
    8,983ExpensesReal estate taxes
    
    
    4,020
    
    
    
    2,299
    
    
    
    1,721
    
    
    
    1,397
    
    
    
    324Property operating costs
    
    
    8,126
    
    
    
    5,008
    
    
    
    3,118
    
    
    
    2,279
    
    
    
    839Depreciation and amortization
    
    
    15,464
    
    
    
    8,188
    
    
    
    7,276
    
    
    
    6,041
    
    
    
    1,235Management fees
    
    
    
    
    
    
    2,318
    
    
    
    (2,318
    )
    
    
    
    
    
    
    (2,318
    )Cost of management and development fees
    
    
    4,847
    
    
    
    
    
    
    
    4,847
    
    
    
    
    
    
    
    4,847General and administrative
    
    
    7,064
    
    
    
    293
    
    
    
    6,771
    
    
    
    
    
    
    
    6,771Total operating expenses
    
    
    39,521
    
    
    
    18,106
    
    
    
    21,415
    
    
    
    9,717
    
    
    
    11,698Interest income and expense, minority
interestInterest income
    
    
    608
    
    
    
    120
    
    
    
    488
    
    
    
    58
    
    
    
    430Interest expense
    
    
    (11,913
    )
    
    
    (13,871
    )
    
    
    1,958
    
    
    
    (5,476
    )
    
    
    7,434Minority interest
    
    
    236
    
    
    
    
    
    
    
    236
    
    
    
    200
    
    
    
    36Net income (loss)
    
    $
    (1,726
    )
    
    $
    (5,447
    )
    
    $
    3,721
    
    
    $
    (1,464
    )
    
    $
    5,185
   
    
    Rental income Increased rental income is primarily attributable to our Presidents Park properties
which were 44.5% occupied at January 1, 2005 and 69.5% occupied at September 30, 2006 and contributed
$2.8 million in increased revenue. This increase is partially offset by lower rental income at the
remaining properties (Corporate Pointe IV, Pender, Lakeside I&II, WillowWood III&IV, Corporate Oaks and
Republic Park 1-7) which were 95.3% occupied at January 1, 2005 and 95.2% occupied at September 30,
2006. At Presidents Park, 183,000 square feet remains vacant as of September 30, 2006, of which 150,000
square feet remains in shell condition. We believe that it may take approximately six months from the
date a lease is executed to build out shell space and prepare it for occupancy.
    
    Management and development fees We earned management and development fees from the various management
and development agreements with related parties that were contributed to us in connection with the IPO
and formation transactions. Also included in management and development fees are $2.2 million of cost
reimbursements relating to the second quarter of 2006 progress on the West Palm Beach project. The costs
to which the reimbursements relate are reflected in cost of management and development fees.Management and development fees earned in the 2006 period consist of $2.6 million of management fees and
payroll reimbursements, $1.0 million of development fees and $0.6 million of financing fees.
    
    Real estate taxes Real estate taxes increased due to increased tax assessments at two of our properties
    
    Property operating costs Property operating costs increased primarily due to increased occupancy at
Presidents Park, in addition to higher utility, maintenance, landscaping and maintenance costs at our
other properties.
    
    Depreciation and amortization Depreciation and amortization increased as a result of the amortization
of the intangible assets for our third-party management and development agreements, a write-off of the
$181,000 intangible asset related to the West Palm Beach development agreement, and depreciation
associated with the recent tenant improvements at Presidents Park.
    
    Management fees Management fees expense represents fees paid by our Predecessor prior to our IPO.
These agreements were terminated on December 19, 2005.
 12




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
    
    Cost of management and development fees Cost of
management and development fees include costs associated
with providing the services under our management and
development agreements. Costs related to providing services
under our management and development agreements excluding
the City Center project amounted to $2.6 million for the
period presented. These costs include direct and other
attributable payroll costs. We incurred $2.2 million of
costs during the second quarter of 2006 in connection with
the City Center project which are reimbursable by the City
of West Palm Beach and are reflected as management and
development fees.
    
    General and administrative General and administrative
expense is not directly comparable since the costs of our
administrative function were not borne by our predecessor.
General and administrative costs include costs of our
administrative function generally and the costs associated
with operating as a public company. Also reflected in
general and administrative expense for the nine months
ended September 30, 2006 is approximately $0.5 million of
costs incurred in connection with the termination of the
line of credit with Lehman Brothers and $0.8 million of
legal and professional fees related to the West Palm Beach
internal inquiry and negotiation of the assignment
agreement and mutual release with the CRA.
    
    Interest income Interest income increased as a result of
higher cash balances and investments of some of our IPO
proceeds in marketable securities.
    
    Interest expense Interest expense decreased due to the
repayment of approximately $124 million of our
Predecessors debt using proceeds from our IPO. We expect
interest expense in subsequent periods to increase given
higher debt levels primarily due to the financing of our
recent acquisitions.
 Liquidity and Capital Resources
 Nine
months ended September 30,(Dollars in thousands)
    
    2006
    
    2005Net loss
    
    $
    (1,726
    )
    
    $
    (5,447
    )Net cash provided by operating activities
    
    
    11,359
    
    
    
    4,673Net cash used in investing activities
    
    
    (118,219
    )
    
    
    (402
    )Net cash provided by financing activities
    
    
    93,047
    
    
    
    771Cash and cash equivalents at end of period
    
    
    9,314
    
    
    
    7,117
        13




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
    
    The outstanding principal balance under the line of credit
cannot exceed 65% of the sum of appraised values of each
of the mortgaged properties ( i.e.,Presidents Park I, II
and III). From May 1 to September 29, borrowings under
the facility were also secured by our Republic Park 1-7
property. This property was released as collateral in
connection with the September 2006 closing of the Republic
Park Loan.
    
    Corporate leverage ratio cannot exceed 70%;
    
    The ratio of adjusted consolidated EBITDA to consolidated
fixed charges cannot be less than 1.45 to 1.00 for the sum
of the two most recently ended calendar quarters; and
    
    Our consolidated tangible net worth cannot be less than
the sum of $190 million plus 75% of the sum of (a) net
offering proceeds derived from equity offerings (excluding
the initial public offering) plus (b) the value of
operating partnership units or common shares issued upon
contribution of assets to our operating partnership.
         14




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##### 



Recent Developments
  (i)
    
    the filing of federal criminal fraud and corruption charges, which charges arose from activities
that were unrelated to Republic Property Trust or any of its affiliates, against Raymond Liberti, a
city commissioner in West Palm Beach, Florida (the City) and his subsequent resignation as a commissioner of the City;(ii)
    
    the Citys mayors public statements that Republic Properties Corporation, a private corporation wholly
owned by Richard L. Kramer (our Chairman of the Board of Trustees) and Steven A. Grigg
(our Vice Chairman of the Board of Trustees and President and Chief Development Officer), had executed a
consulting agreement with Raymond Liberti;(iii)
    
    our learning that Republic Property Trust may have benefited from certain votes cast by Mr. Liberti while
he was a paid consultant of Republic Properties Corporation;(iv)
    
    certain discussions with the Citys
representatives relating to the Professional Services Agreement  (the PSA), the agreement under which
we were providing fee-based development services to the City to design, develop and construct the City Center at
West Palm Beach (the Project); and(v)
    
    our understanding that a Florida state grand jury is reviewing the Citys procurement process.
   
    
    We have no further involvement in the Project;
    
    Republic WPB LLC, a subsidiary of our operating partnership, conveyed all of its rights under the
PSA, and the CRA accepted all of such rights and assumed all of our obligations and liabilities under such agreement;
    
    We and the CRA expressly and unconditionally released each other from any and all claims,
demands, suits, or causes of actions, of any kind or nature relating to the Project, including,
but not limited to, those arising out of or related to the PSA; and
    
    We agreed to execute mutual releases with each of our architect, general contractor and certain of our subcontractors.
   15




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##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
     Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Internal Control Over Financial Reporting
  16




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##### 



PART II. OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  
    
    On October 19, 2006 we entered into the Assignment
Agreement with mutual releases with the CRA. Entering into
the agreement with CRA is expected to have no additional
impact on our financial statements or results of
operations. Accordingly, the financial and business risks
associated with any failure to resolve our dispute with the
CRA that were provided in our Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 2006 are no longer
applicable.
    
    As previously disclosed, we have entered into agreements
with related parties that grant us the option to acquire
Republic Square I, Republic Square II and Portals III,
three Class A trophy office buildings located in
Washington, D.C. The terms of these agreements allow us to
exercise our initial option to purchase a property during a
period beginning from the receipt of a certificate of
substantial completion and continuing until 60 days prior
to the maturity (including any extensions) of any
construction loans on the property. If we do not exercise
our initial option on a property, and the property is not
sold to a third party, we have a second option to purchase
a property during the period beginning 180 days after the
expiration of the initial option and continuing through the
fourth anniversary of the receipt of the propertys
certificate of substantial completion. Our future growth
is dependent in part on our ability to acquire these properties.The option agreements contain provisions that permit the
seller to terminate an agreement if a change in control of
our company occurs. The agreements define a change of
control as, among other things, if Messrs. Richard Kramer
and Grigg cease to be trustees for any reason other than
(i) death or voluntary resignation, (ii) removal for cause
in accordance with our Declaration of Trust or (iii)
resignation following a termination of employment for
Cause as that term is defined by any applicable
employment agreement. Our ability to acquire these
properties is subject to several additional risks,
including, but not limited to, that Republic Square II is
not ultimately developed, that one or more of the
properties are not leased to the appropriate level, that
the option is terminated upon a change in control and that
our independent trustees do not approve our acquisition of
one or more of the properties.
    
    Legal counsel to Messrs. Richard Kramer and Grigg, in separate communications, have threatened litigation due to certain
actions taken by our Audit Committee and Board of Trustees, including actions taken in connection with the Audit
Committees internal investigation conducted by our Audit Committee in connection with the City Center project in West Palm
Beach, Florida.  In addition, as a result of the internal investigation, the Audit Committee recommended certain actions, including
that we seek to resolve certain matters with Messrs. Richard Kramer and Grigg, including their service as Chairman and Vice Chairman
of our Board of Trustees, respectively, and as members of our Board of Trustees, as well as Mr. Griggs employment by us.
The Audit Committee continues to consider the recommendations, and our Board of Trustees has not taken any definitive action concerning
the investigation or the recommendations of the Audit Committees independent counsel.  The final resolution of these matters
could also result in litigation.  Any litigation against Messrs. Richard Kramer and/or Grigg is likely to cause us to incur
significant legal and other costs and expenses, could delay or terminate our ability to exercise our options on Republic
Square I, Republic Square II and/or Portals III or enforce the other related party agreements with entities controlled by Messrs.
Richard Kramer and Grigg and could divert our managements time and attention away from the operation of our business,
require us to pay damages or otherwise restrict our activities, any or all which could have a negative impact on our cash flows,
liquidity, operating results and future growth prospects.
 17




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##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
   18




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##### 



Item 6. Exhibits.
 10.1
    
    First Amendment to Senior Secured Revolving Credit Agreement, dated September 27, 2006. *10.2
    
    Deed of Trust, Assignment of Leases and Rents, Security Agreement, and
Fixture Filing for Republic Park LLC, dated September 29, 2006. *10.3
    
    Promissory Note between KeyBank
National Association and Republic Park LLC, dated September 29, 2006. *31.1
    
    Section 302 Certification of Mark R. Keller, the Registrants Chief Executive Officer, dated November 7, 2006. *31.2
    
    Section 302 Certification of Michael J. Green, the Registrants Chief Financial Officer, dated November 7, 2006. *32.1
    
    Section 906 Certification of Mark R. Keller and Michael J. Green, the Registrants Chief Executive Officer and
the Chief Financial Officer, respectively, dated November 7, 2006.*
 
 *
    
    Included herein. 19




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##### 



SIGNATURES
  REPUBLIC PROPERTY TRUSTBy:
    /s/ Michael J. GreenMichael J. GreenExecutive Vice President and Chief Financial Officer
(Principal Financial Officer and duly authorized Officer)November 7, 2006