##### 



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, 2007
 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.)13861 Sunrise Valley Drive, Suite 410Herndon, VA
    
    20171(Address of principal executive offices)
    
    (Zip Code)
 (703) 880-2900
 None
 þ o
  o þ o
 o þ
  Class
    
    Outstanding at August 1, 2007Common Shares of beneficial interest,
$0.01 par value per share
    
    26,090,940 shares




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##### 



TABLE OF CONTENTS
 Page No.PART I FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    32Item 5. Other Information
    
    
    32Item 6. Exhibits
    
    
    32
 2




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##### 



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 or disputes with members of our management or Board of Trustees;
    
    The outcome of the litigation with respect to Republic Square I or our ability to close
on the purchase of Republic Square I pursuant to the Option Agreement;
    
    The effect of the proposed merger with Liberty Property Trust on our ability to acquire
the option properties;
    
    The outcome of any material litigation (including any litigation with our former Vice
Chairman and President and Chief Development Officer, and the Chairman of our Board of
Trustees); and
    
    The outcome of the merger with Liberty Property Trust or any other strategic alternative
courses of action.
   3




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##### 



PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements
 Republic Property Trust
Condensed Consolidated Balance Sheets
As of June 30, 2007 and December 31, 2006
 June 30, 2007
    
    
    December 31, 2006(Dollars in thousands)
    
    (Unaudited)
    
    
    (Audited)ASSETSInvestment in real estate:Land
    
    $
    137,600
    
    
    $
    102,100Commercial office buildings and improvements
    
    
    482,299
    
    
    
    483,287619,899
    
    
    
    585,387Less: accumulated depreciation and amortization
    
    
    (43,636
    )
    
    
    (33,635
    )Net income producing property
    
    
    576,263
    
    
    
    551,752Construction in progress
    
    
    35,888
    
    
    
    Net real estate and development assets
    
    
    612,151
    
    
    
    551,752Cash and cash equivalents
    
    
    10,541
    
    
    
    6,956Restricted cash
    
    
    6,386
    
    
    
    6,745Rents and other receivables
    
    
    8,466
    
    
    
    7,630Prepaid expenses and other assets
    
    
    23,954
    
    
    
    23,385Total Assets
    
    $
    661,498
    
    
    $
    596,468LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Mortgage notes payable
    
    $
    377,587
    
    
    $
    345,134Line of credit payable
    
    
    49,000
    
    
    
    5,000Intangible lease liabilities
    
    
    20,497
    
    
    
    20,789Accounts payable and accrued liabilities
    
    
    14,128
    
    
    
    9,335Tenant security deposits
    
    
    2,399
    
    
    
    2,501Advance rents
    
    
    1,071
    
    
    
    1,393Total liabilities
    
    
    464,682
    
    
    
    384,152Minority interest  operating partnership
    
    
    23,122
    
    
    
    25,503Shareholders EquityPreferred shares of beneficial interest, par
value $0.01, 40 million shares authorized,
none issued and outstanding in 2007 or 2006
    
    
    
    
    
    
    Common shares of beneficial interest, par
value $0.01, 200 million shares authorized,
26.1 million shares issued and outstanding in
2007 and 2006
    
    
    261
    
    
    
    261Additional paid-in capital
    
    
    219,732
    
    
    
    219,947Accumulated deficit
    
    
    (46,299
    )
    
    
    (33,395
    )Total Shareholders Equity
    
    
    173,694
    
    
    
    186,813Total Liabilities and Shareholders Equity
    
    $
    661,498
    
    
    $
    596,468
  4




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##### 



Republic Property Trust
Consolidated Statements of Operations  Unaudited
For the Three and Six Months Ended June 30, 2007 and 2006
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,(Dollars in thousands except per share amounts)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue:Rental income
    
    $
    17,341
    
    
    $
    13,939
    
    
    $
    33,749
    
    
    $
    27,264Management and development fees and associated reimbursements
    
    
    283
    
    
    
    3,862
    
    
    
    2,032
    
    
    
    5,224Total operating revenue
    
    
    17,624
    
    
    
    17,801
    
    
    
    35,781
    
    
    
    32,488Expenses:Real estate taxes
    
    
    1,966
    
    
    
    1,312
    
    
    
    3,792
    
    
    
    2,602Property operating costs
    
    
    3,322
    
    
    
    2,510
    
    
    
    6,588
    
    
    
    5,020Depreciation and amortization
    
    
    5,976
    
    
    
    4,997
    
    
    
    12,017
    
    
    
    9,696Cost of management and development fees and associated
reimbursements
    
    
    574
    
    
    
    3,070
    
    
    
    1,730
    
    
    
    3,937General and administrative
    
    
    3,883
    
    
    
    2,299
    
    
    
    7,213
    
    
    
    4,630Management and development agreement write-offs
    
    
    
    
    
    
    181
    
    
    
    142
    
    
    
    181Total operating expenses
    
    
    15,721
    
    
    
    14,369
    
    
    
    31,482
    
    
    
    26,066Operating income
    
    
    1,903
    
    
    
    3,432
    
    
    
    4,299
    
    
    
    6,422Other income and expense:Interest income
    
    
    90
    
    
    
    148
    
    
    
    174
    
    
    
    462Interest expense
    
    
    (6,068
    )
    
    
    (3,782
    )
    
    
    (11,716
    )
    
    
    (7,017
    )Total other income and expense
    
    
    (5,978
    )
    
    
    (3,634
    )
    
    
    (11,542
    )
    
    
    (6,555
    )Loss before minority interest
    
    
    (4,075
    )
    
    
    (202
    )
    
    
    (7,243
    )
    
    
    (133
    )Minority interest
    
    
    480
    
    
    
    24
    
    
    
    860
    
    
    
    16Net loss
    
    $
    (3,595
    )
    
    $
    (178
    )
    
    $
    (6,383
    )
    
    $
    (117
    )Basic and diluted loss per common share
    
    $
    (0.13
    )
    
    $
    (0.01
    )
    
    $
    (0.24
    )
    
    $
    (0.00
    )Weighted average common shares outstanding, basic and
diluted (in millions)
    
    
    26.1
    
    
    
    26.0
    
    
    
    26.1
    
    
    
    26.0Distributions declared per common share
    
    $
    0.125
    
    
    $
    0.206
    
    
    $
    0.250
    
    
    $
    0.233
  5




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##### 



Republic Property Trust
Consolidated Statements of Cash Flows  Unaudited
For the Six Months Ended June 30, 2007 and 2006
 Six Months Ended June 30,(Dollars in thousands)
    
    2007
    
    
    2006Operating activities:Net loss
    
    $
    (6,383
    )
    
    $
    (117
    )Adjustments to reconcile net loss to net cash provided by operating activities:Minority interest
    
    
    (860
    )
    
    
    (16
    )Stock awards
    
    
    155
    
    
    
    74Management and development agreement write-offs
    
    
    142
    
    
    
    181Depreciation and amortization
    
    
    12,017
    
    
    
    9,696Amortization of net lease intangibles
    
    
    (1,438
    )
    
    
    (735
    )Amortization of loan costs
    
    
    526
    
    
    
    206Other
    
    
    209
    
    
    
    197Changes in operating assets and liabilities:Marketable securities
    
    
    
    
    
    
    10,004Rents and other receivables
    
    
    (836
    )
    
    
    (1,022
    )Prepaid expenses and other assets
    
    
    (1,698
    )
    
    
    (1,339
    )Accounts payable and accrued expenses
    
    
    981
    
    
    
    (469
    )Advance rents
    
    
    (322
    )
    
    
    247Tenant security deposits
    
    
    (102
    )
    
    
    182Net cash provided by operating activities
    
    
    2,391
    
    
    
    17,089Investing activitiesAcquisition of real estate and intangibles
    
    
    (62,937
    )
    
    
    (74,725
    )Capital expenditures for building and improvements
    
    
    (1,632
    )
    
    
    (3,988
    )Redevelopment costs
    
    
    (1,511
    )
    
    
    Net cash used in investing activities
    
    
    (66,080
    )
    
    
    (78,713
    )Financing activitiesNet proceeds from sale of common stock
    
    
    
    
    
    
    11,396Payment of offering costs
    
    
    
    
    
    
    (4,018
    )Taxes paid on behalf of Predecessor
    
    
    
    
    
    
    (15,212
    )Proceeds from issuance of debt
    
    
    62,999
    
    
    
    46,400Principal repayments of debt
    
    
    (30,756
    )
    
    
    (33,280
    )Line of credit, net
    
    
    44,000
    
    
    
    47,000Payments of financing costs
    
    
    (917
    )
    
    
    (1,811
    )Decrease in restricted cash
    
    
    359
    
    
    
    2,395Redemption of operating partnership units
    
    
    (1,011
    )
    
    
    Distributions paid to shareholders
    
    
    (6,521
    )
    
    
    (6,069
    )Distributions paid to unitholders
    
    
    (879
    )
    
    
    (830
    )Net cash provided by financing activities
    
    
    67,274
    
    
    
    45,971Net increase (decrease) in cash and cash equivalents
    
    
    3,585
    
    
    
    (15,653
    )Cash and cash equivalents at beginning of period
    
    
    6,956
    
    
    
    23,127Cash and cash equivalents at end of period
    
    $
    10,541
    
    
    $
    7,474Supplemental disclosure of cash flow informationCash paid during the period for interest, net of amount capitalized
    
    $
    10,597
    
    
    $
    6,225
  6




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##### 



Republic Property Trust
Notes to Consolidated Financial Statements  Unaudited
For the Six Months Ended June 30, 2007 and 2006
 1. Organization and Description of Business
   
   2. Basis of Presentation
  7




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##### 



Accounting for Uncertainty in Income
Taxes
 3. Earnings Per Share
  4. Comprehensive Income
  5. Distributions Declared
  6. Income Taxes
   8




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##### 



7. 1129 20th Street Acquisition
      Three months ended
    
    Six months endedJune 30,
    
    
    
    June 30,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue
    
    $
    17,624
    
    
    $
    19,211
    
    
    $
    36,145
    
    
    $
    35,380Net loss
    
    $
    (3,595
    )
    
    $
    (920
    )
    
    $
    (6,524
    )
    
    $
    (1,543
    )Diluted loss per share
    
    $
    (0.13
    )
    
    $
    (0.04
    )
    
    $
    (0.25
    )
    
    $
    (0.06
    )
 9




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##### 



8. Related Party Transactions
   Balance2007
    
    
    Receivable atRevenue
    
    
    June 30,Recognized
    
    
    2007Portals I Management Fees and Payroll Reimbursements
    
    $
    252
    
    
    $
    107Portals II Management Fees and Payroll Reimbursements
    
    
    266
    
    
    
    122PDA Asset Management Fees
    
    
    303
    
    
    
    196Republic Square I  Management Fees and Payroll Reimbursements
    
    
    159
    
    
    
    21Republic Square I  Development Fees
    
    
    246
    
    
    
    Portals III Management and Development Fees and Payroll Reimbursements
    
    
    224
    
    
    
    166Other
    
    
    24
    
    
    
    5Total (1)
    
    $
    1,474
    
    
    $
    617
 
 (1)
    
    Of the $617,000 receivable balance at June 30, 2007 $596,000 remains outstanding. We have
reserved $15,000 against the accounts receivable. Although we believe that all balances
outstanding at June 30, 2007 are due and payable under the contracts, there is some
possibility that a portion of the accounts receivable balance eventually may not be collected.
We have demanded payment, in writing, for the outstanding amounts. The related parties have
asserted various defaults under the related party agreements, which assertions we deny. We
also have a deferred income balance in connection with one of the related party agreements
which results from an excess of cash received to date over revenue recognized to date. We
included the deferred income balance in our analysis of whether to record a reserve against
the amounts receivable under the related party agreements. 9. Independent Investigation
   10




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##### 



10. Commitments and Contingencies
 Legal Matters
   11




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##### 



12




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##### 



11. Minority Interest
   12. Termination of Various Management and Development Agreements
 Republic Square II and Portals IV and V Development and Management Agreements
 Portals III and Republic Square I Development and Management Agreements
   13




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##### 



Portals I and Portals II Management Agreements and PDA Asset Management Agreement
   13. Change in Control Severance Plans
   14. Subsequent Events
 Merger Agreement
   14




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##### 



15




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 .
 Critical Accounting Policies
  Capitalization of costs 
 Comparison of three months ended June 30, 2007 to three months ended June 30, 2006
  ChangesResultingfromJune 30,
    
    
    June 30,
    
    
    
    
    
    
    Additional
    
    
    Remaining(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    Variance
    
    
    Properties
    
    
    VarianceRevenueRental income
    
    $
    17,117
    
    
    $
    13,806
    
    
    $
    3,311
    
    
    $
    2,928
    
    
    $
    383Management and development fees
    
    
    283
    
    
    
    3,862
    
    
    
    (3,579
    )
    
    
    
    
    
    
    (3,579
    )Other
    
    
    224
    
    
    
    133
    
    
    
    91
    
    
    
    41
    
    
    
    50Total revenue
    
    
    17,624
    
    
    
    17,801
    
    
    
    (177
    )
    
    
    2,969
    
    
    
    (3,146
    )ExpensesReal estate taxes
    
    
    1,966
    
    
    
    1,312
    
    
    
    654
    
    
    
    419
    
    
    
    235Property operating costs
    
    
    3,322
    
    
    
    2,510
    
    
    
    812
    
    
    
    742
    
    
    
    70Depreciation and amortization
    
    
    5,976
    
    
    
    4,997
    
    
    
    979
    
    
    
    1,487
    
    
    
    (508
    )Cost of management and development fees
    
    
    574
    
    
    
    3,070
    
    
    
    (2,496
    )
    
    
    
    
    
    
    (2,496
    )General and administrative
    
    
    3,883
    
    
    
    2,299
    
    
    
    1,584
    
    
    
    
    
    
    
    1,584Management and development agreement write off
    
    
    
    
    
    
    181
    
    
    
    (181
    )
    
    
    
    
    
    
    (181
    )Total operating expenses
    
    
    15,721
    
    
    
    14,369
    
    
    
    1,352
    
    
    
    2,648
    
    
    
    (1,296
    )Interest income and expense, minority interestInterest income
    
    
    90
    
    
    
    148
    
    
    
    (58
    )
    
    
    3
    
    
    
    (61
    )Interest expense
    
    
    (6,068
    )
    
    
    (3,782
    )
    
    
    (2,286
    )
    
    
    (1,264
    )
    
    
    (1,022
    )Minority interest
    
    
    480
    
    
    
    24
    
    
    
    456
    
    
    
    110
    
    
    
    346Net loss
    
    $
    (3,595
    )
    
    $
    (178
    )
    
    $
    (3,417
    )
    
    $
    (830
    )
    
    $
    (2,587
    )
 Revenue
  16




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##### 




    
    The remaining increase in rental income is primarily due to higher
tenant reimbursements attributable to increased real estate tax
assessments.
 
    
    Management and development fees are primarily related to the fee
revenue we earned from the various management and development
agreements contributed by related parties to us in connection with
the initial public offering and formation transactions. In April
2007, we received a notice terminating the development and
management services rights to provide fee-based development and
management services with respect to our related party agreements.
As a result of the termination of these agreements, we do not
expect to have significant management and development fees, or the
related costs, in the future. Management and development fees
earned with respect to the contributed agreements amounted to $0.2
million for the period. These fees consist of management fees from
Republic Square I and II, Portals I, II and III and asset
management fees from Portals Development Associates, payroll
reimbursements for our employees performing these services and
development fees from Portals III and Republic Square I and II.
Also included in management and development fees are $0.1 million
relating to the construction and management of the build-out of a
space for one of our tenants located at the Republic Building
during the period. Costs amounting to $0.1 million relating to
this revenue are reflected in cost of management and development
fees. During the second quarter of 2006 we recorded $2.2 million
in fees related to reimbursements for the City Center project located
in West Palm Beach.Each of the Portals I Agreement, Portals II Agreement and PDA Asset Management Agreement provided
that it would have terminated on December 15, 2007, so long as either party had elected to
terminate the same upon not less than ninety days prior written notice to the other party
electing to terminate such agreement. Since the owners did not adhere to the termination
provisions contained in the agreements, we rejected these improper termination notices in their
entirety. Due to the owners anticipatory breach of the Portals I Agreement, Portals II Agreement
and PDA Asset Management Agreement, in addition to other actions by the owners that constitute
defaults under these agreements, we delivered written notices to the owners terminating these
three agreements effective April 10, 2007. We believe in good faith that the owners allegations
and assertions in each of its termination notices that we breached the agreements are without
merit, and we intend to vigorously prosecute and defend our position.
 Expenses
  
    
    Management and development agreement write-offs are related to the impairment of
development service agreements contributed to us in connection with the IPO and formation
transactions. During the second quarter of 2006 we wrote off to management and development
agreement write-off expense approximately $0.2 million with respect to the West Palm Beach
Development Agreement.
    
    The remaining increase in real estate taxes was due to higher
assessments on all of our properties. The assessment base increased on
average by 13% at our Virginia properties and by 31% at the Republic
Building. We expect to be able to recover most of this increase from
our tenants.
    
    The remaining decrease in depreciation and amortization expense is as
a result of tenants that have vacated several of our properties and,
as a result, intangible assets were fully depreciated in 2006.
Further, lower amortization of intangible management and development
contracts occurred in 2007 due to the impairment of the majority of
the agreements at the end of 2006.
    
    Cost of management and development fees include the costs associated
with providing services under our management and development
agreements. In April 2007, we received a notice terminating the
development and management services rights to provide fee-based
development and management services with respect to our related party
agreements. As a result of the termination of these agreements, we do
not expect to have significant costs of management and development
fees in the future. We incurred and paid $0.2 million in severance
costs during the second quarter of 2007 related to the termination of
employees associated with performing services under these agreements.
Costs related to providing these services under our management and
development agreements amounted to $0.3 million during the period and
$0.8 million for the same period in 2006. We incurred costs
during the second quarter of 2007 related to the construction and management of the build-out of
a space for one of our tenants located at the Republic Building. These costs amounted to $0.1
million. During the second quarter of 2006 we incurred $2.3 million in costs related to the City
Center project located in West Palm Beach. The reimbursement of
$2.2 million of these costs is included in
management and development fees.
 17




---



##### 




    
    General and administrative expenses increased approximately $1.5 million primarily due to costs related to exploring
strategic alternatives and increased legal costs related to current litigation. The litigation costs amounted to
approximately $1.0 million for the period and costs related to exploring strategic alternatives amounted to approximately
$0.5 million for the period. During the second quarter of 2006 we incurred $0.3 million of legal costs in connection with
the internal investigation surrounding the City Center project located in West Palm Beach.
    
    The remaining interest expense increased primarily due to financing Republic Park 1-7 in September 2006.
  Comparison of six months ended June 30, 2007 to six months ended June 30, 2006
  ChangesResultingfromJune 30,
    
    
    June 30,
    
    
    
    
    
    
    Additional
    
    
    Remaining(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    Variance
    
    
    Properties
    
    
    VarianceRevenueRental income
    
    $
    33,318
    
    
    $
    26,969
    
    
    $
    6,349
    
    
    $
    5,970
    
    
    $
    379Management and development fees
    
    
    2,032
    
    
    
    5,224
    
    
    
    (3,192
    )
    
    
    
    
    
    
    (3,192
    )Other
    
    
    431
    
    
    
    295
    
    
    
    136
    
    
    
    65
    
    
    
    71Total revenue
    
    
    35,781
    
    
    
    32,488
    
    
    
    3,293
    
    
    
    6,035
    
    
    
    (2,742
    )ExpensesReal estate taxes
    
    
    3,792
    
    
    
    2,602
    
    
    
    1,190
    
    
    
    750
    
    
    
    440Property operating costs
    
    
    6,588
    
    
    
    5,020
    
    
    
    1,568
    
    
    
    1,430
    
    
    
    138Depreciation and amortization
    
    
    12,017
    
    
    
    9,696
    
    
    
    2,321
    
    
    
    3,218
    
    
    
    (897
    )Cost of management and development fees
    
    
    1,730
    
    
    
    3,937
    
    
    
    (2,207
    )
    
    
    
    
    
    
    (2,207
    )General and administrative
    
    
    7,213
    
    
    
    4,630
    
    
    
    2,583
    
    
    
    
    
    
    
    2,583Management and development agreement write off
    
    
    142
    
    
    
    181
    
    
    
    (39
    )
    
    
    
    
    
    
    (39
    )Total operating expenses
    
    
    31,482
    
    
    
    26,066
    
    
    
    5,416
    
    
    
    5,398
    
    
    
    18Interest income and expense, minority interestInterest income
    
    
    174
    
    
    
    462
    
    
    
    (288
    )
    
    
    4
    
    
    
    (292
    )Interest expense
    
    
    (11,716
    )
    
    
    (7,017
    )
    
    
    (4,699
    )
    
    
    (2,695
    )
    
    
    (2,004
    )Minority interest
    
    
    860
    
    
    
    16
    
    
    
    844
    
    
    
    243
    
    
    
    601Net loss
    
    $
    (6,383
    )
    
    $
    (117
    )
    
    $
    (6,266
    )
    
    $
    (1,811
    )
    
    $
    (4,455
    )
 Revenue
  
    
    The remaining increase in rental income is primarily due to higher
tenant reimbursements attributable to increased real estate tax
assessments.
 18




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
    
    Management and development fees are primarily related to the fee
revenue we earned from the various management and development
agreements contributed by related parties to us in connection with
the initial public offering and formation transactions. In April
2007, we received a notice terminating the development and
management services rights to provide fee-based development and
management services with respect to our related party agreements.
As a result of the termination of these agreements, we do not
expect to have significant management and development fees, or the
related costs, in the future. Management and development fees
earned with respect to the contributed agreements amounted to $1.5
million for the period. These fees consist of $0.2 million in
management fees from Republic Square I and II, Portals I, II and
III, $0.3 million in asset management fees from Portals
Development Associates, $0.6 million in payroll reimbursements for
our employees performing these services and $0.4 million in
development fees from Portals III and Republic Square I and II.
Also included in management and development fees are $0.5 million
relating to the construction and management of the build-out of a
space for one of our tenants located at the Republic Building
during the period. Costs amounting to $0.4 million relating to
this revenue are reflected in cost of management and development
fees. During the second quarter of 2006 we recorded $2.2 million
in fees related to reimbursements for the City Center project
located in West Palm Beach.Each of the Portals I Agreement, Portals II Agreement and PDA Asset Management Agreement provided
that it would have terminated on December 15, 2007, so long as either party had elected to
terminate the same upon not less than ninety days prior written notice to the other party
electing to terminate such agreement. Since the owners did not adhere to the termination
provisions contained in the agreements, we rejected these improper termination notices in their
entirety. Due to the owners anticipatory breach of the Portals I Agreement, Portals II Agreement
and PDA Asset Management Agreement, in addition to other actions by the owners that constitute
defaults under these agreements, we delivered written notices to the owners terminating these
three agreements effective April 10, 2007. We believe in good faith that the owners allegations
and assertions in each of its termination notices that we breached the agreements are without
merit, and we intend to vigorously prosecute and defend our position.
 Expenses
  
    
    Management and development agreement write-offs are related to the
impairment of development service agreements contributed to us in
connection with the IPO and formation transactions. We recorded
intangible assets of $1.9 million for these contracts in connection
with the IPO. In April 2007, we received a notice terminating the
development and management services rights to provide fee-based
development and management services with respect to our related party
agreements. Due to the receipt of these termination notices, in the
first quarter 2007 financial close, we wrote off to management and
development agreement write-off expense approximately $0.1 million
with respect to the Portals III and Republic Square I Development
Agreements. In addition to the impairment charges, we recorded $0.1
million of amortization expense during the first quarter of 2007. We
had fully written off all intangible assets related to these
agreements as of March 31, 2007. During the second quarter of 2006 we
wrote off to management and development agreement write-off expense
approximately $0.2 million with respect to the West Palm Beach
Development Agreement.
    
    The remaining increase in real estate taxes was due to higher
assessments on all of our properties. The assessment base increased on
average by 13% at our Virginia properties and by 31% at the Republic
Building. We expect to be able to recover most of this increase from
our tenants.
    
    The decrease in depreciation and amortization expense is as a result
of tenants that have vacated several of our properties and, as a
result, intangible assets were fully depreciated in 2006. Further,
lower amortization of intangible management and development contracts
occurred in 2007 due to the impairment of the majority of the
agreements at the end of 2006.
    
    Cost of management and development fees include the costs associated
with providing services under our management and development
agreements. In April 2007, we received a notice terminating the
development and management services rights to provide fee-based
development and management services with respect to our related party
agreements. As a result of the termination of these agreements, we do
not expect to have significant costs of management and development
fees in the future. We incurred and paid $0.2 million in severance
costs during the second quarter of 2007 related to the termination of
employees associated with performing services under these agreements.
Costs related to providing these services under our management and
development agreements amounted to $1.0 million during the period and
$1.6 million for the same period in 2006. We incurred
costs during the period related to the construction and management of the build-out of a space
for one of our tenants located at the Republic Building. These costs amounted to $0.4 million.
The reimbursement of these costs, and an additional $0.1 million fee, are included in management
and development fees. We incurred $2.3 million of costs during the second quarter of 2006 in
connection with the City Center project located in West Palm Beach.
The reimbursement of $2.2 million of these costs is included in
management and development fees.
 19




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##### 




    
    General and administrative expenses increased primarily due to costs related to exploring strategic alternatives and
increased legal costs related to current litigation. These litigation costs amounted to approximately $1.6 million for the
period and costs related to exploring strategic alternatives amounted to approximately $0.6 million for the period.
Partially offsetting these increases are $0.5 million of costs incurred during the first quarter of 2006 in connection with
the termination of the line of credit commitment with Lehman Brothers and $0.3 million of legal costs incurred during the
second quarter of 2006 in connection with the internal investigation surrounding the City Center project located in West
Palm Beach.
    
    The remaining interest expense increased primarily due to financing Republic Park 1-7 in September 2006.
  Liquidity and Capital Resources
 June 30,
    
    June 30,(Dollars in thousands)
    
    2007
    
    2006Net loss
    
    $
    (6,383
    )
    
    $
    (117
    )Net cash provided by operating activities
    
    
    2,391
    
    
    
    17,089Net cash used in investing activities
    
    
    (66,080
    )
    
    
    (78,713
    )Net cash provided by financing activities
    
    
    67,274
    
    
    
    45,971Cash and cash equivalents at end of period
    
    
    10,541
    
    
    
    7,474
  Comparison of the six months ended June 30, 2007 to the six months ended June 30, 2007
    20




---



##### 



Short-Term Liquidity Requirements
  Tenant Improvements.
 Development of 1129 20 th Street.
  Litigation.
    21




---



##### 



Long-Term Liquidity Requirements
    22




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##### 



Line of Credit
   
    
    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);
    
    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.
         23




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##### 



Loan agreement, dated May 24, 2006, by and between RPB Willowwood I LLC and RPB Willowwood II LLC
and Lehman Brothers Bank, FSB. (the Willowwood loan)
  i.e
  Construction Loan for 1129 20th Street NW, Washington, D.C.
     24




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##### 



Recent Developments
 Strategic Alternatives and Merger Agreement
        25




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##### 



Change in Control Severance Plans
   Termination of Various Management and Development Agreements
 Republic Square II and Portals IV and V Development and Management Agreements
 Portals III and Republic Square I Development and Management Agreements
   Portals I and Portals II Management Agreements and PDA Asset Management Agreement
 26




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##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
     Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  27




---



##### 



Internal Control Over Financial Reporting
  28




---



##### 



PART II. OTHER INFORMATION
 Item 1. Legal Proceedings
      29




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##### 



Item 1A. Risk Factors
  We have lost our right to provide management or development services on an outsource basis for The
Portals Properties and Republic Square; our cash flows and operating results will be negatively
impacted.
   30




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##### 



The announcement of our proposed Merger with Liberty Property Trust may have a negative effect on
our business, financial condition and operating results.
  If we are unable to realize our proposed merger with Liberty Property Trust, our business,
financial condition, operating results and stock price could suffer.
  
    
    we would remain liable for significant costs relating to the transaction, including, among others,
legal, accounting, financial advisory and financial printing expenses;
    
    activities relating to the proposed merger and related uncertainties could divert managements attention
from our day-to-day business and disrupt our operations;
    
    an announcement that we have abandoned the proposed merger could trigger a decline in our stock price to
the extent that our stock price reflects a market assumption that we will complete the merger;
    
    we could be required to pay Liberty a termination fee and/or expense reimbursement if the Merger
Agreement is terminated under certain circumstances; and
    
    we may forego alternative business opportunities or fail to respond effectively to competitive pressures.
 The Merger Agreement limits our ability to pursue alternatives to the proposed merger.
   Certain restrictive pre-closing covenants in the Merger Agreement may negatively affect our
business, financial condition, operating results and cash flows.
  31




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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
  Item 5. Other Information
  Item 6. Exhibits.
 10.1
    
    Third Amendment to Senior Secured Revolving Credit Agreement, dated June 29, 2007. *10.2
    
    Compensation for the members of the
Strategic Alternatives Special Committee. *#10.3
    
    Form of Republic Property Trust, Republic Property Limited Partnership and Republic Property TRS
Change in Control Severance Plan (and Summary Plan Description),
effective as of June 29, 2007. *#10.4
    
    Form of Senior Executive Change in Control Severance Agreement. *#31.1
    
    Section 302 Certification of Mark
R. Keller, the Registrants Chief Executive Officer, dated August 6, 2007. *31.2
    
    Section 302 Certification of Michael J. Green, the Registrants Chief Financial Officer, dated August 6, 2007. *32.1
    
    Section 906 Certification of Mark R. Keller and Michael J. Green, the Registrants Chief
Executive Officer and Chief Financial Officer, respectively, dated August 6, 2007. *
 
 *
    
    Included herein.#
    
    Represents a management contract or compensation plan, contract or arrangement. 32




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##### 



SIGNATURES
  REPUBLIC PROPERTY TRUSTBy:
    /s/ Michael J. GreenMichael J. GreenExecutive Vice President and Chief Financial Officer (Principal
Financial Officer, Principal Accounting Officer and duly 
authorized Officer)
August 6, 2007 33