##### 



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 June 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
    
    20-3241867(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1280 Maryland Avenue, S.W., Suite 280
Washington, D.C.
    
    20024(Zip Code)(Address of principal executive offices)
 (202) 863-0300
 None
  þ o
  o o þ
  o þ
  Class
    
    Outstanding at August 7, 2006Common Shares of beneficial interest,
    
    26,056,528 shares$0.01 par value per share




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##### 



TABLE OF CONTENTS
 Page No.PART I FINANCIAL INFORMATION
    
    2Item 1. Financial Statements
    
    2Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    9Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    15Item 4. Controls and Procedures
    
    15PART II. OTHER INFORMATION
    
    16Item 1. Legal Proceedings
    
    16Item 1A. Risk Factors
    
    16Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    17Item 3. Defaults Upon Senior Securities
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    17Item 5. Other Information
    
    17Item 6. Exhibits
    
    18
 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 estimated distributions at their current rate;
    
    Governmental actions and initiatives;
    
    Environmental requirements; 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 Report on
From 10-Q for the three months ended March 31, 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 June 30, 2006 and December 31, 2005
 (Dollars in thousands)
    

June
30, 2006(Unaudited)
    
    

December
31, 2005(Audited)ASSETSInvestment in real estate:Land
    
    $
    94,600
    
    
    $
    83,600Commercial office buildings and improvements
    
    
    443,141
    
    
    
    384,490537,741
    
    
    
    468,090Less: accumulated depreciation and amortization
    
    
    (27,617
    )
    
    
    (19,486
    )510,124
    
    
    
    448,604Cash and cash equivalents
    
    
    7,474
    
    
    
    23,127Marketable securities
    
    
    
    
    
    
    10,004Restricted cash
    
    
    6,991
    
    
    
    9,386Rents and other receivables
    
    
    6,323
    
    
    
    5,301Prepaid expenses and other assets
    
    
    25,459
    
    
    
    23,975Total Assets
    
    $
    556,371
    
    
    $
    520,397LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Mortgage notes payable
    
    $
    245,211
    
    
    $
    231,894Line of credit payable
    
    
    47,000
    
    
    
    Intangible lease liabilities
    
    
    20,956
    
    
    
    20,886Taxes payable
    
    
    642
    
    
    
    16,604Accounts payable and accrued liabilities
    
    
    9,100
    
    
    
    15,127Acquisition payables
    
    
    
    
    
    
    7,204Tenant security deposits
    
    
    2,449
    
    
    
    2,267Advance rents
    
    
    1,252
    
    
    
    1,005Total liabilities
    
    
    326,610
    
    
    
    294,987Minority interest  operating partnership
    
    
    27,622
    
    
    
    28,080Shareholders EquityPreferred stock, par value $0.01, 40 million
shares authorized, none issued and outstanding
in 2006 or 2005
    
    
    
    
    
    
    Common stock, 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
    
    
    219,798
    
    
    
    208,814Accumulated deficit
    
    
    (17,920
    )
    
    
    (11,734
    )Total Shareholders Equity
    
    
    202,139
    
    
    
    197,330Total Liabilities and Shareholders Equity
    
    $
    556,371
    
    
    $
    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 Company
    
    
    The Predecessor
    
    
    The Company
    
    
    The PredecessorThree months ended June 30,
    
    
    Six months ended June 30,(Dollars in thousands except per share amounts)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue:Rental income
    
    $
    13,939
    
    
    $
    8,819
    
    
    $
    27,264
    
    
    $
    17,510Management and development fees and associated
reimbursements
    
    
    3,862
    
    
    
    
    
    
    
    5,224
    
    
    
    Total operating revenue
    
    
    17,801
    
    
    
    8,819
    
    
    
    32,488
    
    
    
    17,510Expenses:Real estate taxes
    
    
    1,312
    
    
    
    771
    
    
    
    2,602
    
    
    
    1,541Property operating costs
    
    
    2,510
    
    
    
    1,684
    
    
    
    5,020
    
    
    
    3,243Depreciation and amortization
    
    
    5,178
    
    
    
    2,733
    
    
    
    9,877
    
    
    
    5,464Management fees
    
    
    
    
    
    
    759
    
    
    
    
    
    
    
    1,525Cost of management and development fees and
associated reimbursements
    
    
    3,070
    
    
    
    
    
    
    
    3,937
    
    
    
    General and administrative
    
    
    2,299
    
    
    
    83
    
    
    
    4,630
    
    
    
    208Total operating expenses
    
    
    14,369
    
    
    
    6,030
    
    
    
    26,066
    
    
    
    11,981Operating income
    
    
    3,432
    
    
    
    2,789
    
    
    
    6,422
    
    
    
    5,529Other income and expense:Interest income
    
    
    148
    
    
    
    40
    
    
    
    462
    
    
    
    66Interest expense
    
    
    (3,782
    )
    
    
    (4,618
    )
    
    
    (7,017
    )
    
    
    (9,078
    )Total other income and expense
    
    
    (3,634
    )
    
    
    (4,578
    )
    
    
    (6,555
    )
    
    
    (9,012
    )Net loss before minority interest
    
    
    (202
    )
    
    
    (1,789
    )
    
    
    (133
    )
    
    
    (3,483
    )Minority interest
    
    
    24
    
    
    
    
    
    
    
    16
    
    
    
    Net loss
    
    $
    (178
    )
    
    $
    (1,789
    )
    
    $
    (117
    )
    
    $
    (3,483
    )Basic and diluted loss per common share
    
    $
    (0.01
    )
    
    
    
    
    
    $
    (0.00
    )Weighted average common shares outstanding
basic and diluted
    
    
    26,044,285
    
    
    
    
    
    
    
    26,015,180Distributions declared per common share
    
    $
    0.206
    
    
    
    
    
    
    $
    0.233
  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
 The Company
    
    
    The PredecessorSix Months Ended June 30,(Dollars in thousands)
    
    2006
    
    
    2005Operating activities:Net loss
    
    $
    (117
    )
    
    $
    (3,483
    )Adjustments to reconcile net loss to net cash provided by operating activities:Minority interest
    
    
    (16
    )
    
    
    Stock awards
    
    
    74
    
    
    
    Depreciation and amortization
    
    
    9,877
    
    
    
    5,464Amortization of net lease intangibles
    
    
    (735
    )
    
    
    310Amortization of loan costs
    
    
    206
    
    
    
    1,127Other
    
    
    197
    
    
    
    Changes in operating assets and liabilities:Rents and other receivables
    
    
    (1,022
    )
    
    
    (1,072
    )Prepaid expenses and other assets
    
    
    (1,339
    )
    
    
    (1,676
    )Accounts payable and accrued expenses
    
    
    (469
    )
    
    
    3,206Advance rents
    
    
    247
    
    
    
    90Tenant security deposits
    
    
    182
    
    
    
    155Net cash provided by operating activities
    
    
    7,085
    
    
    
    4,121Investing activitiesInvestment in real estate and intangibles
    
    
    (74,725
    )
    
    
    Purchase of property and equipment
    
    
    (3,988
    )
    
    
    (348
    )Sale of marketable securities, net
    
    
    10,004
    
    
    
    Net cash used in investing activities
    
    
    (68,709
    )
    
    
    (348
    )Financing activitiesNet proceeds of sale of common stock
    
    
    11,396
    
    
    
    Payment of IPO offering costs
    
    
    (4,018
    )
    
    
    Payment of tax liability assumed in Formation Transactions
    
    
    (15,212
    )
    
    
    Issuance of debt
    
    
    46,400
    
    
    
    626Line of credit, net
    
    
    47,000
    
    
    
    Principal repayments of debt
    
    
    (33,280
    )
    
    
    (4,264
    )Deferred financing costs
    
    
    (1,811
    )
    
    
    Decrease (increase) in restricted cash
    
    
    2,395
    
    
    
    (1,301
    )Distributions paid to shareholders
    
    
    (6,069
    )
    
    
    Distributions paid to unitholders
    
    
    (830
    )
    
    
    Contributions from partners
    
    
    
    
    
    
    7,384Distributions to partners
    
    
    
    
    
    
    (4,401
    )Net cash provided by (used in) financing activities
    
    
    45,971
    
    
    
    (1,956
    )Net (decrease) increase in cash and cash equivalents
    
    
    (15,653
    )
    
    
    1,817Cash and cash equivalents at beginning of period
    
    
    23,127
    
    
    
    2,075Cash and cash equivalents at end of period
    
    $
    7,474
    
    
    $
    3,892Supplemental disclosure of cash flow informationCash paid during the period for interest
    
    $
    6,225
    
    
    $
    6,815
  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 Six Months Ended June 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 Six Months Ended June 30, 2006 and 2005
 5. Distributions Declared
  6. Shareholders Equity
  7. Taxes payable
   8. WillowWood I and II Acquisition
   Three months ended June 30,
    
    
    Six months ended June 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    18,778
    
    
    $
    10,388
    
    
    $
    35,094
    
    
    $
    20,642Net loss
    
    $
    (609
    )
    
    $
    (2,613
    )
    
    $
    (1,260
    )
    
    $
    (5,104
    )Diluted loss per share
    
    $
    (0.02
    )
    
    
    
    
    
    $
    (0.05
    )
  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 Six Months Ended June 30, 2006 and 2005
 9. Commitments and Contingencies
 Legal Matters
  10. Line of Credit
   11. City Center Project in West Palm Beach
     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 Six Months Ended June 30, 2006 and 2005
   12. Subsequent Events
    8




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 .
 Critical Accounting Policies
  Comparison of three months ended June 30, 2006 to three months ended June 30, 2005
 ChangesResultingfromJune 30,
    
    
    June 30,
    
    
    
    
    
    
    Additional
    
    
    Remaining(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    Variance
    
    
    Properties
    
    
    VarianceRevenueRental income
    
    $
    12,409
    
    
    $
    7,828
    
    
    $
    4,581
    
    
    $
    3,774
    
    
    $
    807Tenant reimbursements
    
    
    1,397
    
    
    
    896
    
    
    
    501
    
    
    
    527
    
    
    
    (26
    )Management and development fees
    
    
    3,862
    
    
    
    
    
    
    
    3,862
    
    
    
    
    
    
    
    3,862Other
    
    
    133
    
    
    
    95
    
    
    
    38
    
    
    
    (7
    )
    
    
    45Total revenue
    
    
    17,801
    
    
    
    8,819
    
    
    
    8,982
    
    
    
    4,294
    
    
    
    4,688ExpensesReal estate taxes
    
    
    1,312
    
    
    
    771
    
    
    
    541
    
    
    
    444
    
    
    
    97Property operating costs
    
    
    2,510
    
    
    
    1,684
    
    
    
    826
    
    
    
    630
    
    
    
    196Depreciation and amortization
    
    
    5,178
    
    
    
    2,733
    
    
    
    2,445
    
    
    
    1,979
    
    
    
    466Management fees
    
    
    
    
    
    
    759
    
    
    
    (759
    )
    
    
    
    
    
    
    (759
    )Cost of management and development fees
    
    
    3,070
    
    
    
    
    
    
    
    3,070
    
    
    
    
    
    
    
    3,070General and administrative
    
    
    2,299
    
    
    
    83
    
    
    
    2,216
    
    
    
    
    
    
    
    2,216Total operating expenses
    
    
    14,369
    
    
    
    6,030
    
    
    
    8,339
    
    
    
    3,053
    
    
    
    5,286Interest income and expense, minority
interestInterest income
    
    
    148
    
    
    
    40
    
    
    
    108
    
    
    
    25
    
    
    
    83Interest expense
    
    
    (3,782
    )
    
    
    (4,618
    )
    
    
    836
    
    
    
    (1,782
    )
    
    
    2,618Minority interest
    
    
    24
    
    
    
    
    
    
    
    24
    
    
    
    62
    
    
    
    (38
    )Net income (loss)
    
    $
    (178
    )
    
    $
    (1,789
    )
    
    $
    1,611
    
    
    $
    (454
    )
    
    $
    2,065
   
    
    Rental income Increased rental income is primarily attributable to our Presidents
Park property which was 44.5% leased at January 1, 2005 and 69.5% leased at June 30, 2006
and contributed $0.9 million in increased revenue. At Presidents Park, 183,000 square feet
remains vacant as of June 30, 2006, of which 150,000 square feet remains in shell
condition. We believe that it can 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. Included in management and
development fees are $2.2 million of cost reimbursements relating to the 2006 second
quarter 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 period presented also consist of $0.9 million
of management fees and payroll reimbursements, $0.2 million of development fees and $0.6
million of financing fees.
 9




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##### 




    
    Real estate taxes Real estate taxes increased due to increased tax assessments at two
of our properties.
    
    Property operating costs Property operating costs increased due to increased
occupancy at Presidents Park, in addition to higher HVAC maintenance, landscaping and
property management 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.
    
    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 West Palm Beach project amounted to $0.8 million for the period
presented. These costs include direct and other attributable payroll costs. We incurred
costs during the second quarter of 2006 in connection with the West Palm Beach Project.
$2.2 million of these costs are reimbursable by the City of West Palm Beach and are
reflected as management and development fees. An additional $0.1 million in miscellaneous
costs related to the project are reflected in cost of management and development fees and are not reimbursable to us.
    
    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 June 30, 2006 is approximately
$0.3 million of legal and professional fees related to the West Palm Beach internal
inquiry.
    
    Interest income Interest income increased as a result of temporarily 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
recent acquisition of WillowWood I & II.
 10




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##### 



Comparison of six months ended June 30, 2006 to six months ended June 30, 2005
 ChangesResultingfromJune 30,
    
    
    June 30,
    
    
    
    
    
    
    Additional
    
    
    Remaining(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    Variance
    
    
    Properties
    
    
    VarianceRevenueRental income
    
    $
    24,119
    
    
    $
    15,522
    
    
    $
    8,597
    
    
    $
    6,897
    
    
    $
    1,700Tenant reimbursements
    
    
    2,850
    
    
    
    1,798
    
    
    
    1,052
    
    
    
    1,032
    
    
    
    20Management and development fees
    
    
    5,224
    
    
    
    
    
    
    
    5,224
    
    
    
    
    
    
    
    5,224Other
    
    
    295
    
    
    
    190
    
    
    
    105
    
    
    
    23
    
    
    
    82Total revenue
    
    
    32,488
    
    
    
    17,510
    
    
    
    14,978
    
    
    
    7,952
    
    
    
    7,026ExpensesReal estate taxes
    
    
    2,602
    
    
    
    1,541
    
    
    
    1,061
    
    
    
    854
    
    
    
    207Property operating costs
    
    
    5,020
    
    
    
    3,243
    
    
    
    1,777
    
    
    
    1,172
    
    
    
    605Depreciation and amortization
    
    
    9,877
    
    
    
    5,464
    
    
    
    4,413
    
    
    
    3,492
    
    
    
    921Management fees
    
    
    
    
    
    
    1,525
    
    
    
    (1,525
    )
    
    
    
    
    
    
    (1,525
    )Cost of management and development fees
    
    
    3,937
    
    
    
    
    
    
    
    3,937
    
    
    
    
    
    
    
    3,937General and administrative
    
    
    4,630
    
    
    
    208
    
    
    
    4,422
    
    
    
    
    
    
    
    4,422Total operating expenses
    
    
    26,066
    
    
    
    11,981
    
    
    
    14,085
    
    
    
    5,518
    
    
    
    8,567Interest income and expense, minority
interestInterest income
    
    
    462
    
    
    
    66
    
    
    
    396
    
    
    
    42
    
    
    
    354Interest expense
    
    
    (7,017
    )
    
    
    (9,078
    )
    
    
    2,061
    
    
    
    (3,242
    )
    
    
    5,303Minority interest
    
    
    16
    
    
    
    
    
    
    
    16
    
    
    
    92
    
    
    
    (76
    )Net income (loss)
    
    $
    (117
    )
    
    $
    (3,483
    )
    
    $
    3,366
    
    
    $
    (674
    )
    
    $
    4,040
   
    
    Rental income Increased rental income is primarily attributable to our Presidents Park
properties which was 44.5% leased at January 1, 2005 and 69.5% leased at June 30, 2006 and
contributed $1.8 million in increased revenue. At Presidents Park, 183,000 square feet
remains vacant as of June 30, 2006, of which 150,000 square feet remains in shell
condition. We believe that it can 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 cost of management and development fees.Management and development fees earned in the period presented consist of $1.7 million of
management fees and payroll reimbursements, $0.7 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 due to increased occupancy
at Presidents Park, in addition to higher HVAC maintenance, landscaping and property
management 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.
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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 West Palm Beach project amounted to $1.6 million for the period
presented. These costs include direct and other attributable payroll costs. We incurred
costs during the second quarter of 2006 in connection with the West Palm Beach Project. $2.2
million of these costs are reimbursable by the City of West Palm Beach and are reflected as
management and development fees. An additional $0.1 million in miscellaneous costs related
to the project are reflected in cost of management and development fees and are not reimbursable to us.
    
    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 six months ended June 30, 2006 is approximately
$0.5 million of costs incurred in connection with the termination of the line of credit
with Lehman Brothers and $0.3 million of legal and professional fees related to the West
Palm Beach internal inquiry.
    
    Interest income Interest income increased as a result of temporarily 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 recent
acquisition of WillowWood I & II.
 Liquidity and Capital Resources
 June 30,
    
    June 30,(Dollars in thousands)
    
    2006
    
    2005Net loss
    
    $
    (117
    )
    
    $
    (3,483
    )Net cash provided by operating activities
    
    
    7,085
    
    
    
    4,121Net cash used in investing activities
    
    
    (68,709
    )
    
    
    (348
    )Net cash provided by (used in) financing activities
    
    
    45,971
    
    
    
    (1,956
    )Cash and cash equivalents at end of period
    
    
    7,474
    
    
    
    3,892
      
    
    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.,Campus at Dulles Technology Center and
Presidents Park I, II and III);
    
    Corporate leverage ratio cannot exceed 70%;
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
    
    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.
        Recent Developments
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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
  15




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PART II. OTHER INFORMATION
 Item 1. Legal Proceedings.
  Item 1A. Risk Factors.
  
    
    In May 2006, we closed on our $150.0 million senior secured line of credit with KeyBank
National Association and other lenders. Accordingly, the risk of not closing the line that
was provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005
is no longer applicable. Further, as anticipated, the executed line of credit includes
financial and other covenants that limit our ability to take certain actions in respect to
our business, which could adversely affect our financial condition, liquidity and results
of operations.
    
    Advances under our line of credit bear interest at a variable rate. We may borrow
additional money with variable interest rates in the future. Although we may enter into
hedging agreements to limit our exposure to rising interest rates as we determine to be
appropriate and cost effective, increases in interest rates, or the loss of the benefits of
hedging agreements, would increase our interest expense and consequently could adversely
affect our cash flows and results of operations. As of June 30, 2006, we had $47.0 million
of variable rate debt outstanding. We have not entered into any hedging agreements.Further, rising interest rates could limit our ability to refinance existing debt when it
matures. An inability to refinance our existing debt could harm our ability to execute our
business strategies and grow our portfolio. In addition, an increase in interest rates could
decrease the amount third-parties are willing to pay for our assets, thereby limiting our
ability to change our portfolio promptly in response to changes in economic or other
conditions.
    
    Due to the uncertainty concerning the resolution of the disagreements with respect to
the City Center development project located in West Palm Beach, we have written-off to
depreciation and amortization expense $0.2 million in unamortized costs related to the
development agreement that was contributed to the Company by Republic Properties
Corporation. Accordingly, the financial risks associated with losing the right to provide
fee-based development services for the City Center project that were provided in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2005 are no longer applicable.
    
    While the Company and the attorneys for the City of West Palm Beach are engaged in discussions related to a potential resolution of matters between the Company and the City associated with the City Center development agreement, we cannot provide
 any assurances that such resolution will be agreed upon, that such resolution will be on terms favorable to us, or that the City of West Palm Beach will not determine to abandon, or otherwise terminate the City Center development agreement. Any inability to resolve these matters amicably may divert management's attention away from our day-to-day operations and cause us to incur certain legal and other costs, which could have an adverse impact on our cash flows, operating results or
financial condition.
    
    In May 2006, the Audit Committee of our Board of Trustees commenced an internal review
relating to matters surrounding our involvement in the City Center project and with certain
commissioners of West Palm Beach. The ongoing internal review may continue to divert
managements attention away from our day-to-day operations and cause us to incur certain
legal and other costs, which could have an adverse impact on the management of our
business, our cash flows, operating results or financial condition. Until the review is completed, we
cannot appreciate its impact on our business operations, operating results or financial condition.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 (a) Recent sales of unregistered securities
  (b) Use of proceeds
  (c) Issuer Purchases of Equity Securities
  Item 3. Defaults Upon Senior Securities.
  Item 4. Submission of Matters to a Vote of Security Holders.
  Proposal 1: (to elect Trustees to serve one-year terms expiring in 2007  all members of our Board
of Trustees were elected pursuant to the following votes):
 VotesTrustees Standing for Election:
    
    
    
    
    
    Votes For
    
    WithheldRichard L. Kramer
    
    
    
    
    
    
    17,937,586
    
    
    
    1,231,211Steven A. Grigg
    
    
    
    
    
    
    17,908,255
    
    
    
    1,260,542Mark R. Keller
    
    
    
    
    
    
    17,938,337
    
    
    
    1,230,460John S. Chalsty
    
    
    
    
    
    
    19,147,821
    
    
    
    20,976Ronald J. Kramer
    
    
    
    
    
    
    19,121,746
    
    
    
    47,051Gregory H. Leisch
    
    
    
    
    
    
    19,143,446
    
    
    
    25,351Ronald D. Paul
    
    
    
    
    
    
    19,147,446
    
    
    
    21,351
 Proposal 2: (to ratify the appointment of Ernst & Young LLP as the Companys independent registered
public accounting firm for the fiscal year ending December 31,
2006  Ernst & Young LLP was
ratified pursuant to the following votes):
 Votes for:
    
    
    19,161,297Votes against:
    
    
    4,600Abstentions:
    
    
    2,900Broker non-votes:
    
    
    0
 Item 5. Other Information.
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Item 6. Exhibits.
 10.1
    
    Senior Secured Revolving Credit Agreement, dated as of May 1, 2006, by and among Republic Property Limited Partnership, as borrower, and Republic Property Trust, as guarantor, and Key Bank National Association, and other lenders which are parties to the Agreement, and Key Bank National Association , as agent, and Key Bank Capital markets, as sole lead arranger and sole book manager (incorporated by reference to Exhibit 10.5 to the Companys quarterly Report
on Form 10-Q for the quarter ended March 31, 2006, filed on May 12, 2006).10.2
    
    Loan Agreement between RPB WillowWood I, LLC and RPB WillowWood II, LLC and Lehman Brothers Bank, FSB, dated May
24, 2006. *10.3
    
    Purchase and Sale Agreement between Dulles Park Tech LLC, as
seller, and Republic Property Limited Partnership, as purchaser, for
the property located at Dulles Park Technology Center, Fairfax
County, Virginia, dated July 31, 2006.*31.1
    
    Section 302 Certification of Mark R. Keller, the Registrants Chief Executive Officer, dated August 10, 2006. *31.2
    
    Section 302 Certification of Michael J. Green, the Registrants Chief Financial Officer, dated August 10, 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 August 10, 2006. *
 
 *
    
    Included herein. 18




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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)August 10, 2006
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