**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C.  20549**

**FORM 10-Q/A**

**AmendmentNo. 1**

**(MarkOne)**
| **x**  | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**  |
|--------|------------|----------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                     |
|   |       | **For  the quarterly period ended September 30, 2005**                                              |
|   |       |                                                                                                     |
| **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 001-32290**

**GMHCOMMUNITIES TRUST**

(Exact Name of Registrant as Specified in Its Charter)

| **Maryland**                                                     |   | **201181390**                      |
|------------------------------------------------------------------|--------|------------------------------------|
| (State or other  Jurisdiction of  Incorporation or Organization) |   | (IRS Employer  Identification No.) |
|                                                             |   |                               |
| **10  Campus Boulevard, Newtown Square, PA**                     |   | **19073**                          |
| (Address of  Principal Executive Offices)                        |   | (Zip Code)                         |

 

Registrant’s Telephone Number, Including Area Code**(610) 355-8000**

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes ** **x   No  o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated fileror a non-accelerated filer. (See definition of accelerated filer and largeaccelerated filed in Rule 12b-2 of the Exchange Act).

Large AcceleratedFiler o Accelerated Filer xNon-Accelerated Filer o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  Yes ** **o   No  x

OnOctober 31, 2005, 39,699,843 of the registrant’s common shares ofbeneficial interest, $0.001 par value, were outstanding. This amount includes33,854 restricted common shares that are considered outstanding for votingpurposes and are eligible to receive dividend distributions payable to commonshareholders, but are not considered outstanding under generally acceptedaccounting principles for purposes of the financial statements included in thisreport.

 

----

**GMH COMMUNITIES TRUST**

**EXPLANATORY NOTE**

GMH CommunitiesTrust (“we” or the “Company”) is amending its quarterly report on Form 10-Q forthe period ended September 30, 2005 to restate the Company’s consolidatedinterim financial statements for the three and nine month periods endedSeptember 30, 2005 and the related disclosures. Please refer to Note 2 to ourconsolidated interim financial statements included in this amendment on Form10-Q/A for a further discussion of the restatement.

As the Companypreviously disclosed in Part II, Item 9A of its Annual Report on Form 10-K forthe year ended December 31, 2005, in the first quarter of 2006 the AuditCommittee of the Company’s Board of Trustees conducted an investigation ofcertain accounting and financial reporting matters. The investigationidentified material weaknesses in our internal control over financial reportingand in our disclosure controls and procedures as of December 31, 2005. Inconnection with the investigation, we reviewed our previously reportedfinancial statements. Through this review, we identified adjustments that werematerial to the results we previously reported for the quarterly periods endedMarch 31, 2005, June 30, 2005 and September 30, 2005. Morespecifically, the Company determined that the restatements with respect to itsconsolidated financial statements for these periods were necessary due to thediscovery of errors in revenue recognition, depreciation and operating expensesrelated to certain transactions reported by the Company and to reclassifyequity in earnings of unconsolidated entities. Accordingly, we have restated ourfinancial statements for the quarterly periods ended March 31, 2005 and June30, 2005 in connection with the filing of our quarterly reports for thecomparable periods during 2006, and we are now restating our financialstatements for the quarterly period ended September 30, 2005 in this amendedreport. A summary of our restated operating results for each of the quarterlyperiods during 2005 is set forth in Note 15 of the notes to consolidatedand combined financial statements contained in the section entitled “FinancialStatements and Supplementary Data” in Part II, Item 8 of our AnnualReport on Form 10-K for the year ended December 31, 2005. 

Except as discussedabove, we have not modified or updated disclosures presented in the originalquarterly report on Form 10-Q, except as required to reflect the effects of therestatement in this Form 10-Q/A. Accordingly, this Form 10-Q/A does not reflectevents occurring after the filing of our original Form 10-Q or modify or updatethose disclosures affected by subsequent events. Information not affected bythe restatement is unchanged and reflects the disclosures made at the time ofthe original filing of the Form 10-Q on November 14, 2005. This Form 10-Q/Ashould be read in conjunction with our filings made with the Securities andExchange Commission subsequent to the filing of the original Form 10-Q,including any amendments to those filings. The following items in this Form10-Q/A have been amended as a result of the restatement: 

·      PartI—Item 1—Financial Statements

·      PartI—Item 2—Management’s Discussion and Analysis of Financial Condition andResults of Operations

·      PartI—Item 4—Controls and Procedures

Please refer toNote 2 to the accompanying consolidated interim financial statements foradditional information on the restatement. 

2

----

**GMH COMMUNITIES TRUST**

**INDEX TO FORM 10-Q**
| Cautionary Note Regarding  Forward-Looking Statements                                               |   |
|-----------------------------------------------------------------------------------------------------|--------|
|                                                                                                |   |
| **Part I —  Financial Information**                                                       |   |
| Item 1.  Financial Statements                                                                       |   |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations |   |
| Item 3. Quantitative and Qualitative Disclosure About  Market Risk                                  |   |
| Item 4. Controls and Procedures                                                                     |   |
|                                                                                                |   |
| **Part II  — Other Information**                                                          |   |
| Item  1. Legal Proceedings                                                                          |   |
| 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                                                                          |   |
| Item 6.  Exhibits                                                                                   |   |
|                                                                                                |   |
| Signatures                                                                                          |   |

 

**CAUTIONARYNOTE REGARDING FORWARD-LOOKING STATEMENTS**

Ourdisclosure and analysis in this report contain forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, asamended. Forward-looking statements provide our current expectations orforecasts of future events and are not statements of historical fact. Theseforward-looking statements include information about possible or assumed futureevents, including, among other things, operating or financial performance,strategic plans and objectives, or regulatory or competitive environments.Statements regarding the following subjects are forward-looking by theirnature:

·         ourability to successfully implement our business strategy, including our abilityto acquire and manage student housing properties and to secure and operatemilitary housing privatization projects;

·         ourprojected operating results and financial condition;

·         completionof any of our targeted acquisitions or development projects within our expectedtimeframe or at all;

·         ourability to obtain future financing arrangements on terms acceptable to us, orat all;

·         estimatesrelating to, and our ability to pay, future dividends;

·         ourability to qualify as a real estate investment trust (“REIT”) for federalincome tax purposes;

·         ourunderstanding of our competition, market opportunities and trends;

·         projectedtiming and amounts of capital expenditures; and

·         theimpact of technology on our properties, operations and business.

Theforward-looking statements are based on our beliefs, assumptions andexpectations of our future performance, taking into account all informationcurrently available to us. These beliefs, assumptions and expectations canchange as a result of many possible events or factors, not all of which areknown to us. If a change occurs, our business, financial condition, liquidityand results of operations may vary materially from those expressed in ourforward-looking statements. Factors that could cause actual results to differmaterially from our management’s current expectations include, but are notlimited to:

·         thefactors referenced in the 424(b) prospectus relating to our most recentpublic offering of common shares, as filed with the Securities and ExchangeCommission (“SEC”) on September 28, 2005, including those sections of theprospectus titled “Risk Factors,” “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” and “Our Business andProperties;”

3

----

 

·         changesin our business strategy, including acquisition and development activities;

·         availability,terms and deployment of capital, including equity and debt financing;

·         availabilityof qualified personnel;

·         unanticipatedcosts associated with the acquisition and integration of our student housingproperty acquisitions and development projects, and military housingprivatization projects;

·         theeffects of military base realignment and closures on installations covered byour military housing privatization projects;

·         highleverage on the entities that own the military housing privatization projects;

·         reductionsin government military spending;

·         changesin student population enrollment at colleges and universities or adverse trendsin the off-campus student housing market;

·         changesin the student and military housing industry, interest rates or the generaleconomy;

·         changesin local real estate conditions (including changes in rental rates and thenumber of competing properties) and the degree and nature of our competition;

·         ourfailure to lease unoccupied space in accordance with management’s projections;

·         potentialliability under environmental or other laws; and

·         theexistence of complex regulations relating to our status as a REIT and theadverse consequences of our failure to qualify as a REIT.

Whenwe use the words “believe,” “expect,” “may,” “potential,” “anticipate,” “estimate,”“plan,” “will,” “could,” “intend” or similar expressions, we intend to identifyforward-looking statements. You should not place undue reliance on theseforward-looking statements. We are not obligated to publicly update or reviseany forward-looking statements, whether as a result of new information, futureevents or otherwise, except to the extent otherwise required by law.

4

----

 

**PART I— FINANCIAL INFORMATION**

**Item1.    Financial Statements**

**GMH COMMUNITIES TRUST**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

(in thousands, except par value and number of shares)
| ** **                                                                                                                                                                        | ** ** | **September 30,  2005  Unaudited** | ** ** | **December 31,  2004** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                        | ** ** | **(as restated)**                  | ** ** | ** **                  | ** ** |
| ASSETS                                                                                                                                                                            |       |                                    |       |                        |       |
| Real estate investments:                                                                                                                                                          |       |                                    |       |                        |       |
| Student housing properties                                                                                                                                                        |       | $                                       | 1,086,902  |                        | $          | 638,635 |   |
| Accumulated depreciation                                                                                                                                                          |       | (21,372                                 | )          | (3,905                      | )          |
|                                                                                                                                                                              |       | 1,065,530                               |       | 634,730                     |       |
| Corporate  assets:                                                                                                                                                                |       |                                    |       |                        |       |
| Corporate assets                                                                                                                                                                  |       | 7,686                                   |       | 11,625                      |       |
| Accumulated depreciation                                                                                                                                                          |       | (443                                    | )          | (241                        | )          |
|                                                                                                                                                                              |       | 7,243                                   |       | 11,384                      |       |
| Cash and cash  equivalents                                                                                                                                                        |       | 33,872                                  |       | 60,926                      |       |
| Restricted cash                                                                                                                                                                   |       | 12,575                                  |       | 2,313                       |       |
| Accounts and  other receivables, net:                                                                                                                                             |       |                                    |       |                        |       |
| Related party                                                                                                                                                                     |       | 23,080                                  |       | 9,309                       |       |
| Third party                                                                                                                                                                       |       | 3,137                                   |       | 2,257                       |       |
| Investments in  military housing projects                                                                                                                                         |       | 37,220                                  |       | 39,482                      |       |
| Deferred  contract costs                                                                                                                                                          |       | 338                                     |       | 126                         |       |
| Deferred  financing costs, net                                                                                                                                                    |       | 4,064                                   |       | 2,820                       |       |
| Lease  intangibles, net                                                                                                                                                           |       | 3,244                                   |       | 4,994                       |       |
| Deposits                                                                                                                                                                          |       | 672                                     |       | 1,848                       |       |
| Other assets                                                                                                                                                                      |       | 5,834                                   |       | 2,872                       |       |
| Total assets                                                                                                                                                                      |       | $                                       | 1,196,809  |                        | $          | 773,061 |   |
| **LIABILITIES  AND BENEFICIARIES’ EQUITY**                                                                                                                                   | ** ** | ** **                              | ** ** | ** **                  | ** ** |
| Notes payable                                                                                                                                                                     |       | $                                       | 629,171    |                        | $          | 370,007 |   |
| Line of credit                                                                                                                                                                    |       | 137,000                                 |       | —                      |       |
| Accounts  payable:                                                                                                                                                                |       |                                    |       |                        |       |
| Related party                                                                                                                                                                     |       | 57                                      |       | 277                         |       |
| Third party                                                                                                                                                                       |       | 589                                     |       | 1,160                       |       |
| Accrued expenses                                                                                                                                                                  |       | 27,497                                  |       | 9,308                       |       |
| Dividends and  distributions payable                                                                                                                                              |       | 14,107                                  |       | 9,583                       |       |
| Other  liabilities                                                                                                                                                                |       | 18,805                                  |       | 4,907                       |       |
| Total  liabilities                                                                                                                                                                |       | 827,226                                 |       | 395,242                     |       |
| Minority  interest                                                                                                                                                                |       | 192,282                                 |       | 182,118                     |       |
| Beneficiaries’  equity:                                                                                                                                                      |       |                                    |       |                        |       |
| Common shares of  beneficial interest, $0.001 par value; 500,000,000 shares authorized,  30,350,989 issued and outstanding at September 30, 2005 and  December 31, 2004 |       | 30                                      |       | 30                          |       |
| Preferred  shares—100,000,000 shares authorized, no shares issued or outstanding                                                                                             |       | —                                  |       | —                      |       |
| Additional  paid-in capital                                                                                                                                                       |       | 200,367                                 |       | 200,276                     |       |
| Cumulative  earnings                                                                                                                                                              |       | 2,490                                   |       | 251                         |       |
| Cumulative  dividends                                                                                                                                                             |       | (25,586                                 | )          | (4,856                      | )          |
| Total  beneficiaries’ equity                                                                                                                                                 |       | 177,301                                 |       | 195,701                     |       |
| Total liabilities and  beneficiaries’ equity                                                                                                                                 |       | $                                       | 1,196,809  |                        | $          | 773,061 |   |

 

*See accompanying notes to condensedconsolidated and combined financial statements.*

5

----

 

**GMH COMMUNITIES TRUST AND THE GMHPREDECESSOR ENTITIES**

**CONDENSED CONSOLIDATED AND COMBINEDSTATEMENTS OF OPERATIONS**

(Unaudited and in thousands, except share and pershare information)
| ** **                                                                                               | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **2005**                                                 | ** ** | **2004**                                                | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                                               | ** ** | **(Company)**                                            | ** ** | **(Predecessor)**                                       | ** ** | **(Company)** | ** ** | **(Predecessor)** | ** ** |
| ** **                                                                                               | ** ** | **(as restated)**                                   | ** ** | ** **                                              | ** ** | **(as restated)** | ** ** | ** ** | ** ** |
| **Revenue:**                                                                                             | ** ** | ** **                                               | ** ** | ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Rent and other  property income                                                                          |       | $                                                        | 35,409     |                                                    | $          | 6,753 |   | $ | 91,013 |   | $ | 7,023 |   |
| Expense  reimbursements:                                                                                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Related party                                                                                            |       | 20,096                                                   |       | 8,702                                                   |       | 40,552 |   | 16,669 |   |
| Third party                                                                                              |       | 1,299                                                    |       | 1,906                                                   |       | 3,876 |   | 5,475 |   |
| Management fees:                                                                                         |       |                                                     |       |                                                    |       |   |   |   |   |
| Related party                                                                                            |       | 1,755                                                    |       | 967                                                     |       | 5,085 |   | 2,683 |   |
| Third party                                                                                              |       | 611                                                      |       | 752                                                     |       | 2,156 |   | 3,430 |   |
| Other fee  income-related party                                                                          |       | 5,895                                                    |       | 2,115                                                   |       | 12,849 |   | 4,174 |   |
| Other income                                                                                             |       | 81                                                       |       | 141                                                     |       | 248 |   | 493 |   |
| Total revenue                                                                                            |       | 65,146                                                   |       | 21,336                                                  |       | 155,779 |   | 39,947 |   |
| **Operating  Expenses:**                                                                                 | ** ** | ** **                                               | ** ** | ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Property  operating expenses                                                                             |       | 18,906                                                   |       | 5,808                                                   |       | 41,104 |   | 9,851 |   |
| Reimbursed  expenses                                                                                     |       | 21,395                                                   |       | 10,608                                                  |       | 44,428 |   | 22,144 |   |
| Real estate  taxes                                                                                       |       | 3,184                                                    |       | 490                                                     |       | 8,339 |   | 490 |   |
| Administrative  expenses                                                                                 |       | 2,992                                                    |       | 2,172                                                   |       | 8,768 |   | 4,488 |   |
| Profits interest  expense                                                                                |       | —                                                   |       | 33,180                                                  |       | — |   | 33,180 |   |
| Depreciation and  amortization                                                                           |       | 8,550                                                    |       | 1,770                                                   |       | 24,958 |   | 2,188 |   |
| Interest                                                                                                 |       | 8,989                                                    |       | 1,722                                                   |       | 21,247 |   | 1,880 |   |
| Total operating  expenses                                                                                |       | 64,016                                                   |       | 55,750                                                  |       | 148,844 |   | 74,221 |   |
| Income (loss) before  equity in earnings of unconsolidated entities, income taxes and minority  interest |       | 1,130                                                    |       | (34,414                                                 | )          | 6,935 |   | (34,274 | ) |
| Equity in  earnings of unconsolidated entities                                                           |       | 1,058                                                    |       | —                                                  |       | 1,999 |   | — |   |
| Income (loss)  before income taxes and minority interest                                                 |       | 2,188                                                    |       | (34,414                                                 | )          | 8,934 |   | (34,274 | ) |
| Income taxes                                                                                             |       | 2,254                                                    |       | —                                                  |       | 4,512 |   | — |   |
| (Loss) income  before minority interest                                                                  |       | (66                                                      | )          | —                                                  |       | 4,422 |   | — |   |
| Minority  interest                                                                                       |       | (34                                                      | )          | —                                                  |       | 2,183 |   | — |   |
| Net (loss)  income                                                                                       |       | $                                                        | (32        | )                                                       | $          | (34,414 | ) | $ | 2,239 |   | $ | (34,274 | ) |
|                                                                                                     |       |                                                     |       |                                                    |       |   |   |   |   |
| Earnings per  common share—basic                                                                    |       | $                                                        | (0.00      | )                                                       |       |   | $ | 0.07 |   |   |   |
|                                                                                                     |       |                                                     |       |                                                    |       |   |   |   |   |
| Earnings per  common share—diluted                                                                  |       | $                                                        | (0.00      | )                                                       |       |   | $ | 0.07 |   |   |   |
| Weighted-average  shares outstanding during the period:                                                  |       |                                                     |       |                                                    |       |   |   |   |   |
| Basic                                                                                                    |       | 30,350,989                                               |       |                                                    |       | 30,350,989 |   |   |   |
| Diluted                                                                                                  |       | 64,413,934                                               |       |                                                    |       | 64,085,950 |   |   |   |
| Common share dividend  declared per share                                                                |       | $                                                        | 0.2275     |                                                    |       |   | $ | 0.6825 |   |   |   |

 

*See accompanying notes to condensedconsolidated and combined financial statements.*

6

----

 

**GMH COMMUNITIES TRUST AND THE GMHPREDECESSOR ENTITIES**

**CONDENSED CONSOLIDATED AND COMBINEDSTATEMENTS OF CASH FLOWS**

(Unaudited and in thousands)
| ** **                                                                                     | ** ** | **Nine Months Ended September 30,** | ** ** |
|------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                                     | ** ** | **2005**                                                | ** ** | **2004** | ** ** |
| ** **                                                                                     | ** ** | **(Company)**                                           | ** ** | **(Predecessor)** | ** ** |
| ** **                                                                                     | ** ** | **(as restated)**                                  | ** ** | ** ** | ** ** |
| **Cash  flows from operating activities:**                                                     |       |                                                    |       |   |   |
| Net income  (loss)                                                                             |       | $                                                       | 2,239      |   | $ | (34,274 | ) |
| Adjustments to  reconcile net income (loss) to net cash from operating activities:             |       |                                                    |       |   |   |
| Depreciation                                                                                   |       | 17,878                                                  |       | 2,188 |   |
| Amortization:                                                                                  |       |                                                    |       |   |   |
| Lease intangibles                                                                              |       | 7,080                                                   |       | — |   |
| Notes payable fair value adjustment                                                            |       | (1,637                                                  | )          | (266 | ) |
| Deferred loan costs                                                                            |       | 905                                                     |       | 36 |   |
| Restricted shares                                                                              |       | 78                                                      |       | — |   |
| Allowance for doubtful accounts                                                                |       | 935                                                     |       | — |   |
| Equity in earnings of unconsolidated entities, in  excess of distributions received            |       | (716                                                    | )          | (70 | ) |
| Minority interest                                                                              |       | 2,183                                                   |       | — |   |
| Changes in  operating assets and liabilities:                                                  |       |                                                    |       |   |   |
| Restricted cash                                                                                |       | (10,262                                                 | )          | (1,966 | ) |
| Accounts and other receivables                                                                 |       | (16,602                                                 | )          | (346 | ) |
| Deferred contract costs                                                                        |       | (344                                                    | )          | (4,954 | ) |
| Due from related parties                                                                       |       | —                                                  |       | (4,778 | ) |
| Other assets                                                                                   |       | (1,782                                                  | )          | (4,972 | ) |
| Accounts payable                                                                               |       | (792                                                    | )          | — |   |
| Accrued expenses                                                                               |       | 17,858                                                  |       | 14,171 |   |
| Accrued profits interest                                                                       |       | —                                                  |       | 33,180 |   |
| Other liabilities                                                                              |       | 13,898                                                  |       | 1,030 |   |
| Net cash from  operating activities                                                            |       | 30,919                                                  |       | (1,021 | ) |
| **Cash  flows from investing activities:**                                                     |       |                                                    |       |   |   |
| Property  acquisitions                                                                         |       | (329,160                                                | )          | (120,152 | ) |
| Capitalized  expenditures                                                                      |       | (9,898                                                  | )          | (75 | ) |
| Distributions  received in excess of earnings of unconsolidated entities                       |       | 4,062                                                   |       | (3 | ) |
| Purchase of  management contracts                                                              |       | —                                                  |       | (1,186 | ) |
| Net cash from  investing activities                                                            |       | (334,996                                                | )          | (121,416 | ) |
| **Cash  flows from financing activities:**                                                     |       |                                                    |       |   |   |
| Owner  distributions                                                                           |       | (36,866                                                 | )          | (31,652 | ) |
| Owner  contributions                                                                           |       | —                                                  |       | 90,688 |   |
| Proceeds from  line of credit                                                                  |       | 244,000                                                 |       | — |   |
| Repayment of  line of credit                                                                   |       | (107,000                                                | )          | — |   |
| Proceeds from  notes payable                                                                   |       | 202,228                                                 |       | 69,536 |   |
| Repayment of  notes payable                                                                    |       | (23,190                                                 | )          | (808 | ) |
| Short-term  borrowings from owner                                                              |       | —                                                  |       | 3,697 |   |
| Payment of  financing costs                                                                    |       | (2,149                                                  | )          | (663 | ) |
| Costs related to  initial public offering                                                      |       | —                                                  |       | (5,443 | ) |
| Net cash from  financing activities                                                            |       | 277,023                                                 |       | 125,355 |   |
| Net (decrease)  increase in cash and cash equivalents                                          |       | (27,054                                                 | )          | 2,918 |   |
| Cash and cash  equivalents, beginning of period                                                |       | 60,926                                                  |       | 515 |   |
| Cash and cash  equivalents, end of period                                                      |       | $                                                       | 33,872     |   | $ | 3,433 |   |
|                                                                                           |       |                                                    |       |   |   |
| **Supplemental  information:**                                                                 |       |                                                    |       |   |   |
| Real estate  acquired by assuming debt                                                         |       | $                                                       | 83,341     |   | $ | 128,622 |   |
| Issuance of  units of limited partnership interest for purchase of student housing  properties |       | $                                                       | 28,528     |   | $ | — |   |
| Property  distributed at net book value                                                        |       | $                                                       | 3,854      |   | $ | 381 |   |
| Debt distributed  at net book value                                                            |       | $                                                       | 4,208      |   | $ | — |   |
| Cash paid for  interest, net of amounts capitalized of $90                                     |       | $                                                       | 20,846     |   | $ | 1,880 |   |
| Cash paid for  taxes                                                                           |       | $                                                       | 2,272      |   | $ | — |   |
| Furniture and computers  contributed at net book value                                         |       | $                                                       | —     |   | $ | 463 |   |

 

*See accompanying notes to condensedconsolidated and combined financial statements.*

7

----

**GMH COMMUNITIES TRUST AND THE GMHPREDECESSOR ENTITIES**

Notes to Condensed Consolidated and Combined FinancialStatements

September 30, 2005

(Unaudited)

**1. Organization and Basis of Presentation**

***Organization***

Managementof both GMH Communities Trust (the “Trust,” and collectively with itssubsidiaries, “we” or the “Company) and The GMH Predecessor Entities (definedbelow) has prepared these condensed consolidated and combined financialstatements pursuant to the rules and regulations of the Securities and ExchangeCommission (the “SEC”). Certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with U.S. generallyaccepted accounting principles have been condensed or combined pursuant to suchrules and regulations, although we believe that the disclosures areadequate to make the information presented not misleading. The financialstatements as of and for the three and nine month periods ended September 30,2005 have been restated in conformance with the restated results reported as ofsuch date and for such periods in the Company’s Annual Report on Form 10-K forthe year ended December 31, 2005 (see Note 2). The condensed consolidated andcombined financial statements should be read in conjunction with the auditedfinancial statements and the notes thereto of the Trust and The GMH PredecessorEntities included in the Trust’s Annual Report on Form 10-K for the yearended December 31, 2004, as filed with the SEC on March 31, 2005. Inmanagement’s opinion, all adjustments, consisting solely of normal recurringadjustments, necessary to present fairly the consolidated financial position ofthe Trust and the consolidated and combined results of operations and cashflows of the Trust and The GMH Predecessor Entities are included. The resultsof operations for such interim periods are not necessarily indicative of theresults for the full year.

TheTrust elected to qualify as a real estate investment trust, or REIT, under theInternal Revenue Code of 1986, as amended (the “Code”) commencing with itstaxable year ended December 31, 2004. The Trust was formed as a Marylandreal estate investment trust in May 2004 and prior to completion of ourinitial public offering, had no operations. We completed our initial public offeringon November 2, 2004, pursuant to which we sold an aggregate of 30,350,989common shares of beneficial interest at an offering price of $12.00 per share,and raised an aggregate of $331.7 million in net proceeds, after deductingthe underwriters’ discount and other offering-related expenses. We contributedthe net proceeds from the offering to our operating partnership, GMHCommunities, LP, a Delaware limited partnership (the “Operating Partnership”),in exchange for units of partnership interest. As of September 30, 2005,the Operating Partnership had 61,978,306 units of partnership interestoutstanding, of which the Trust owned 29,769,820 units of limited partnershipinterest; and through a wholly-owned subsidiary, GMH Communities GP Trust, the Trustowned 581,169 units of general partnership interest, which represents 100% ofthe general partnership interest in the Operating Partnership. As ofSeptember 30, 2005, there were 31,627,317 units of limited partnershipinterest outstanding that were not owned by the Company.

InSeptember 2005, we commenced a public offering of common shares. Theoffering was completed on October 4, 2005 with the sale of 9,315,000common shares of beneficial interest, including 1,215,000 shares issued uponfull exercise of the underwriters’ over-allotment option, at an offering priceof $14.25 per share. The Company raised an aggregate of $124.6 million in netproceeds from the offering after deducting the underwriters’ discounts, paymentof financial advisory fees and other offering-related expenses.  The net proceeds of this offering, which theCompany contributed to the Operating Partnership in exchange for units ofpartnership interest, were used by the Operating Partnership to repay outstandingindebtedness under our credit facility.

We,through the Operating Partnership and its subsidiaries, are a self-advised,self-managed, specialty housing company that focuses on providing housing tocollege and university students residing off-campus and to members of the U.S.military and their families located on or near military bases throughout theUnited States. Through the Operating Partnership, we own and operate ourstudent housing properties and the interests in joint ventures that ownmilitary housing privatization projects (“military housing projects”).

***Formation Transactions***

TheOperating Partnership commenced operations on July 27, 2004, when Gary M.Holloway, Sr., our chairman, president, and chief executive officer,Vornado Realty Trust (“Vornado”), and certain entities affiliated withMr. Holloway and Vornado, entered into an agreement to contribute variousassets to the Operating Partnership. Under the terms of the contributionagreement, Mr. Holloway contributed equity interests relating to studenthousing properties and military housing projects owned by him and by entitiesaffiliated with him, including College Park Management, Inc., GMH MilitaryHousing, LLC, other entities owning a 10% interest in four student housingproperties, and other related assets in exchange for 66,000 Class Apartnership interests in the Operating Partnership. Vornado agreed tocontribute up to $159.0 million to the

8

----

OperatingPartnership in exchange for 34,000 Class B partnership interests. Inconnection with its investment in the Operating Partnership, Vornado alsopurchased a warrant for $1.0 million to acquire, at its option, a numberof units of limited partnership interest in the Operating Partnership, commonshares in the Trust, or a combination of both, representing a 38.264% economicinterest in the Operating Partnership or the Trust, as the case may be,immediately prior to completion of our initial public offering. The proceedsfrom sale of the warrant are included in minority interest on the accompanyingconsolidated balance sheets. In addition, in connection with the closing of ourinitial public offering on November 2, 2004, Mr. Holloway furthercontributed his interests in 353 Associates, L.P. and Corporate FlightServices, LLC, a student housing property and other related assets to theOperating Partnership. We collectively refer to College ParkManagement, Inc., GMH Military Housing, LLC, 353 Associates, L.P. andCorporate Flight Services, LLC, together with the Operating Partnership, as TheGMH Predecessor Entities.  The exchange of contributed interests has beenaccounted for as a reorganization of entities under common control.Accordingly, the contributed assets and assumed liabilities have been recordedat the historical cost of The GMH Predecessor Entities.

Thefollowing are descriptions of each of The GMH Predecessor Entities, other thanthe Operating Partnership:

·                            353Associates, L.P. owns and operates a 44,721 square foot commercial officebuilding located in Newtown Square, Pennsylvania. In connection with thecompletion of our initial public offering on November 2, 2004,Mr. Holloway and an entity wholly-owned by him contributed 100% of theequity interests in 353 Associates, L.P. to the Operating Partnership. Thebuilding is currently used as the Company’s corporate headquarters. 353Associates, L.P. historically leased the building to certain of The GMHPredecessor Entities and other entities owned or controlled byMr. Holloway. We continue to lease a portion of the building to certainother entities owned or controlled by Mr. Holloway that were notcontributed to the Company in connection with our initial public offering.

·                            CollegePark Management, Inc. performed property management and asset managementservices for residential apartment properties leased to students at collegesand universities located throughout the United States. In connection with theformation of the Operating Partnership on July 27, 2004, Mr. Hollowayconsented to the merger of College Park Management, Inc. with and intoCollege Park Management, LLC, a wholly-owned subsidiary of the OperatingPartnership. College Park Management TRS, Inc., a subsidiary of CollegePark Management, LLC, has made an election to be treated for federal income taxpurposes as a “taxable REIT subsidiary,” as defined in the Code.

·                            GMHMilitary Housing, LLC, through its wholly-owned subsidiaries, engages in thedevelopment, construction, renovation and management of family military housingunits located on or near military bases throughout the United States. Inconnection with the formation of the Operating Partnership on July 27,2004, Mr. Holloway contributed 100% of the outstanding equity interests inGMH Military Housing, LLC and each of its wholly-owned subsidiaries to theOperating Partnership. GMH Military Housing, LLC has made an election to betreated as a corporation for federal income tax purposes as a “taxable REITsubsidiary,” as defined in the Code.

·                            CorporateFlight Services, LLC (“Corporate Flight LLC”) owned and operated a corporateaircraft that had been leased to certain of The GMH Predecessor Entities andother entities owned or controlled by Mr. Holloway that were notcontributed to the Company in connection with our initial public offering. Inconnection with the completion of our initial public offering onNovember 2, 2004, Mr. Holloway contributed 100% of the outstandingequity interests in Corporate Flight LLC to the Operating Partnership. InFebruary 2005, the Company transferred its interest in Corporate FlightLLC, including the corporate aircraft and associated debt initially contributedto the Operating Partnership at the time of the initial public offering, backto Mr. Holloway.  See Note 9.

***Redemption of Operating PartnershipInterests***

Priorto our initial public offering, Vornado and Mr. Holloway were the soleequity holders of the Operating Partnership and each held, through affiliatedentities, general partnership interests in the Operating Partnership.Concurrent with the closing of the Company’s initial public offering onNovember 2, 2004, we became the sole general partner of the OperatingPartnership. In accordance with the terms of the limited partnership agreementof the Operating Partnership and concurrent with the completion of our initialpublic offering on November 2, 2004, we paid approximately$77.3 million to Vornado relating to the redemption of all of Vornado’sClass B partnership interests in the Operating Partnership based onVornado’s $113.8 million contribution to the Operating Partnership as ofthe date of the offering, plus a preferential return in the amount of$13.5 million, and after giving effect to the surrender by Vornado of$50.0 million in value of its pre-offering partnership interest in theOperating Partnership, as payment for the portion of its warrant required to beexercised upon completion of our initial public offering under the terms of thewarrant. Upon closing of our initial public offering, Vornado exercised thewarrant to purchase 6,666,667 units of limited partnership interest in ourOperating Partnership at a price of $7.50 per unit, which represented a 20.972%economic interest in the Operating Partnership immediately prior to our initialpublic offering. As of September 30, 2005, the remaining portion of thewarrant was exercisable for up to 5,857,164 units of limited 

9

----

partnershipinterest of the Operating Partnership or common shares, at an exercise price of$8.54 per unit or common share, at any time during the 18 months followingthe closing of our initial public offering.

Inaddition, in connection with the redemption of Vornado’s interests in theOperating Partnership and amendment to the partnership agreement for theOperating Partnership on November 2, 2004, Mr. Holloway’sClass A limited partnership interest and managing general partnershipinterest in the Operating Partnership were exchanged for 19,624,294 limitedpartnership units and Mr. Holloway contributed additional assets to theOperating Partnership, including interests in entities that own our corporateheadquarters and aircraft and interests in an additional student housingproperty.

Inrecognition of past service, certain employees of The GMH Predecessor Entitiesand other entities affiliated with Gary M. Holloway were awarded profitsinterests by Gary M. Holloway. These employees were eligible to participate inthe net proceeds or value received by Gary M. Holloway upon the sale ordisposition of certain student housing properties and the military housingbusiness in excess of Mr. Holloway’s equity investments in suchassets.  These employees rendered all services and satisfied allconditions necessary to earn the right to benefit from these profits interestsas of the date that such profits interests were awarded.  In accordancewith Financial Accounting Standards Statement No.5,*Accounting for Contingencies*, compensation expense relatingto the award of these profits interests was required to be recognized by TheGMH Predecessor Entities when the sale or disposition of the assets resultingin proceeds received by Gary M. Holloway in an amount in excess of his equityinvestment in such assets became probable.  This amount became probableduring the third quarter of 2004 when, in connection with the contribution ofthe ownership interests in GMH Military Housing LLC, College Park Management, Inc.and other assets by Mr. Holloway to our operating partnership inanticipation of the initial public offering of the Company, the remainingprofits interests awards were amended to fix the value of such awards at $33.2million to be paid to these employees unconditionally.  Accordingly, thisamount was recognized in the third quarter of 2004 and Mr. Holloway’sobligations regarding the profits interests were satisfied upon the transfer of$33.2 million of units of limited partnership in our operating partnership tothese employees on November 2, 2004, the closing date of our initialpublic offering.

***Basis of Presentation***

Thefinancial statements of GMH Communities Trust included herein present theconsolidated financial position of the Company and its subsidiaries as ofSeptember 30, 2005 and December 31, 2004, the consolidated results oftheir operations for the three and nine months ended September 30, 2005and their consolidated cash flows for the nine months ended September 30,2005. All intercompany items and transactions have been eliminated.

Thefinancial statements of The GMH Predecessor Entities included herein presentthe combined results of their operations for the three and nine months endedSeptember 30, 2004 and their combined cash flows for the nine months endedSeptember 30, 2005. All intercompany items and transactions have beeneliminated.

**2. Restatement of****CondensedConsolidated Financial Statements**

In the firstquarter of 2006, the Audit Committee of the Company’s Board of Trustees commencedan investigation of certain accounting and financial reporting matters. Theinvestigation identified material weaknesses in the Company’s internal controlover financial reporting and in its disclosure controls and procedures as ofDecember 31, 2005. In connection with the investigation, the Companyreviewed its previously reported financial statements. Through this review, theCompany identified adjustments that were material to the results the Companypreviously reported for the quarterly periods ended March 31, 2005,June 30, 2005 and September 30, 2005. More specifically, the Companydetermined that the restatements with respect to its financial statements forthese periods were necessary due to the discovery of errors in revenuerecognition, depreciation and operating expenses related to certaintransactions reported by the Company and to reclassify equity in earnings ofunconsolidated entities. Accordingly,the Company has restated its financial statements for the quarterly periodsended March 31, 2005 and June 30, 2005 in connection with the filing of itsquarterly reports for the comparable periods during 2006, and is restating itsfinancial statements for the quarterly period ended September 30, 2005 in thisamended report. 

The following schedulesreconcile the amounts originally reported in the Company’s condensedconsolidated balance sheet as of September 30, 2005, and the condensedconsolidated statements of operations for the three and nine month periodsended September 30, 2005 to the corresponding amounts in each of thesestatements (in thousands). 

10

----

 
| ** **                                       | ** ** | **September 30,** | ** ** | **Total**       | ** ** | **September 30,** | ** ** |
|--------------------------------------------------|------------|------------------------|------------|-----------------|------------|------------------------|------------|
| ** **                                       | ** ** | **2005**               | ** ** | **Adjustments** | ** ** | **2005**               | ** ** |
| ** **                                       | ** ** | **(as reported)** | ** ** | ** **      | ** ** | **(as restated)** | ** ** |
|                                             |       |                   |       |            |       |                   |       |
| **Balance Sheet:**                               |       |                   |       |            |       |                   |       |
| **Assets**                                       |       |                   |       |            |       |                   |       |
| Real estate  investments:                        |       |                   |       |            |       |                   |       |
| Student housing  properties                      |       | $                      | 1,080,304  |            | $          | 6,598                  | (a)        | $ | 1,086,902 |   |
| Accumulated  depreciation                        |       | (19,109                | )          | (2,263          | )(b)       | (21,372                | )          |
|                                             |       | 1,061,195              |       | 4,335           |       | 1,065,530              |       |
| Corporate assets:                                |       |                   |       |            |       |                   |       |
| Corporate assets                                 |       | 7,686                  |       | —          |       | 7,686                  |       |
| Accumulated  depreciation                        |       | (443                   | )          | —          |       | (443                   | )          |
|                                             |       | 7,243                  |       | —          |       | 7,243                  |       |
| Cash and cash equivalents                        |       | 33,248                 |       | 624             | (a)        | 33,872                 |       |
| Restricted cash                                  |       | 12,575                 |       | —          |       | 12,575                 |       |
| Accounts and other  receivables, net:            |       |                   |       |            |       |                   |       |
| Related party                                    |       | 21,912                 |       | 1,168           | (c)        | 23,080                 |       |
| Third party                                      |       | 5,365                  |       | (2,228          | )(d)       | 3,137                  |       |
| Investments in military  housing projects        |       | 37,220                 |       | —          |       | 37,220                 |       |
| Deferred contract costs                          |       | 470                    |       | (132            | )(e)       | 338                    |       |
| Deferred financing  costs, net                   |       | 4,064                  |       |            |       | 4,064                  |       |
| Lease intangibles, net                           |       | 3,244                  |       | —          |       | 3,244                  |       |
| Deposits                                         |       | 672                    |       | —          |       | 672                    |       |
| Other assets                                     |       | 6,080                  |       | (246            | )(f)       | 5,834                  |       |
| Total assets                                     |       | $                      | 1,193,288  |            | $          | 3,521                  |       | $ | 1,196,809 |   |
|                                             |       |                   |       |            |       |                   |       |
| **Liabilities**                                  |       |                   |       |            |       |                   |       |
| Notes payable                                    |       | $                      | 629,171    |            | $          | —                 |       | $ | 629,171 |   |
| Line of credit                                   |       | 137,000                |       | —          |       | 137,000                |       |
| Accounts payable:                                |       |                   |       |            |       |                   |       |
| Related party                                    |       | 57                     |       | —          |       | 57                     |       |
| Third party                                      |       | 688                    |       | (99             | )(g)       | 589                    |       |
| Accrued expenses                                 |       | 24,233                 |       | 3,264           | (g)        | 27,497                 |       |
| Dividends and  distributions payable             |       | 14,107                 |       | —          |       | 14,107                 |       |
| Other liabilities                                |       | 10,728                 |       | 8,077           | (h)        | 18,805                 |       |
| Total liabilities                                |       | 815,984                |       | 11,242          |       | 827,226                |       |
| Minority interest                                |       | 197,120                |       | (4,838          | )          | 192,282                |       |
|                                             |       |                   |       |            |       |                   |       |
| **Beneficiaries’  Equity**                  |       |                   |       |            |       |                   |       |
| Common shares                                    |       | 30                     |       | —          |       | 30                     |       |
| Additional  paid-in-capital                      |       | 200,367                |       | —          |       | 200,367                |       |
| Cumulative earnings                              |       | 5,373                  |       | (2,883          | )          | 2,490                  |       |
| Cumulative dividends                             |       | (25,586                | )          | —          |       | (25,586                | )          |
| Total beneficiaries’  equity                |       | 180,184                |       | (2,883          | )          | 177,301                |       |
|                                             |       |                   |       |            |       |                   |       |
| Total liabilities and beneficiaries’ equity |       | $                      | 1,193,288  |            | $          | 3,521                  |       | $ | 1,196,809 |   |

 

11

----

 
| ** **                                                                                       | ** ** | **Three Months Ended  September 30, 2005** | ** ** | **Adjustments** | ** ** | **Three Months Ended  September 30, 2005** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|-----------------|------------|----------------------------------------------------------------|------------|
| ** **                                                                                       | ** ** | **(as reported)**                                         | ** ** | ** **      | ** ** | **(as restated)**                                         | ** ** |
| ** **                                                                                       | ** ** | ** **                                                     | ** ** | ** **      | ** ** | ** **                                                     | ** ** |
| **Statement of Operations:**                                                                     | ** ** | ** **                                                     | ** ** | ** **      | ** ** | ** **                                                     | ** ** |
| **Revenue:**                                                                                     | ** ** | ** **                                                     | ** ** | ** **      | ** ** | ** **                                                     | ** ** |
| Rent and other property  income                                                                  |       | $                                                              | 35,429     |            | $          | (20                                                            | )          | $ | 35,409 |   |
| Expense reimbursements:                                                                          |       |                                                           |       |            |       |                                                           |       |
| Related party                                                                                    |       | 20,744                                                         |       | (648            | )(i)       | 20,096                                                         |       |
| Third party                                                                                      |       | 1,299                                                          |       | —          |       | 1,299                                                          |       |
| Management fees:                                                                                 |       |                                                           |       |            |       |                                                           |       |
| Related party                                                                                    |       | 1,838                                                          |       | (83             | )(j)       | 1,755                                                          |       |
| Third party                                                                                      |       | 1,364                                                          |       | (753            | )(k)       | 611                                                            |       |
| Other fee income –  related party                                                           |       | 7,181                                                          |       | (1,286          | )(l)       | 5,895                                                          |       |
| Other income                                                                                     |       | 81                                                             |       | —          |       | 81                                                             |       |
| Total revenue                                                                                    |       | 67,936                                                         |       | (2,790          | )          | 65,146                                                         |       |
|                                                                                             |       |                                                           |       |            |       |                                                           |       |
| **Operating  Expenses:**                                                                         | ** ** | ** **                                                     | ** ** | ** **      | ** ** | ** **                                                     | ** ** |
| Property operating expenses                                                                      |       | 17,306                                                         |       | 1,600           | (m)        | 18,906                                                         |       |
| Reimbursed expenses                                                                              |       | 22,043                                                         |       | (648            | )(i)       | 21,395                                                         |       |
| Real estate taxes                                                                                |       | 3,428                                                          |       | (244            | )(n)       | 3,184                                                          |       |
| Administrative expenses                                                                          |       | 2,983                                                          |       | 9               | (n)        | 2,992                                                          |       |
| Depreciation and amortization                                                                    |       | 7,719                                                          |       | 831             | (b)        | 8,550                                                          |       |
| Interest                                                                                         |       | 8,981                                                          |       | 8               |       | 8,989                                                          |       |
| Total operating  expenses                                                                        |       | 62,460                                                         |       | 1,556           |       | 64,016                                                         |       |
|                                                                                             |       |                                                           |       |            |       |                                                           |       |
| Income before equity in  earnings of unconsolidated entities, income taxes and minority interest |       | 5,476                                                          |       | (4,346          | )          | 1,130                                                          |       |
| Equity in earnings of  unconsolidated entities                                                   |       | —                                                         |       | 1,058           | (o)        | 1,058                                                          |       |
| Income before income  taxes and minority interest                                                |       | 5,476                                                          |       | (3,288          | )          | 2,188                                                          |       |
| Income taxes                                                                                     |       | 976                                                            |       | 1,278           |       | 2,254                                                          |       |
| Income (loss) before  minority interest                                                          |       | 4,500                                                          |       | (4,566          | )          | (66                                                            | )          |
| Minority interest                                                                                |       | 2,758                                                          |       | (2,792          | )          | (34                                                            | )          |
| Net income (loss)                                                                                |       | $                                                              | 1,742      |            | $          | (1,774                                                         | )          | $ | (32 | ) |

 
| ** **                                                                                       | ** ** | **Nine Months Ended**  | ** ** | ** **      | ** ** | **Nine Months Ended**  | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|-----------------|------------|----------------------------------|------------|
| ** **                                                                                       | ** ** | **September 30, 2005** | ** ** | **Adjustments** | ** ** | **September 30, 2005** | ** ** |
| ** **                                                                                       | ** ** | **(as reported)**           | ** ** | ** **      | ** ** | **(as restated)**           | ** ** |
| ** **                                                                                       | ** ** | ** **                       | ** ** | ** **      | ** ** | ** **                       | ** ** |
| **Statement of Operations:**                                                                     | ** ** | ** **                       | ** ** | ** **      | ** ** | ** **                       | ** ** |
| **Revenue:**                                                                                     | ** ** | ** **                       | ** ** | ** **      | ** ** | ** **                       | ** ** |
| Rent and other property  income                                                                  |       | $                                | 91,033     |            | $          | (20                              | )          | $ | 91,013 |   |
| Expense reimbursements:                                                                          |       |                             |       |            |       |                             |       |
| Related party                                                                                    |       | 42,475                           |       | (1,923          | )(i)       | 40,552                           |       |
| Third party                                                                                      |       | 3,876                            |       | —          |       | 3,876                            |       |
| Management fees:                                                                                 |       |                             |       |            |       |                             |       |
| Related party                                                                                    |       | 5,350                            |       | (265            | )(j)       | 5,085                            |       |
| Third party                                                                                      |       | 3,015                            |       | (859            | )(k)       | 2,156                            |       |
| Other fee income –  related party                                                           |       | 14,762                           |       | (1,913          | )(l)       | 12,849                           |       |
| Other income                                                                                     |       | 248                              |       | —          |       | 248                              |       |
| Total revenue                                                                                    |       | 160,759                          |       | (4,980          | )          | 155,779                          |       |
|                                                                                             |       |                             |       |            |       |                             |       |
| **Operating  Expenses:**                                                                         | ** ** | ** **                       | ** ** | ** **      | ** ** | ** **                       | ** ** |
| Property operating expenses                                                                      |       | 39,900                           |       | 1,204           | (m)        | 41,104                           |       |
| Reimbursed expenses                                                                              |       | 46,351                           |       | (1,923          | )(i)       | 44,428                           |       |
| Real estate taxes                                                                                |       | 8,003                            |       | 366             | (n)        | 8,339                            |       |
| Administrative expenses                                                                          |       | 8,657                            |       | 111             | (n)        | 8,768                            |       |
| Depreciation and amortization                                                                    |       | 22,563                           |       | 2,395           | (b)        | 24,958                           |       |
| Interest                                                                                         |       | 21,228                           |       | 19              |       | 21,247                           |       |
| Total operating  expenses                                                                        |       | 146,702                          |       | 2,142           |       | 148,844                          |       |
|                                                                                             |       |                             |       |            |       |                             |       |
| Income before equity in  earnings of unconsolidated entities, income taxes and minority interest |       | 14,057                           |       | (7,122          | )          | 6,935                            |       |
| Equity in earnings of  unconsolidated entities                                                   |       | —                           |       | 1,999           | (o)        | 1,999                            |       |
| Income before income  taxes and minority interest                                                |       | 14.057                           |       | (5,123          | )          | 8,934                            |       |
| Income taxes                                                                                     |       | 1,914                            |       | 2,598           |       | 4,512                            |       |
| Income before minority  interest                                                                 |       | 12,143                           |       | (7,721          | )          | 4,422                            |       |
| Minority interest                                                                                |       | 7,021                            |       | (4,838          | )          | 2,183                            |       |
| Net income                                                                                       |       | $                                | 5,122      |            | $          | (2,883                           | )          | $ | 2,239 |   |

 

12

----

Net cash provided by operating activities increased by$7.6 million and net cash used in investing activities decreased by $7.0million for the nine months ended September 30, 2005 as a result of therestatement. There was no impact on net cash provided by financing activitiesfor the nine months ended September 30, 2005. 

----

(a)          Adjustments include theconsolidation of a joint venture being accounted for as a financing transaction,net of adjustments for previously capitalized costs that should have beenexpensed.  The investment in the jointventure was accounted for under the equity method prior to the restatement.

(b)         Adjustments include (i)the Company’s finalization of the purchase price allocation of student housing propertiesresulting in an adjustment to amounts allocated to land and building.  Previously, the Company recorded 20% of thepurchase price for acquired properties as land. Management has now reflected the allocation for properties acquired tocorrespond to appraised values.  Thechange in estimate is being applied retroactively through prior periods.  With respect to properties acquired for whichappraisals had not been obtained prior to implementation of this change inestimate, the Company used appraisals for properties with similarcharacteristics.  The change in estimatehas resulted in an increase in the purchase price allocation to buildings and adecrease in the purchase price allocation to land for the properties acquiredthrough 2005, and an increase in the depreciation expense on buildings; and(ii) the expensing of previously capitalized costs.

(c)          Adjustments include therecognition of additional reimburseable expenses and pre-construction anddevelopment fees relating to our military housing segment.

(d)         Adjustments include (i)the reversal of management fees previously recognized during the third quarterof 2005 as the triggering event for recognition occurred in the fourth quarterof 2005;  (ii) reversal of tenant expensereimbursements that were not billable per the terms of the tenant contracts;and (iii) elimination of our investment in the joint venture that is nowconsolidated and accounted for under the financing method which had previouslybeen accounted for under the equity method of accounting.

(e)          Adjustments include therecognition of additional amortization expense associated with one of ourmilitary housing projects.

(f)            Adjustments includethe elimination of our investment in the joint venture that is now consolidatedand accounted for under the financing method which had previously beenaccounted for under the equity method of accounting.

(g)         Adjustments includecorrections to our accounts payable and accrued expenses balances relating tovarious income statement adjustments.

(h)         Adjustments include theconsolidation of a joint venture which we are accounting for as a financingtransaction, which had been previously accounted for under the equity method ofaccounting.

(i)             Adjustments includereversals relating to the overbooking of certain reimbursable expenses.

(j)             Adjustments include areclassification of fees earned on one of our military housing projects frommanagement fees – related party to other fee income – related party.

(k)          Adjustments include thereversal of management fees previously recognized during the third quarter of2005 as the triggering event for recognition occurred in the fourth quarter of2005.

13

----

(l)             Adjustments include(i) the reclassification of $1,059,000 and $1,999,000 for the three and ninemonths ended September 30, 2005, respectively, of preferred returns frommilitary housing project joint ventures; (ii) the reclassification of $83,000and $265,000 for the three and nine months ended September 30, 2005,respectively, of management fees – related party to other fee income – relatedparty; and (iii) the elimination of development fees earned from a jointventure that is now consolidated and accounted for under the financing methodwhich had previously been accounted for under the equity method of accounting.

(m)       Adjustments include (i)costs that were initially capitalized in purchase accounting with respect tocertain student housing properties acquired by the Company during 2005 thatshould have been expensed; and (ii) previously capitalized costs that shouldhave been expensed.

(n)         Adjustments includecorrections to the reporting of expenses in the appropriate periods.

(o)         Adjustments include thereclassification of $1,059,000 and $1,999,000 for the three and nine monthsended September 30, 2005, respectively, of preferred returns from militaryhousing project joint ventures.

**3. Summary of Significant Accounting Policies**

***Use of Estimates***

Thepreparation of financial statements in conformity with U.S. generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect various amounts reported in the financial statements andaccompanying notes. Actual results could differ from those estimates.

***Real Estate Investments and CorporateAssets***

Wecarry real estate investments and corporate assets at cost, net of accumulateddepreciation. Cost of acquired assets includes the purchase price and relatedclosing costs. We allocate the cost of real estate investments to tangible andidentified intangible assets based on relative fair values in accordance withStatement of Financial Accounting Standards No. 141 (“SFAS 141”),*Business Combinations*. We estimate fairvalue based on information obtained from a number of sources, including our duediligence, marketing and leasing activities, independent appraisals that may beobtained in connection with the acquisition or financing of the respectiveproperty, and other market data.

Thevalue of in-place leases is based on the difference between (i) theproperty valued with existing in-place leases and (ii) the property valuedas if vacant. As lease terms typically are 12 months or less, rates onin-place leases generally approximate market rental rates. Factors that we considerin the valuation of in-place leases include an estimate of incremental carryingcosts during the expected lease-up periods considering current marketconditions and nature of the tenancy. We amortize the value of in-place leasesto expense over the remaining term of the respective leases. Accumulatedamortization related to intangible lease costs was $9.2 million atSeptember 30, 2005 and $2.3 million at December 31, 2004.

Purchaseprices of student housing properties to be acquired are not expected to beallocated to tenant relationships considering the terms of the leases and theexpected levels of renewals.

Weexpense routine repair and maintenance expenditures that do not improve thevalue of an asset or extend its useful life, including turnover costs such ascleaning and interior painting. We capitalize expenditures that improve thevalue and extend the useful life of an asset. We compute depreciation using thestraight-line method over the estimated useful lives of the assets, which is40 years for buildings including student housing properties and thecommercial office building, and three to five years for residential furnitureand appliances. During the third quarter of each fiscal year, the Companytypically will experience an increase in property operating expenses over otherquarters as a result of repair and maintenance expenditures relating toturnover of units at student housing properties. The Company’s student housinglease terms generally commence in August or September to coincide with thebeginning of the academic year. Accordingly, the Company expects to incur amajority of its repair and maintenance costs in the third quarter to preparefor new residents.

Inaccordance with Statement of Financial Accounting Standards No. 144 (“SFAS 144”),*Accounting for the Impairment or Disposal ofLong-Lived Assets*, long-lived assets, such as real estateinvestments and purchased intangibles subject to amortization, are reviewed forimpairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. These circumstances may include, butare not limited to, operational performance, market conditions and competitionfrom other off-campus properties and on-campus housing, legal and environmentalconcerns, and results of appraisals or other information obtained as part of afinancing or disposition strategy. We review recoverability of assets to beheld and used through a comparison of the carrying amount of an asset toestimated undiscounted future cash

14

----

flowsexpected to be generated by the asset. If the carrying amount of an assetexceeds its estimated undiscounted future cash flows, an impairment charge isrecognized by the amount by which the carrying value of the asset exceeds thefair value of the asset determined using customary valuation techniques, suchas the present value of expected future cash flows. Assets to be disposed ofwould be separately presented in the balance sheet and reported at the lower ofthe carrying amount or fair value less costs to sell, and no longer would bedepreciated.

***Cash Equivalents***

Allhighly-liquid investments with an original maturity of three months or less areconsidered to be cash equivalents.

***Restricted Cash***

Restrictedcash consists of security deposits and cash held as escrows for real estatetaxes and capital expenditures as required by the terms of various loanagreements.

***Allowance for Doubtful Accounts***

Weestimate the collectibility of receivables generated by rental and other incomeas a result of the operation of our student housing properties. If we believethat the collectibility of certain amounts is questionable, we record aspecific reserve for these amounts to reduce the amount outstanding to anamount we believe will be collectible and a reserve for all other accountsbased on a range of percentages applied to aging categories, which is based onhistorical collection and write-off experience.

Wealso evaluate the collectibility of fee income and expense reimbursementsgenerated by the management of student housing properties owned by others andthrough the provision of development, construction, renovation and managementservices to our military housing projects based upon the individual facts andcircumstances, and record a reserve for specific amounts, if necessary.

Accountsreceivable are stated net of an allowance for doubtful accounts of $409,000 atSeptember 30, 2005 and $159,000 at December 31, 2004.

***Deferred Financing Costs***

Costsincurred in connection with obtaining financing are capitalized and amortizedon a straight-line basis over the term of the related loan, which is notmaterially different than the effective interest method. Amortization ofdeferred financing costs is included in interest expense. Accumulatedamortization of deferred financing costs was $915,000 at September 30,2005 and $359,000 at December 31, 2004.

***Deferred Contract Costs***

Deferredcontract costs represent costs attributable to a specific military housingproject incurred in connection with seeking Congressional approval of aCommunity Development and Management Plan, or CDMP, subsequent to the projectbeing awarded by the Department of Defense, or DoD. In addition, deferredcontract costs also include transition and closing costs incurred that areexpected to be reimbursed by the military housing project. Such amounts areevaluated as to the probability of recovery and costs that are not consideredprobable of recovery are written off. Revenue is recognized and the relatedcosts are expensed at the time that the reimbursement for preparing the CDMP isapproved by Congress or at closing of the military housing project.

***Deposits***

Depositsprimarily consist of amounts paid to third parties in connection with plannedstudent housing acquisitions and amounts paid to lenders that provide therelated financing or the refinancing of existing loans.  AtSeptember 30, 2005, deposits for planned acquisitions and financingstotaled less than $0.1 million and other deposits not related toacquisitions or financings totaled $0.6 million. At December 31, 2004, depositsfor planned acquisitions totaled $0.8 million and deposits related tofinancings totaled $1.0 million.

***Advertising Costs***

Advertisingcosts are expensed as incurred. Advertising expense for the three andnine-month periods ended September 30, 2005 and 2004 was $513,000,$1,394,000, $21,000, and $41,000, respectively.

15

----

***Revenue Recognition***

*Student Housing Segment*

Rentalrevenue is recognized when due over the lease terms, which are generally12 months or less.

Standardmanagement fees are based on a percentage of monthly cash receipts or grossmonthly rental and other revenues generated by the properties managed forothers. We recognize these fees when the cash is received by the property orthe revenue is earned by the managed property, depending upon whether themanagement agreement relating to a student housing property bases the earnedmanagement fee on cash versus accrual basis revenue recognition.

Incentivemanagement fees are earned as a result of the achievement of certain operatingperformance criteria over a specified period of time by certain managedproperties, including targeted annual debt service coverage ratios. Revenue isrecognized at the amount that would be due under the contract if the contractwas terminated on the balance sheet date.

Expensereimbursements are comprised primarily of salary and related costs of ouremployees working at certain properties we manage for others, the cost of whichis reimbursed by the owners of the related properties. We accrue expensereimbursements as the related expenses are incurred.

*Military Housing Segment*

Standardmanagement fees are based on a percentage of revenue generated by the militaryhousing projects from the basic allowance for housing provided by thegovernment to service members, referred to as BAH, and are recognized when therevenue is earned by the military housing projects. Incentive management feesare based upon the satisfaction of certain criteria including, among otherthings, satisfying designated benchmarks relating to emergency work orderresponse, occupancy rates, home turnover and resident satisfaction surveys.Incentive management fees are recognized when the various criteria stipulatedin the management contract have been satisfied.

Standarddevelopment and construction/renovation fees are based on a percentage ofdevelopment and construction/renovation costs incurred by the military housingprojects including hard and soft costs and financing costs, and are recognizedon a monthly basis as the costs are incurred by the military housing projects.Hard costs consist of costs relating to goods such as building components,furniture and equipment and other tangible assets; and soft costs consist ofcosts incurred relating to intangible services such as consulting,architectural and design services. Incentive development andconstruction/renovation fees are based upon the satisfaction of certaincriteria including, among other things, completing a number of housing unitsaccording to schedule, achieving specific safety records and implementing smallbusiness or minority subcontracting plans. Incentive development andconstruction/renovation fees are recognized when the various criteriastipulated in the contract have been satisfied.

Revenueson fixed-price renovation contracts are recorded on thepercentage-of-completion method. When the percentage-of-completion method isused, contract revenue is recognized in the ratio that costs incurred to datebear to estimated costs at completion. Adjustments to cost estimates are madein the period in which the facts requiring such revisions become known. Whenthe revised estimates indicate a loss, such loss is currently provided for inits entirety.

Businessdevelopment fees are earned from companies with which we have relationships inrecognition of business development efforts and expenses incurred by us inconnection with pursuing military housing projects. The fees consist of(i) a base fee, which is a fee paid to the Company in consideration of theCompany’s ongoing pursuit of additional projects, and is paid regardless ofwhether a project is awarded, and (ii) an incentive fee, which is paidover the course of an awarded project based on a percentage of certaindevelopment costs incurred by the project.  The base fees are recognizedon a straight-line basis over the term of the related business developmentagreement.  The incentive fees are recognized as the related costs areincurred by the respective military housing projects.

Preferredreturns are earned on our investments in military housing projects.  Thepreferred returns are based on a fixed percentage of our investment in militaryhousing projects and are recognized at the rates specified in the agreements,subject to projected availability of funds in the underlying project. Accrued preferred returns are periodically evaluated for collectibility.

***Reimbursed Expenses***

Expensereimbursements include payroll and related expenses, incurred for certainemployees engaged in the operation of certain student housing properties andmilitary housing projects under management, and other operating expenses thatare reimbursed to the Company by the owner of the related student housingproperty or military housing project.

16

----

***Minority Interest***

Minorityinterest as initially recorded at the date of our initial public offeringrepresented the net equity of the Operating Partnership, including the proceedsreceived from the sale of the warrant to Vornado, multiplied by the ownershippercentage of holders of limited partnership units in the Operating Partnershipother than the Company. The Operating Partnership is obligated to redeem, atthe request of a holder, each unit of limited partnership interest for cash orcommon shares on a one-for-one basis, subject to adjustments for share splits,dividends, recapitalizations or similar events. If the minority interest unitholders’ share of a current year loss would cause the minority interest balanceto be less than zero, the minority interest balance will be reported as zerounless there is an obligation of the minority interest holders to fund thoselosses. Any losses in excess of the minority interest will be charged againstequity. If future earnings materialize, equity will be credited for allearnings up to the amount of those losses previously absorbed. Distributions tolimited partnership unit holders other than the Company are recorded as areduction to minority interest.

InMarch 2005, June 2005 and September 2005, the Company declaredquarterly distributions of $0.2275 per outstanding unit of limited partnershipinterest. The March 2005 distribution to the holders of limitedpartnership units in the Operating Partnership of $6.7 million wasrecorded as a reduction to minority interest and was paid in April 2005.The June 2005 distribution to the holders of limited partnership units inthe Operating Partnership of $6.8 million was recorded as a reduction tominority interest and was paid in July 2005. The September 2005distribution to the holders of limited partnership units in the OperatingPartnership of $7.2 million was recorded as a reduction to minorityinterest on the September 30, 2005 balance sheet and was paid inOctober 2005.

***Investments in Military Housing Projectsand Student Housing Joint Ventures***

Weevaluate each of our investments in military housing projects to determine ifthe underlying entity is a variable interest entity (“VIE”) as defined underFASB Financial Interpretation No. 46 (as revised) (“FIN 46”). If an entityis deemed to be a VIE pursuant to FIN 46, the entity that absorbs a majority ofthe expected losses of the VIE is deemed to be the primary beneficiary and mustconsolidate the VIE. If the entity is not a VIE, it is evaluated forconsolidation based on controlling voting interests. If we have the majorityvoting interest with the ability to control operations and where no approval,veto or other important rights have been granted to other holders, the entitywould be consolidated. We are not the primary beneficiary of any VIEs, nor dowe have controlling voting interests in any of our military housing projects.We record investments in military housing projects initially at our cost andsubsequently adjust them to reflect our preferred return, and otherdistributions.

TheCompany entered into a joint venture in August 2005 to develop and constructtwo student housing properties.  TheCompany is accounting for the transaction as a financing arrangement becausethe Company originally owned the land and contributed it to the joint ventureand has the option to purchase the joint venture partner’s interest in thejoint venture within one year of completion of the properties, and because theCompany has provided certain guarantees for the completion of the constructionand for a portion of the construction loans. Therefore, the Company accountsfor its investment in the joint venture by including its assets and liabilitiesin the Company’s consolidated financial statements. Prior to the restatement,the investment in this joint venture was accounted for using the equity method.

***Income Taxes***

GMHCommunities Trust elected to be taxed as a REIT under the Code when it filedits tax return for the year ended December 31, 2004 in September 2005pursuant to an extension granted in March 2005. To continue to qualify asa REIT, the Company must meet a number of organizational and operationalrequirements, including a requirement that we currently distribute at least 90%of our adjusted taxable income to our shareholders. We believe we are organizedand operate in a manner that allows us to qualify for taxation as a REIT underthe Code, and it is our intention to adhere to these requirements and maintainthe Company’s REIT status in the future. Accordingly, no provision has beenmade for federal income taxes in the accompanying consolidated financialstatements, other than with respect to the Company’s taxable REIT subsidiaries.

Inconformity with the Code and applicable state and local tax statutes, taxableincome or loss of The GMH Predecessor Entities was required to be reported inthe tax returns of Gary M. Holloway, Sr. and Vornado, as such entitieswere treated as pass-through entities for tax purposes. Accordingly, no incometax provision has been reflected in the accompanying combined statements ofoperations of The GMH Predecessor Entities.

***Recent Accounting Pronouncements***

InDecember 2004, the Financial Accounting Standards Board issued SFASNo. 123R, as revised,*“Share-BasedPayment.”* SFAS No. 123R replaces SFAS No. 123,*“Accounting for Stock-Based Compensation”*and supersedes APB Opinion No. 25,*“Accountingfor Stock Issued to Employees.”* The scope of SFAS No. 123Rincludes a wide range of share-based

17

----

compensationarrangements including stock options, restricted share plans, performance-basedawards, stock appreciation rights, and employee stock purchase plans. SFASNo. 123R requires companies to recognize in their financial statements thecompensation expense relating to share-based payment transactions. Prior to theeffective date of this revision, SFAS No. 123 permitted entities the optionof applying the guidance in APB Opinion No. 25, as long as the footnotesto the financial statements disclosed what net income (loss) would have beenhad the company used the preferable fair-value-based method. The Company willbe required to implement SFAS No. 123R for the year beginningJanuary 1, 2006. The Company does not expect the adoption of SFASNo. 123R to have a material impact on its financial statements.

InNovember 2004, the Company established an equity incentive plan (the “Plan”)that provides for the issuance of options, restricted shares, shareappreciation rights, performance units and other equity based awards.  Forthe three and nine months ended September 30, 2005, the Company issued8,126 and 33,854 restricted common shares under the Plan to non-employeemembers of the Company’s Board of Trustees. The restricted common shares vestover a three-year period from the grant date. The restricted common shares areentitled to the same dividend and voting rights during the vesting period as theissued and outstanding common shares. The fair value of the awards wascalculated based on the closing market price of the Company’s common shares onthe grant date and is expensed on a straight-line basis over the vestingperiod.  The Company recognized non-cash stock-based compensation expenserelated to the restricted common shares of $32,000 and $78,000 for the threeand nine months ended September 30, 2005, respectively.

***Reclassifications***

Certainamounts in the prior period financial statements have been reclassified to beconsistent with the current period presentation.

**4. Real Estate Investments and Acquisitions**

As ofSeptember 30, 2005, the Company owned 52 student housing propertieslocated near 39 colleges and universities in 24 states. These propertiescontain an aggregate of 9,657 units and 31,371 beds. The Company’s investmentin student housing properties at September 30, 2005 and December 31,2004 was as follows (in thousands):
|                                      | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|--------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                           | ** ** | **(restated)**               | ** ** | ** **                  | ** ** |
| Land                                 |       | $                            | 214,890    |                        | $          | 124,656 |   |
| Building and improvements            |       | 843,644                      |       | 501,680                     |       |
| Residential furniture and appliances |       | 22,747                       |       | 12,299                      |       |
| Construction in progress             |       | 5,621                        |       | —                      |       |
|                                 |       | $                            | 1,086,902  |                        | $          | 638,635 |   |

 

Duringthe three months ended September 30, 2005, the Company acquired sixstudent housing properties located near six colleges and universities in sixstates with an aggregate of 1,213 units and 3,237 beds for an aggregateacquisition cost of approximately $123.4 million.

Duringthe three months ended June 30, 2005, the Company acquired eight studenthousing properties located near six colleges and universities in five stateswith an aggregate of 1,354 units and 4,300 beds for an aggregate acquisitioncost of approximately $147.4 million.  In connection with theacquisition of two of these properties, the Company issued a total of 1,940,282units of limited partnership interest in the Operating Partnership to thesellers with an aggregate fair value of $26.9 million.  The fair value ofthe limited partnership units was based on the closing price of the Company’scommon shares on the acquisition date.  The fair value of the units oflimited partnership interest was recorded as an increase to minority interest.

Duringthe three months ended March 31, 2005, the Company acquired eight studenthousing properties located near six colleges and universities in six stateswith an aggregate of 1,607 units and 4,795 beds for an aggregate acquisitioncost of approximately $172.8 million. Gary M. Holloway, Sr., fourother employees of the Company, including two executive officers of theCompany, and an employee of an entity owned by Mr. Holloway, held anownership interest in two of these properties that were acquired for a totalpurchase price of $38.2 million.  The Company paid $36.6 million ofcash to investors in the selling entity not affiliated with the Company andissued a total of 141,549 units of limited partnership interest in theOperating Partnership to Mr. Holloway and these individuals with an aggregatefair value of $1.6 million in connection with the purchase of the twoproperties.  The fair value of the limited partnership units was based onthe closing price of the Company’s common shares on the acquisition date. Thefair value of the units of limited partnership interest was recorded as anincrease to minority interest.

In August 2005, the Company entered into ajoint venture with an institutional investor to develop and construct twostudent

18

----

housing properties. The joint venture plans to develop two 144 unit/576 bed purpose builtstudent housing communities located in Orono, Maine and Bowling Green,Ohio.  Construction is expected to becompleted by August 2006, concurrent with the beginning of the 2006-2007academic year.  Under the terms of thejoint venture agreement, the Company contributed the two undeveloped landparcels on which the properties will be built in exchange for a 10% equityinterest in the joint venture.  Inaddition, the Company will manage the development and construction of the jointventure properties and receive a fee for these services.  The joint venture has obtained oneconstruction loan and expects to obtain a second construction loan in thefourth quarter that will permit draws of up to $32.0 million to fund the constructionof the properties.  In addition tocustomary default provisions, the construction loans shall be deemed to be indefault if there is a material default, after any applicable notice and cureperiod, under the Company’s $150.0 million senior unsecured revolving creditfacility (see Note 8).  The Company hasguaranteed the repayment of up to $8.0 million of the construction loans.  The guarantee is reduced to $4.8 million in theevent that no event of default, as defined in the loan agreements, has occurredand certain other conditions are satisfied. The Company is accounting for the transaction as a financing arrangementbecause the Company originally owned the land and contributed it to the jointventure and the Company has the option to purchase the joint venture partner’sinterest in the joint venture within one year of completion of the propertiesand because the Company has provided certain guarantees for the completion ofconstruction and for a portion of the construction loans.  Therefore, the Company accounts for itsinvestment in the joint venture by including the joint venture’s assets andliabilities in the Company’s consolidated financial statements.  Interest cost of $90,000 has been capitalizedduring the three and nine months ending September 30, 2005.  The Company has agreed to fund the cost ofconstruction overruns for these properties, and has entered into guaranteedmaximum price contracts with the general contractor for the properties unlesssuch overruns result from change orders from the original construction plans.

**5. Investments in Military Housing Projects**

Werecord our investments in joint ventures under our military housing projects inaccordance with the equity method of accounting.  Our investment is initially recorded at cost,and then subsequently adjusted at each balance sheet to an amount equal to whatwe would receive from the joint venture in the event that it were liquidated atnet book value as of that date,  assumingthat the proceeds from the liquidation are distributed in accordance with theterms of, and priority of returns set forth under, the joint venture’soperating agreement. The terms of the various agreements generally provide forthe payment to the Company of an agreed upon preferred return on the Company’sinvested capital and a return of the Company’s invested capital prior to thedistribution of any amounts to the government entity that is a member of thejoint venture.

InNovember 2003, GMH Military Housing, LLC and FW Military Housing LLCformed a joint venture known as GMH Military Housing-Fort Carson LLC, whichacquired the ownership interests of an unrelated bankrupt entity that was amember of Fort Carson Family Housing LLC, the entity that owns the Fort Carsonmilitary housing project. GMH Military Housing, LLC contributed approximately$2.4 million to GMH Military Housing-Fort Carson LLC in return for its 10%interest in the joint venture. The 10% ownership interest in the joint venturewas accounted for using the equity method of accounting from the acquisitiondate in November 2003 through November 1, 2004. In connection withour initial public offering on November 2, 2004, the remaining 90%interest in the joint venture was acquired in exchange for the issuance to FWMilitary Housing LLC of 2,583,334 units of limited partnership interest in theOperating Partnership having a value of $31.0 million. This acquisitionwas recorded at the fair value of the consideration paid. During the three andnine months ended September 30, 2005, the Company received $0.1 millionand $4.0 million, respectively, of equity distributions from Fort Carson FamilyHousing LLC.  The carrying value of thisinvestment was $25.7 million at September 30, 2005 and $29.7 millionat December 31, 2004. The Company earns a preferred return on itsinvestment in Fort Carson Family Housing LLC, which is paid on a monthly basis.

InNovember 2004, the Company and Benham Military Communities, LLC formed ajoint venture known as GMH/Benham Military Communities LLC for the purpose ofinvesting in the Navy Northeast Region military housing project. The Companycontributed $9.5 million to GMH/Benham Military Communities LLC in returnfor a 90% interest and Benham Military Communities, LLC invested$1.1 million for the remaining 10% interest. The Company consolidatesGMH/Benham Military Communities LLC as it has a 90% economic interest andcontrols a majority of the voting interests. Benham Military Communities, LLC’s10% interest is accounted for as minority interest and is included in accruedexpenses on the consolidated balance sheet at September 30, 2005 andDecember 31, 2004.  In November 2004, GMH/Benham MilitaryCommunities, LLC invested $10.6 million in Northeast Housing LLC, whichowns and operates the Navy Northeast Region military housing project.GMH/Benham Military Communities LLC earns a preferred return on its investmentin Northeast Housing LLC. The preferred return will accrue, but not be paid,until the end of the initial development period for the project inOctober 2010. The carrying value of this investment was $11.5 millionat September 30, 2005 and $10.8 million at December 31, 2004.

19

----

**6.Income Taxes**

Current income taxexpense of the Company’s taxable REIT subsidiaries was $4.5 million, whichincludes $3.8 million of federal taxes and $0.7 million of state taxes, for thenine months ended September 30, 2005.  The federal statutory tax rateof the taxable REIT subsidiaries for the nine months ended September 30,2005 was 34%.  The effective tax rate of the taxable REIT subsidiaries forthe nine months ended September 30, 2005 was 32.5%. The Company’seffective tax rate is lower than the federal statutory rate as a result of thepermanent depreciation and amortization differences between income subject toincome tax for book and tax purposes.

**7.Notes Payable**

During the threemonths ended September 30, 2005, a fixed-rate note payable in the amountof $6.6 million was assumed relating to the acquisition of a studenthousing property and fixed-rate notes payable totaling $72.6 million wereobtained in connection with the acquisition of five other student housingproperties and the refinancing of a previously acquired property. These notesrequire monthly payments of principal and/or interest, bear interest at fixedrates ranging from 4.76% to 5.30%, and mature at various dates through 2024. Inconjunction with the purchase accounting for these properties, the net carryingvalue of the assumed note payable was increased by $0.2 million to recordit at its estimated fair value. The fair value of the assumed note wascalculated as the difference between the present value of the note using a currentestimated market rate of interest and the outstanding principal amount. Thisamount is being amortized as an adjustment to interest expense over the term ofthe related debt.

During the threemonths ended June 30, 2005, fixed-rate notes payable totaling $28.8 millionwere assumed relating to the acquisition of two student housing properties andfixed-rate notes payable totaling $58.8 million were obtained in connectionwith the acquisition of five student housing properties. These notes requiremonthly payments of principal and/or interest, bear interest at fixed ratesranging from 4.50% to 5.46%, and mature at various dates through 2015. Inconjunction with the purchase accounting for these properties, the net carryingvalue of the assumed notes payable was increased by $0.4 million to recordthem at their estimated fair value. The fair value of the assumed notes wascalculated as the difference between the present value of the notes using acurrent estimated market rate of interest and the outstanding principal amount.This amount is being amortized as an adjustment to interest expense over theterm of the related debt.

During the threemonths ended June 30, 2005, a variable-rate note payable in the amount of$6.8 million was obtained in connection with the acquisition of a studenthousing property. The note requires payments of interest only at LIBOR plus2.05% (LIBOR on this loan was 3.56% at September 30, 2005) and matures in2015.

On June 27,2005,  we placed a total of $23.6 million of fixed-rate mortgageindebtedness on two student housing properties located in State College,Pennsylvania that serve Pennsylvania State University.  The mortgage debthas a fixed interest rate of 4.70% and a term of five years.  Theproperties were acquired by the Company in March 2005 for an aggregatepurchase price of $38.2 million. Proceeds of this mortgage debt financing wereused to repay outstanding borrowings under the Company’s line of credit thatwere originally drawn to acquire these properties.

During the three monthsended March 31, 2005, fixed-rate notes payable totaling $48.0 millionwere assumed relating to the acquisition of four student housing properties anda fixed-rate note payable in the amount of $31.4 million was obtained inconnection with the acquisition of another student housing property. Thesenotes require monthly payments of principal and/or interest, bear interest atfixed rates ranging from 4.92% to 7.09%, and mature at various dates through2014. In conjunction with the purchase accounting for these properties, the netcarrying value of the assumed notes payable was increased by $2.1 millionto record them at their estimated fair value. The fair value of the assumednotes was calculated as the difference between the present value of the notes usinga current estimated market rate of interest and the outstanding principalamount. This amount is being amortized as an adjustment to interest expenseover the term of the related debt.

During the threemonths ended March 31, 2005, a variable-rate note payable in the amount of$9.2 million was obtained in connection with the acquisition of a studenthousing property. The note requires payments of interest only at LIBOR plus1.90% (LIBOR on this loan was 3.57% at September 30, 2005) and matures in2007.

InFebruary 2005, the Company completed the refinancing of variable-ratenotes secured by seven of its student housing properties. In connection withthe refinancing, the Company repaid approximately $20.4 million of thetotal $113.7 million of indebtedness secured by these seven properties,and replaced the remaining $93.3 million of variable-rate debt with anequal amount of fixed-rate debt with interest rates ranging from 4.24% to 4.7%and maturity terms ranging from five to seven years.

Prior to its contributionto the Company in connection with the completion of our initial publicoffering, Corporate Flight LLC financed the acquisition and refurbishments ofthe corporate aircraft with two notes payable. One loan required monthlypayments of principal and interest at the commercial paper rate plus 1.8%through January 2011. The second loan required monthly payments ofprincipal and interest at 9.5% through August 2006. On February 28,2005, the Company sold and transferred its ownership of 100% of the outstandingmembership interests in Corporate Flight LLC back to

20

----

Gary M.Holloway, Sr. Corporate Flight LLC’s primary asset was the corporateaircraft which had a net book value of $3.8 million at February 28,2005 and was secured by the two notes payable, which had an aggregateoutstanding balance of $4.2 million at February 28, 2005. Corporate Flight LLC’s net deficit of $171,000, net of $180,000 tax expenserelated to the taxable gain upon the transfer, was recorded as a capitalcontribution and allocated to additional paid-in capital and minority intereston the consolidated balance sheet.

AtSeptember 30, 2005, notes payable totaling $623.5 million weresecured by 45 student housing properties with a cost and net book value of$907.5 million and $891.5 million, respectively. At December 31,2004, notes payable totaling $359.8 million were secured by 23 studenthousing properties with a cost and net book value of $451.9 million and$449.1 million, respectively.

AtSeptember 30, 2005, the Company had a note payable in the amount of$5.7 million secured by the corporate headquarters, requiring monthlypayments of principal and interest at LIBOR plus 2.25% (LIBOR on this loan was3.56% at September 30, 2005).  In July 2005, the maturity dateof the loan was extended from August 2005 to November 2005. The remainingprincipal balance was repaid in full in October 2005.

The aggregateannual principal payments as of September 30, 2005 due on our notespayable and line of credit for the remainder of 2005, the five succeeding yearsand thereafter are as follows (in thousands):
| 2005       |   | $       | 7,043   |   |
|------------|--------|---------|---------|--------|
| 2006       |   | 5,188   |    |
| 2007       |   | 224,960 |    |
| 2008       |   | 4,708   |    |
| 2009       |   | 34,076  |    |
| 2010       |   | 65,954  |    |
| Thereafter |   | 424,242 |    |
|       |   | $       | 766,171 |   |

 

**8.Line of Credit**

InNovember 2004, the Company entered into a $150 million three-yearunsecured revolving credit facility, subject to increase to $250 million(the “Credit Facility”), with a consortium of banks. The Credit Facilityprovides for the issuance of up to $20 million of letters of credit, whichis included in the $150 million available under the Credit Facility. TheCompany’s availability under the Credit Facility as of September 30, 2005was limited to a borrowing base amount equal to the sum of 60% of the value ofan unencumbered asset pool (which as of September 30, 2005 consisted ofseven student housing properties, and in no event could contain fewer than fivestudent housing properties) as of the end of the previous quarter and 50% ofthe annualized value of the Company’s cash flow from the management,development and construction/renovation fees received in connection withmilitary housing projects and from the management of student housing propertiesin the previous quarter, provided that the total cash flow attributable toannualized management fees did not exceed 50% of the borrowing base.

The Company mayelect to have amounts outstanding under the Credit Facility bear interest at aEurodollar rate based on LIBOR or the prime rate, plus an applicable rate,ranging from 1.625% to 2.375% for Eurodollar rate loans or 0.75% to 1.75% forprime rate loans. The applicable rate is determined by the leverage ratio oftotal liabilities to total asset value of the Company, as defined in the CreditFacility. In addition, the Company pays fees for unused availability on theCredit Facility.

The CreditFacility contains affirmative and negative covenants and also containsfinancial covenants that, among other things, as of September 30, 2005,(i) required the Company to maintain a total leverage ratio equal to orless than 65% through December 31, 2005, at the end of the first quarterof 2006, the maximum leverage ratio will decrease to 60%, (ii) limited theaggregate amount of outstanding variable-rate indebtedness to 30% of total indebtednesscommencing February 8, 2005, (iii) limited the payment of dividendsby the Company to its shareholders to 110% of funds from operations as definedin the Credit Facility, (iv) limited the amount of recourse debt,exclusive of amounts outstanding under the Credit Facility, to$25 million, and in no event greater than $150 million in total, and(v) required the Company to maintain a consolidated tangible net worth, asdefined in the Credit Facility, of at least $275 million plus an amount equalto 75% of the net proceeds from any equity issuances subsequent to the closingdate of the Credit Facility in November 2004. The financial covenants asof September 30, 2005 also required the Company to operate in compliancewith the following ratios as defined by the terms of the Credit Facility:(i) fixed charge coverage ratio equal to or greater than 1.75x;(ii) interest coverage ratio equal to or greater than 2.00x; and(iii) unsecured interest coverage ratio equal to or greater than 2.25x.The Company was in compliance with all covenants at September 30, 2005.

InJanuary 2005, the Company paid a dividend to its shareholders in excess of95% of funds from operations for the period

21

----

November 2,2004 to December 31, 2004.  The Company received a formal waiver ofthis instance of noncompliance with the financial covenant. The Company and thelenders also agreed to modify the covenant related to the payment of dividendsto shareholders for the year ending December 31, 2005. Under the terms ofthe modification, the Company is now restricted from paying dividends to itsshareholders in 2005 in excess of 110% of funds from operations. The dividendpayment terms of the Credit Facility will revert to the original restrictionagainst distributions in excess of 95% of funds from operations after 2005.

Additionally, theCompany did not reduce the aggregate amount of its outstanding variable-rateindebtedness as a percentage of its total outstanding indebtedness below 30% byFebruary 8, 2005, as required by the terms of the Credit Facility. OnFebruary 24, 2005, the Company converted certain variable-rate loanssecured by seven student housing properties to fixed-rate loans. As a result ofthis refinancing, the Company lowered its outstanding variable-rateindebtedness as a percentage of fixed-rate indebtedness below the 30% limit.The Company received a formal waiver of this instance of noncompliance with thefinancial covenant for the period from February 8, 2005 throughFebruary 23, 2005.

At June 30,2005, the Company’s leverage ratio exceeded the 60% ceiling set forth in theCredit Facility.  The Company received a formal waiver of this instance ofnoncompliance with the financial covenant.

InAugust 2005, the Company amended the Credit Facility (the “Amendment”). Under the Amendment, the calculation of the borrowing base was revised toinclude cash flow from the military housing construction and development feesand to increase the total cash flow attributable to annualized fees from themanagement, construction and development of the military housing projects andstudent housing properties from 35% to 50%.  The Amendment also increasedthe applicable interest rate ranges on outstanding borrowings under the CreditFacility to the following: 1.625% to 2.375% for Eurodollar rate loans and 0.75%to 1.75% for prime rate loans.  In addition, the Amendment modified thecalculation of the leverage ratio and increased the maximum leverage ratio from60% to 65% through December 31, 2005.  At the end of the firstquarter of 2006, the maximum leverage ratio will revert to 60%.

As ofSeptember 30, 2005, the Company had $137.0 million outstanding under theCredit Facility, bearing interest at a weighted-average rate of 5.90%, and anadditional $13.0 million was available for draw under the facility. As ofSeptember 30, 2005, there were no letters of credit outstanding under theCredit Facility.

**9.Transactions with Related Parties**

In the ordinarycourse of its operations, the Company has on-going business relationships withGary M. Holloway, Sr., entities affiliated with Mr. Holloway,and entities in which Mr. Holloway or the Company has an equityinvestment. These relationships and related transactions are summarized below.The operating results or financial position of the Company and The GMH PredecessorEntities could be significantly different from those that would have beenreported if the entities were autonomous.

Through thecompletion of the Company’s initial public offering on November 2, 2004,common costs for human resources, information technology, office equipment andfurniture, and certain management personnel were allocated to the variousentities owned or controlled by Mr. Holloway, including The GMHPredecessor Entities, using assumptions based on headcount that managementbelieved were reasonable. During the three and nine months endedSeptember 30, 2004, such costs totaled $1.4 million and $2.9 million,respectively, and are included in administrative expenses in the accompanyingcombined statements of operations.  Subsequent to November 2, 2004,such costs were incurred directly by the Operating Partnership. The allocationof such costs to other entities owned or controlled by Mr. Holloway duringthe three and nine months ended September 30, 2005 totaled $21,000 and $232,000,respectively, and is reflected as expense reimbursements from related partiesin the accompanying consolidated statements of operations.

The Company leasesspace in its corporate headquarters to entities wholly-owned byMr. Holloway.  During the three and nine-month periods endedSeptember 30, 2005 and 2004, rental income from these entities totaled$61,000, $183,000, $70,000, and $340,000, respectively, and is included in rentand other property income in the accompanying consolidated and combinedstatements of operations.

The Companyprovides property management consulting services to GMH Capital Partners AssetServices, LP, an entity wholly-owned by Mr. Holloway, in connection withproperty management services that GMH Capital Partners Asset Services, LPperforms related to five student housing properties containing a total of 2,172beds. The Company earns consulting fees equal to 80% of the net management feesthat GMH Capital Partners Asset Services, LP earns for providing the propertymanagement services.  For the three and nine months endedSeptember 30, 2005, such fees totaled $53,000 and $187,000,respectively.  No such fees were recognized in the comparable periods in2004.

ThroughMarch 31, 2005 the Company earned management fees from properties in whichMr. Holloway was an investor.  As of September 30, 2005, theCompany does not manage any properties in which Mr. Holloway is aninvestor and accordingly

22

----

did not earn anysuch fees in the quarter then ended.  During the nine-month period endedSeptember 30, 2005 and the three and nine-month periods endedSeptember 30, 2004, such income totaled $0.2 million, $0.3 million and$1.2 million, respectively.

The Company isreimbursed by the owners of certain military housing projects and studenthousing properties under management, including certain student housingproperties in which Mr. Holloway was an investor through March 31,2005, for the cost of certain employees engaged in the daily operation of thosemilitary housing projects and student housing properties. The reimbursement ofthese costs is reflected as expense reimbursements from related parties in theaccompanying consolidated and combined statements of operations.

The GMHPredecessor Entities previously paid management fees and reimbursed expenses toentities owned by Mr. Holloway that were not contributed to the Company inconnection with its initial public offering. During the three and nine-monthperiods ended September 30, 2004, the management fees and reimbursedexpenses totaled $22,000 and $77,000, respectively.

Denis J. Nayden,one of the Company’s trustees, is a senior vice president of General ElectricCompany, which is the parent company of General Electric Capital Corporation.At September 30, 2005, we had $248.0 million of indebtedness toGeneral Electric Capital Corporation secured by properties or other assets thatwe own.

Mr. Hollowayowns Bryn Mawr Abstract, Inc., an entity that provides title abstractservices to third party title insurance companies, from which we have purchasedtitle insurance with respect to student housing properties that we haveacquired or refinanced in 2005. In connection with our purchase of titleinsurance for these student housing properties, we paid premiums to other titleinsurance companies, which fees in some cases are fixed according to statute.From these premiums, the other title companies paid to Bryn Mawr Abstract$162,000 and $345,000 during the three and nine-month periods endedSeptember 30, 2005, respectively, for the provision of title abstract services.

Mr. Hollowayowns GMH Capital Partners Commercial Realty LP, an entity that provides realestate consulting and brokerage services for real estate transactions. Duringthe three months ended March 31, 2005, GMH Capital Partners CommercialRealty LP received aggregate commissions of $284,000 from the sellers of twostudent housing properties that the Company purchased.

InFebruary 2005, the Company transferred its interest in Corporate FlightLLC, including the corporate aircraft and associated debt initially contributedto the Operating Partnership at the time of the initial public offering, backto Mr. Holloway.  Corporate Flight LLC had a net deficit of $171,000,net of $180,000 tax expense related to the taxable gain upon the transfer toMr. Holloway, on the date it was transferred back to Mr. Holloway.This transfer was accounted for as a capital contribution and recorded as an$87,000 increase to additional paid-in capital and an $84,000 increase tominority interest.  During the three and nine months endedSeptember 30, 2005, the Company paid Corporate Flight LLC $32,000 and$197,000, respectively, for use of an aircraft owned by Corporate Flight LLC.

**10.Commitments and Contingencies**

As ofSeptember 30, 2005, we had an agreement to acquire one undeveloped parcelof land for an aggregate purchase price of $1.4 million.

In connection withfinalizing the agreements with the DoD for the Company’s military housingprojects, the Company has committed to contribute the following aggregateamounts as of September 30, 2005 (in thousands):
| 2006                 |   | $      | 2,000  |   |
|----------------------|--------|--------|--------|--------|
| 2007                 |   | 5,900  |   |
| 2010                 |   | 3,600  |   |
| 2011 and  thereafter |   | 14,300 |   |
| Total                |   | $      | 25,800 |   |

 

In connection withthe development, management, construction, and renovation agreements forcertain of the military housing projects, the Company guarantees the completionof its obligations under the agreements. The guarantees require the Company tofund any costs in excess of the amounts budgeted in the underlying development,management, construction, and renovation agreements. Management believes thatthese guarantees will not have a material adverse impact on the Company’sfinancial position or results of operations.

The Company issubject to routine litigation, claims and administrative proceedings arising inthe ordinary course of business. Management believes that the disposition ofthese matters will not have a material adverse impact on the Company’sfinancial position or results of operations.

23

----

The Company hasentered into employment agreements with three of its executive officers. Eachemployment agreement is for an initial three-year term beginning inNovember 2004 and provides for base salaries aggregating $975,000 in eachof the three years. The base salaries are increased annually effective January 1of each year by a minimum amount equal to at least the percentage increase inthe Consumer Price Index.

Under theprovisions of FIN 45,*“Guarantor’sAccounting and Disclosure Requirements for Guarantees, Including IndirectGuarantees of Indebtedness of Others an interpretation of FASB StatementsNo. 5, 57, and 107 and rescission of FASB Interpretation No. 34,”*a guarantor is to recognize, at the inception of a guarantee, a liability forthe fair value of the obligation undertaken by issuing the guarantee. TheCompany enters into indemnification agreements in the ordinary course ofbusiness that are subject to the provisions of FIN 45. Under these agreements,the Company indemnifies, holds harmless, and agrees to reimburse theindemnified party for losses suffered or incurred by the indemnified party. Themaximum potential amount of future payments the Company could be required tomake under these indemnification agreements is unlimited. The Company believesthe estimated fair value of these agreements is immaterial. Accordingly, therewere no liabilities recorded for these agreements as of September 30, 2005and December 31, 2004.

**11.Segment Reporting**

The Company ismanaged as individual entities that comprise two reportable segments:(1) student housing and (2) military housing. The Company’smanagement evaluates each segment’s performance based upon net income. Theaccounting policies of the reportable segments are the same as those describedin the summary of significant accounting policies.  Corporate includes theactivities of certain departments from a corporate level, which includespersonnel that service GMH Communities Trust as a whole and support our overalloperations.
| ** **                                                                                               | ** ** | **Three Months Ended September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **2005 (Company) (as restated)**          | ** ** | **2004 (Predecessor)** | ** ** |
| ** **                                                                                               | ** ** | **Student  Housing**                                     | ** ** | **Military  Housing** | ** ** | **Corporate** | ** ** | **Total** | ** ** | **Student  Housing** | ** ** | **Military  Housing** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| ** **                                                                                               | ** ** | **(in thousands)**                                  | ** ** |
| **Revenue:**                                                                                             | ** ** | ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Rent and other  property income                                                                          |       | $                                                        | 35,349     |   | $ | — |   | $ | 60 |   | $ | 35,409 |   | $ | 6,683 |   | $ | — |   | $ | 70 |   | $ | 6,753 |   |
| Expense  reimbursements:                                                                                 |       |                                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party                                                                                            |       | —                                                   |       | 20,074 |   | 22 |   | 20,096 |   | 367 |   | 7,697 |   | 638 |   | 8,702 |   |
| Third party                                                                                              |       | 1,299                                                    |       | — |   | — |   | 1,299 |   | 1,906 |   | — |   | — |   | 1,906 |   |
| Management fees:                                                                                         |       |                                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party                                                                                            |       | —                                                   |       | 1,755 |   | — |   | 1,755 |   | 348 |   | 619 |   | — |   | 967 |   |
| Third party                                                                                              |       | 611                                                      |       | — |   | — |   | 611 |   | 752 |   | — |   | — |   | 752 |   |
| Other fee  income-related party                                                                          |       | (39                                                      | )          | 5,934 |   | — |   | 5,895 |   | — |   | 2,115 |   | — |   | 2,115 |   |
| Other income                                                                                             |       | 34                                                       |       | 45 |   | 2 |   | 81 |   | 14 |   | 24 |   | 103 |   | 141 |   |
| Total revenue                                                                                            |       | 37,254                                                   |       | 27,808 |   | 84 |   | 65,146 |   | 10,070 |   | 10,455 |   | 811 |   | 21,336 |   |
| **Operating  Expenses:**                                                                                 | ** ** | ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Property  operating expenses                                                                             |       | 17,658                                                   |       | 1,248 |   | — |   | 18,906 |   | 4,773 |   | 1,035 |   | — |   | 5,808 |   |
| Reimbursed  expenses                                                                                     |       | 1,299                                                    |       | 20,074 |   | 22 |   | 21,395 |   | 2,273 |   | 7,697 |   | 638 |   | 10,608 |   |
| Real estate  taxes                                                                                       |       | 3,184                                                    |       | — |   | — |   | 3,184 |   | 490 |   | — |   | — |   | 490 |   |
| Administrative  expenses                                                                                 |       | —                                                   |       | — |   | 2,992 |   | 2,992 |   | — |   | — |   | 2,172 |   | 2,172 |   |
| Profits interest  expense                                                                                |       | —                                                   |       | — |   | — |   | — |   | — |   | — |   | 33,180 |   | 33,180 |   |
| Depreciation and  amortization                                                                           |       | 8,370                                                    |       | 78 |   | 102 |   | 8,550 |   | 1,526 |   | 10 |   | 234 |   | 1,770 |   |
| Interest                                                                                                 |       | 8,715                                                    |       | — |   | 274 |   | 8,989 |   | 1,627 |   | — |   | 95 |   | 1,722 |   |
| Total operating  expenses                                                                                |       | 39,226                                                   |       | 21,400 |   | 3,390 |   | 64,016 |   | 10,689 |   | 8,742 |   | 36,319 |   | 55,750 |   |
| Income (loss)  before equity in earnings of unconsolidated entities, income taxes and  minority interest |       | (1,972                                                   | )          | 6,408 |   | (3,306 | ) | 1,130 |   | (619 | ) | 1,173 |   | (35,508 | ) | (34,414 | ) |
| Equity in  earnings of unconsolidated entities                                                           |       | —                                                   |       | 1,058 |   | — |   | 1,058 |   | — |   | — |   | — |   | — |   |
|                                                                                                     |       |                                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  before income taxes and minority interest                                                 |       | (1,972                                                   | )          | 7,466 |   | (3,306 | ) | 2,188 |   | (619 | ) | 1,713 |   | (35,508 | ) | (34,414 | ) |
| Income taxes                                                                                             |       | 110                                                      |       | 2,144 |   | — |   | 2,254 |   | — |   | — |   | — |   | — |   |
| Income (loss)  before minority Interest                                                                  |       | (2,082                                                   | )          | 5,322 |   | (3,306 | ) | (66 | ) | (619 | ) | 1,713 |   | (35,508 | ) | (34,414 | ) |
| Minority  interest                                                                                       |       | (1,063                                                   | )          | 2,716 |   | (1,687 | ) | (34 | ) | — |   | — |   | — |   | — |   |
|                                                                                                     |       |                                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                        |       | $                                                        | (1,019     | ) | $ | 2,606 |   | $ | (1,619 | ) | $ | (32 | ) | $ | (619 | ) | $ | 1,713 |   | $ | (35,508 | ) | $ | (34,414 | ) |

 

24

----

 
| ** **                                                                                               | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **2005 (Company) (as restated)**         | ** ** | **2004 (Predecessor)** | ** ** |
| ** **                                                                                               | ** ** | **Student  Housing**                                    | ** ** | **Military  Housing** | ** ** | **Corporate** | ** ** | **Total** | ** ** | **Student  Housing** | ** ** | **Military  Housing** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| ** **                                                                                               | ** ** | **(in thousands)**                                 | ** ** |
| **Revenue:**                                                                                             | ** ** | ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Rent and other  property income                                                                          |       | $                                                       | 90,831     |   | $ | — |   | $ | 182 |   | $ | 91,013 |   | $ | 6,683 |   | $ | — |   | $ | 340 |   | $ | 7,023 |   |
| Expense  reimbursements:                                                                                 |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party                                                                                            |       | 186                                                     |       | 40,134 |   | 232 |   | 40,552 |   | 1,089 |   | 14,845 |   | 735 |   | 16,669 |   |
| Third party                                                                                              |       | 3,876                                                   |       | — |   | — |   | 3,876 |   | 5,475 |   | — |   | — |   | 5,475 |   |
| Management fees:                                                                                         |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party                                                                                            |       | 197                                                     |       | 4,888 |   | — |   | 5,085 |   | 1,163 |   | 1,520 |   | — |   | 2,683 |   |
| Third party                                                                                              |       | 2,156                                                   |       | — |   | — |   | 2,156 |   | 3,430 |   | — |   | — |   | 3,430 |   |
| Other fee  income-related party                                                                          |       | (39                                                     | )          | 12,818 |   | 70 |   | 12,849 |   | — |   | 4,174 |   | — |   | 4,174 |   |
| Other income                                                                                             |       | 109                                                     |       | 69 |   | 70 |   | 248 |   | 58 |   | 70 |   | 365 |   | 493 |   |
| Total revenue                                                                                            |       | 97,316                                                  |       | 57,909 |   | 554 |   | 155,779 |   | 17,898 |   | 20,609 |   | 1,440 |   | 39,947 |   |
| **Operating  Expenses:**                                                                                 | ** ** | ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Property  operating expenses                                                                             |       | 37,866                                                  |       | 3,238 |   | — |   | 41,104 |   | 6,683 |   | 3,168 |   | — |   | 9,851 |   |
| Reimbursed expenses                                                                                      |       | 4,062                                                   |       | 40,134 |   | 232 |   | 44,428 |   | 6,564 |   | 14,845 |   | 735 |   | 22,144 |   |
| Real estate taxes                                                                                        |       | 8,339                                                   |       | — |   | — |   | 8,339 |   | 490 |   | — |   | — |   | 490 |   |
| Administrative  expenses                                                                                 |       | —                                                  |       | — |   | 8,768 |   | 8,768 |   | — |   | — |   | 4,488 |   | 4,488 |   |
| Profits interest  expense                                                                                |       | —                                                  |       | — |   | — |   | — |   | — |   | — |   | 33,180 |   | 33,180 |   |
| Depreciation and  amortization                                                                           |       | 24,414                                                  |       | 132 |   | 412 |   | 24,958 |   | 1,537 |   | 18 |   | 633 |   | 2,188 |   |
| Interest                                                                                                 |       | 20,508                                                  |       | — |   | 739 |   | 21,247 |   | 1,627 |   | — |   | 253 |   | 1,880 |   |
| Total operating  expenses                                                                                |       | 95,189                                                  |       | 43,504 |   | 10,151 |   | 148,844 |   | 16,901 |   | 18,031 |   | 39,289 |   | 74,221 |   |
| Income (loss)  before equity in earnings of unconsolidated entities, income taxes and  minority interest |       | 2,127                                                   |       | 14,405 |   | (9,597 | ) | 6,935 |   | 997 |   | 2,578 |   | (37,849 | ) | (34,274 | ) |
| Equity in  earnings of unconsolidated entities                                                           |       | —                                                  |       | 1,999 |   | — |   | 1,999 |   | — |   | — |   | — |   | — |   |
| Income (loss)  before income taxes and minority interest                                                 |       | 2,127                                                   |       | 16,404 |   | (9,597 | ) | 8,934 |   | 997 |   | 2,578 |   | (37,849 | ) | (34,274 | ) |
| Income taxes                                                                                             |       | 125                                                     |       | 4,387 |   | — |   | 4,512 |   | — |   | — |   | — |   | — |   |
| Income (loss)  before minority interest                                                                  |       | 2,002                                                   |       | 12,017 |   | (9,597 | ) | 4,422 |   | 997 |   | 2,578 |   | (37,849 | ) | (34,274 | ) |
| Minority interest                                                                                        |       | 954                                                     |       | 6,023 |   | (4,794 | ) | 2,183 |   | — |   | — |   | — |   | — |   |
| **Net income (loss)**                                                                                    |       | $                                                       | 1,048      |   | $ | 5,994 |   | $ | (4,803 | ) | $ | 2,239 |   | $ | 997 |   | $ | 2,578 |   | $ | (37,849 | ) | $ | (34,274 | ) |

 
|                                     | ** ** | **Student  Housing**    | ** ** | **Military  Housing** | ** ** | **Corporate** | ** ** | **Total**  | ** ** |
|-------------------------------------|------------|-------------------------|------------|-----------------------|------------|---------------|------------|------------|------------|
| ** **                          | ** ** | **(in thousands)** | ** ** |
| **As of  September 30, 2005:** | ** ** | ** **              | ** ** | ** **            | ** ** | ** **    | ** ** | ** ** | ** ** |
| Total assets                        |       | $                       | 1,093,595  |                  | $          | 60,479        |       | $          | 42,735     |   | $ | 1,196,809 |   |
| **As of  December 31, 2004:**  | ** ** | ** **              | ** ** | ** **            | ** ** | ** **    | ** ** | ** ** | ** ** |
| Total assets                        |       | $                       | 663,980    |                  | $          | 57,856        |       | $          | 51,225     |   | $ | 773,061 |   |

 

**12.Earnings Per Common Share (restated)**

The followingtable details the number of shares and net income used to calculate basic anddiluted earnings per share for the three and nine-month periods endedSeptember 30, 2005 (in thousands, except share and per share amounts):
|                                                                 | ** ** | **Three months ended September 30, 2005** | ** ** | **Nine months ended September 30, 2005** | ** ** |
|-----------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **Basic**                                                          | ** ** | **Diluted**                                                       | ** ** | **Basic** | ** ** | **Diluted** | ** ** |
|                                                            |       |                                                               |       |                                                              |       |   |   |   |   |
| Net income                                                      |       | $                                                                  | (32        | )                                                                 | $          | (32 | ) | $ | 2,239 |   | $ | 2,239 |   |
| Minority  interest                                              |       | —                                                             |       | (34                                                               | )          | — |   | 2,183 |   |
| Income available  to common shareholders                        |       | $                                                                  | (32        | )                                                                 | $          | (66 | ) | $ | 2,239 |   | $ | 4,422 |   |
|                                                            |       |                                                               |       |                                                              |       |   |   |   |   |
| Weighted-average  common shares outstanding                     |       | 30,350,989                                                         |       | 30,350,989                                                        |       | 30,350,989 |   | 30,350,989 |   |
| Warrant                                                         |       | —                                                             |       | 2,435,628                                                         |       | — |   | 2,107,644 |   |
| Units of limited  partnership held by minority interest holders |       | —                                                             |       | 31,627,317                                                        |       | — |   | 31,627,317 |   |
| Restricted  common shares                                       |       | —                                                             |       | —                                                            |       | — |   | — |   |
| Total  weighted-average shares outstanding                      |       | 30,350,989                                                         |       | 64,413,934                                                        |       | 30,350,989 |   | 64,085,950 |   |
| Earnings per common  share                                      |       | $                                                                  | (0.00      | )                                                                 | $          | (0.00 | ) | $ | 0.07 |   | $ | 0.07 |   |

 

25

----

The computation ofdiluted earnings per share for the three and nine month periods ended September 30,2005 excludes the restricted common shares because they have an anti-dilutiveeffect on earnings per share.

InMarch 2005, June 2005 and September 2005, the Company declaredquarterly dividends of $0.2275 per outstanding common share. The March dividendof $6.9 million was paid in April 2005 to common shareholders ofrecord on March 30, 2005. The June dividend of $6.9 million waspaid in July 2005 to common shareholders of record on June 29, 2005.  The September dividend of $6.9 millionwas paid in October 2005 to common shareholders of record onSeptember 22, 2005.

**13.Acquisition of Real Estate Investments**

During the yearended December 31, 2004, the three months ended September 30, 2005and the nine months ended September 30, 2005, the Company acquired 30,six, and 22 student housing properties, respectively, for an aggregateacquisition cost of $1.1 billion. The results of operations for each ofthe acquired properties have been included in our statements of operations fromthe respective purchase dates.  All pro forma financial informationpresented within this footnote is not necessarily indicative of the resultswhich actually would have occurred if the purchases had been consummated onJanuary 1, 2004, nor does the pro forma information purport to representthe results of operations for future periods.

The followingunaudited pro forma financial information for the three and nine month periodsended September 30, 2005 and 2004 gives effect to the acquisition of the52 student housing properties as if the transactions had occurred onJanuary 1, 2004 (in thousands).  Thepro-forma financial information for the three and nine months endedSeptember 30, 2004 excludes the $33.2 million of profits interest expensedue to its material non-recurring nature.
|                              | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                   | ** ** | **2005**                                             | ** ** | **2004**                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                   | ** ** | **(restated)**                                       | ** ** | ** **                                          | ** ** | **(restated)** | ** ** | ** ** | ** ** |
|                         |       |                                                 |       |                                                |       |   |   |   |   |
| Pro forma  revenue           |       | $                                                    | 65,978     |                                                | $          | 33,634 |   | $ | 175,339 |   | $ | 100,903 |   |
| Pro forma net  (loss) income |       | $                                                    | (10        | )                                                   | $          | 4,416 |   | $ | 2,858 |   | $ | 13,249 |   |
| Pro forma EPS –  Basic  |       | $                                                    | (0.00      | )                                                   |       |   | $ | 0.09 |   |   |   |
| Pro forma EPS – Diluted |       | $                                                    | (0.00      | )                                                   |       |   | $ | 0.09 |   |   |   |

 

**14.Subsequent Events**

InSeptember 2005, the Company commenced a public offering of common shares.The offering was completed on October 4, 2005 with the sale of 9,315,000common shares of beneficial interest, including 1,215,000 shares issued uponfull exercise of the underwriters’ over-allotment option, at an offering priceof $14.25 per share. The Company raised an aggregate of $124.6 million in netproceeds from the offering after deducting the underwriters’ discounts, paymentof financial advisory fees and other offering-related expenses.  The net proceeds of this offering, which theCompany contributed to the Operating Partnership in exchange for units ofpartnership interest, were used by the Operating Partnership to repayoutstanding indebtedness under the Company’s credit facility.

InOctober 2005, the Company acquired two student housing properties,containing an aggregate 572 units and 1,620 beds, for an aggregate purchaseprice of $108.2 million. These acquisitions were partially financed with theassumption of a $35.6 million loan secured by one of the properties.

**Item2.****                                   Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

*GMHCommunities Trust commenced operations on November 2, 2004, uponcompletion of its initial public offering and the simultaneous acquisition ofthe sole general partnership interest in GMH Communities, LP, referred tothroughout this report as our Operating Partnership. The historical operationsprior to completion of our initial public offering that are described in thisreport refer to the operations of College Park Management, Inc., GMHMilitary Housing, LLC, 353 Associates, L.P., and Corporate Flight Services,LLC, which are collectively referred to, together with our OperatingPartnership, as The GMH Predecessor Entities or our predecessor entities.*

26

----

*Inconnection with the formation transactions completed prior to andsimultaneously with completion of our initial public offering, the interests inThe GMH Predecessor Entities were contributed to our Operating Partnership asdescribed in Note 1 to the financial statements included in this report. We have described our operations in this report as if the historical operationsof our predecessor entities were conducted by us. The following discussion andanalysis should be read in conjunction with the financial statements and notesthereto of GMH Communities Trust and The GMH Predecessor Entities appearing inPart I, Item 1of this report.*

**Restatementof Financial Statements**

As the Company previouslydisclosed in Part II, Item 9A of its Annual Report on Form 10-K for the yearended December 31, 2005, in the first quarter of 2006 the Audit Committee ofthe Company’s Board of Trustees conducted an investigation of certainaccounting and financial reporting matters. The investigation identifiedmaterial weaknesses in our internal control over financial reporting and in ourdisclosure controls and procedures as of December 31, 2005. In connectionwith the investigation, we reviewed our previously reported financialstatements. Through this review, we identified adjustments that were materialto the results we previously reported for the quarterly periods endedMarch 31, 2005, June 30, 2005 and September 30, 2005. Morespecifically, the Company determined that the restatements with respect to itsconsolidated financial statements for these periods were necessary due to thediscovery of errors in revenue recognition, depreciation and operating expensesrelated to certain transactions reported by the Company and to reclassifyequity in earnings of unconsolidated entities. Accordingly, we have restated ourfinancial statements for the quarterly periods ended March 31, 2005 and June30, 2005 in connection with the filing of our quarterly reports for thecomparable periods during 2006, and we are now restating our financialstatements for the quarterly period ended September 30, 2005 in this amendedreport. A summary of our restated operating results for each of the quarterlyperiods during 2005 is set forth in Note 15 of the notes to consolidatedand combined financial statements contained in the section entitled “FinancialStatements and Supplementary Data” in Part II, Item 8 of our AnnualReport on Form 10-K for the year ended December 31, 2005.

**Overview**

We are aself-advised, self-managed, specialty housing company that focuses on providinghousing to college and university students residing off-campus and to membersof the U.S. military and their families. As of September 30, 2005, weowned 52 student housing properties containing a total of 9,567 units, 31,371beds, and four undeveloped parcels of land for development as student housingproperties, and owned minority interests in joint ventures that own ourmilitary housing projects.  We alsomanaged or provided consulting services for 18 student housing properties ownedby others, containing a total of 4,225 units and 12,085 beds and an estimated224 units and 718 beds currently under construction and we provided interimmanagement services for an additional student housing property underconstruction. Additionally, our Operating Partnership has an ownership interestin, and through various wholly-owned subsidiaries operates, seven militaryhousing projects comprising an aggregate of 15,857 housing units on 18 militarybases.  As of September 30, 2005, wealso were in exclusive negotiation process with the U.S. Department of the Armyfor the Fort Gordon project, containing an estimated 857 end-state housingunits and were in the solicitation process with the U.S. Air Force for amilitary housing project that is expected to cover four bases and in excess of2,000 end-state housing units. Through our taxable REIT subsidiaries, weprovide development, construction, renovation and management services for ourmilitary housing projects, and property management services for student housingproperties owned by others, including colleges, universities, and other privateowners. In order to comply with the applicable requirements under the REITprovisions of the Internal Revenue Code, we must limit the operations of ourtaxable REIT subsidiaries so that securities issued to us by our taxable REITsubsidiaries do not represent more than 20% of our total assets as of the closeof any quarter in our taxable year and so that dividends from our taxable REITsubsidiaries, together with our other non-qualifying gross income, do notexceed 25% of our gross income for any taxable year.

As a result of thevarious transactions and acquisitions completed in anticipation of, inconnection with and subsequent to our initial public offering inNovember 2004, we expect our future results of operations to includesignificantly higher revenues and expenses than those reflected in ourpredecessor entity financial statements.

Currently, ouroperations are managed within two operating segments: (1) student housingand (2) military housing. This structure provides an effective platformfor maximizing market penetration and optimizing operating economies of scale.In addition, we separately report the activities of certain departments from acorporate level, which includes personnel that service GMH Communities Trust asa whole and support our overall operations.

A summary of theactivities in both of our student housing and military segments during thethird quarter of 2005 is provided below. In addition to these events, wecommenced an underwritten public offering of common shares of beneficialinterest during the third quarter of 2005, which was completed onOctober 4, 2005. We sold an aggregate of 9,315,000 common shares in theoffering, including 1,215,000 shares issued upon full exercise of the underwriters’over-allotment option, at an

27

----

offering price of$14.25 per share. We raised an aggregate of $124.7 million in net proceeds fromthe offering, after deducting the underwriters’ discounts, payment of financialadvisory fees and other offering-related expenses.

*StudentHousing*

The studenthousing segment acquires, owns and manages premiere off-campus student housingproperties strategically located near college or university campuses throughoutthe United States. Since July 2004, our rental revenue has increasedsubstantially as a result of our acquisition of a total of 52 properties as ofSeptember 30, 2005. While we manage the properties we own, we do notrecognize any fee income from their management. Instead, the rent payments wereceive as a result of our ownership of these properties are reflected in ourrevenue. Additionally, operating expenses, real estate taxes and depreciationand amortization have increased as a result of these acquisitions. Further,interest expense has increased related to the financing of these propertiesacquired.

We earn managementfees as a percentage of cash receipts or gross rental revenues generated by themanaged properties, according to the management agreements for the propertieswe manage. We also have the ability to earn incentive management fees byachieving specified property-level performance criteria for certain propertieswe manage for third parties. Further, certain operating expenses incurredrelated to properties we manage for others are reimbursed by the owners of theproperties managed. We expect to continue generating fee income revenue andoperating expense reimbursements from the properties that we manage for othersalthough the amounts are expected to become less significant as rental incomeincreases from the properties we own.

During the threemonths ended September 30, 2005, we acquired six student housingproperties and two undeveloped parcels of land for an aggregate acquisitioncost of approximately $123.4 million.  The acquisition cost includestotal purchase price and capitalized acquisition costs which are allocated tostudent housing properties, lease intangibles, and any fair value debtadjustment. The six properties are located near six colleges and universitiesin six states and contain an aggregate of 1,213 units and 3,237 beds. More specifically, these acquisitions included the following:

·             a student housingproperty, Seminole Suites, located in Tallahassee, Florida and serving FloridaState University, Tallahassee Community College and Florida A&MUniversity.  The property contains 264units and 924 beds, and was acquired in July 2005 for an acquisition costof approximately $33.4 million, including the placement of  $20.4 million in fixed-rate mortgage debt;

·             a student housingproperty, The Commons, located in Harrisonburg, Virginia and serving JamesMadison University. The property contains 132 units and 528 beds and wasacquired in July 2005 for an acquisition cost of approximately $13.7million, including the assumption of $6.6 million of indebtedness;

·             a student housingproperty, The Towers at 3rd (formerly known as Presidential Tower), located inChampaign, Illinois and serving the University of Illinois –Urbana/Champaign.  The property contains 136 units and 271 beds and wasacquired in August 2005 for an acquisition cost of approximately $23.1million, including the placement of $14.5 million in fixed-rate mortgage debt;

·             a student housingproperty, Campus Walk, located in Wilmington, North Carolina and servingUniversity North Carolina-Wilmington.  The property contains 289 units and290 beds and was acquired in August 2005 for an acquisition cost ofapproximately $10.4 million, including the placement of $6.7 million infixed-rate mortgage debt;

·             a student housingproperty, Blanton Common, located in Valdosta, Georgia and serving ValdostaState University. The property contains 208 units and 608 beds and was acquiredin September 2005 for an acquisition cost of approximately $25.1 million;

·             a student housingproperty, University Meadows, located in Mt. Pleasant, Michigan and servingCentral Michigan University. The property contains 184 units and 616 beds andwas acquired in September 2005 for an acquisition cost of approximately$14.1 million, including the placement of $9.6 million in fixed-rate mortgagedebt; and

·             through a jointventure with an institutional partner, two undeveloped land parcels located inOrono, Maine and Bowling Green, Ohio and known as Orchard Trails and theEnclave-Phase II, respectively.  OrchardTrails consists of a 61-acre parcel of undeveloped land and the Enclave-PhaseII consists of an 11-acre parcel of undeveloped land.  These development land parcels were initiallyacquired by us for an aggregate acquisition cost of approximately $1.7 million,and then in August 2005, were contributed into the joint venture entity inwhich we hold a 10% interest.  Whendeveloped, both Orchard Trails and the Enclave-Phase II are expected to consistof 144 units and 576 beds.  Constructionon both properties began in August 2005 and is expected to be completedprior to the 2006/2007 academic year. The estimated aggregate costs for acquiring the assets and developmentand construction is $43.5 million, with development

28

----

and construction costs tobe partially funded (up to 75% of total construction and development costs) byconstruction loans with lenders engaged by the joint venture entity, and theremaining amount (approximately $11.5 million) to be funded 10% by us and 90%by our joint venture partner. During the third quarter of 2005, the jointventure completed the placement of the construction loan with respect to theOrchard Trails property, and expects to complete the placement of theconstruction loan with respect to the Enclave – Phase II during the fourthquarter of 2005. We will manage these properties, including development,construction and pre-leasing activities. We account for this transaction as a financing arrangement because weoriginally owned the land and contributed it to the joint venture and we havean option to purchase our joint venture partner’s interest in the joint venturewithin one year after completion of the properties, and because we haveprovided certain guarantees for the completion of construction and for aportion of the construction loans.

In addition to theacquisitions described above, in September 2005, we placed $21.3 millionof fixed-rate mortgage indebtedness on a student housing property located inLubbock, Texas that serves Texas Tech University.  We had acquired theproperty in November 2004 for an aggregate purchase price of $29.5million. Proceeds from this mortgage debt financing were used to repayoutstanding borrowings under our line of credit.

As ofSeptember 30, 2005, with regard to our student housing segment, we:

·             owned 52 studenthousing properties containing a total of 9,657 units and 31,371 beds; and

·             managed, or providedmanagement consulting services for, a total of 18 student housing propertiesowned by others, containing a total of 4,225 units and 12,085 beds and an estimated224 units and 718 beds currently under construction and we provided interimmanagement services for an additional student housing property underconstruction. Specifically, we provided management consulting services withrespect to five of these properties to GMH Capital Partners Asset Services, LP,an entity wholly-owned by Gary M. Holloway, Sr.

In the thirdquarter of 2005, we experienced an increase in property operating expenses as aresult of repair and maintenance expenditures relating to turnover of our unitsat our student housing properties.  Our student housing lease termsgenerally commence in August or September to coincide with thebeginning of the academic year.  As a result, we expect to incur amajority of our repair and maintenance costs in the third quarter to preparethe units for the new residents, and we expect our operating expenses, as apercentage of revenue, to decrease in the fourth quarter. During the thirdquarter, we expensed approximately $3.4 million of repair and maintenance costsrelating to turnover of our student housing units. We also have experienced,and expect to continue to experience going forward, increases in operatingexpenses, including increased utility expenses resulting from national trendsin higher energy-related costs and increased real estate taxes relating to moreaggressive assessments performed by municipal taxing authorities with respectto certain of our student housing properties.

*SubsequentDevelopments.*

InOctober 2005, we acquired two additional student housing properties,referred to as University Crossings and Pegasus Connection.  University Crossings, containing 260units/690 beds, is located in Philadelphia, Pennsylvania and primarily servesDrexel University and the University of Pennsylvania. Pegasus Connection, aproperty that we managed prior to the acquisition and containing 312 units/930beds, is located in Orlando, Florida and serves the University of CentralFlorida.

As ofOctober 31, 2005, we had agreements to acquire three student housingproperties and one land parcel for development, and non-binding letters ofintent to acquire six student housing properties and one land parcel fordevelopment.  We will be continuing ourdue diligence process with respect to these transactions during the fourthquarter of 2005.   During the remainder of 2005, wealso expect to continue to review potential transactions covering additionalstudent housing properties that are located in the Company’s targeted marketsand that meet management’s underwriting criteria for creating long-term growthpotential.  The timing of any of these acquisitions will be dependent uponvarious factors, including the ability to complete satisfactory due diligence,obtain appropriate financing on the properties and the availability of capital.

*MilitaryHousing*

Our militaryhousing segment develops, constructs, renovates and manages military housingprojects in which we acquire interests. Our military housing segment begangenerating revenue in the fourth quarter of 2003 with the initiation of ourFort Carson and Fort Stewart and Hunter Army Airfield projects. Revenue grewthroughout 2004 and continues to grow during 2005 with the addition of variousother projects. Excluding expense reimbursements, revenue from our military housingsegment is comprised primarily of fee income for providing development,construction/renovation and management services to our military housingprojects and, to a lesser extent, from returns on the equity we invest in theprojects. Expense reimbursements consist primarily of payroll and relatedexpenses, closing costs and transition costs we incur for the project in the 30to 90-day period preceding the initiation of our management of the project.Typically, at the time we initiate

29

----

management on a project,the project reimburses us for these amounts from the proceeds of the debtissued by the project to finance its operations.

As ofSeptember 30, 2005, we owned equity interests in the joint ventures thatown seven military housing projects currently in operation. During the threemonths ended September 30, 2005, we earned fees for providing development,construction/renovation and management services to these seven military housingprojects, which encompass 18 military bases totaling 15,857 end-state housingunits. In addition, we were in negotiations with the U.S. Department of theArmy for the Fort Gordon project located near Augusta, GA, and in thesolicitation process with the U.S. Air Force regarding a project expected tocover four bases.

In July 2005,the Company officially partnered with the Department of the Army to design,build, manage and maintain the military family housing units at Fort Bliss,located in El Paso, Texas, and the White Sands Missile Range near Las Cruces,New Mexico. The finalized plans include a six-year initial development periodwith estimated project costs of $445.9 million and 3,277 end-state housingunits.  Project financing was obtained and the initial development periodfor the project began in July 2005.

The Company andthe U.S. Department of the Army also are continuing to review the possibilityof refinancing the Fort Carson project to obtain additional project costfunding, possibly totaling up to $50.0 million for the construction of another200 units.

With regard totrends and uncertainties in the military housing market, the effects of thebase realignment and closure (BRAC) initiatives under the Defense Base Closureand Realignment Act of 1990, as amended, are being closely monitored bymanagement.  Under these regulations, the federal government haspreviously undertaken four rounds of BRAC beginning in 1988, and again in 1991,1993 and 1995. The fifth round of BRAC was initiated in 2004, and the finallist of additional bases approved for realignment or closure became effectiveduring the fourth quarter of 2005.

By way ofbackground, the Department of Defense (DoD) released its initialrecommendations for BRAC in May 2005, and the BRAC Commission then votedto amend the DoD’s initial list on July 19, 2005. Under the BRACCommission’s revisions, several bases were removed from the DoD’s list of basestargeted for closure, including the Submarine Base in New London, CT and thePortsmouth Naval Shipyard in Kittery, Maine. In addition, the BRAC Commissionalso proposed a less significant realignment at the Fort Eustis base under ourFort Eustis/Fort Story project in Newport News, Virginia than was proposed bythe DoD; and the BRAC Commission proposed to close the Naval Air station inBrunswick, Maine, which had been recommended by the DoD to be realigned.   Finally, the BRAC Commission voted to upholdthe DoD’s recommendation to close the Walter Reed Army Medical Center inWashington, DC.  In September 2005,the BRAC Commission sent its report to the President regarding its findings andrecommended changes to the DoD’s initial report, and President Bush acceptedthe BRAC Commission’s recommendations in their entirety. On November 9,2005, the BRAC round was completed when Congress also approved the BRACCommission’s recommendations in their entirety.

Under the finalBRAC list versus the original DoD recommendations, the possible number ofaffected military housing units covered by our existing projects was reducedfrom 2,500 to 700 units, with these remaining 700 units located at the NavalAir Station in Brunswick, Maine.  Webelieve that the closure of the Walter Reed Army Medical Center will not resultin the loss of housing units, as these housing units are likely to be utilizedby personnel who will be relocated from serving at Walter Reed to serving atnearby military medical facilities.

The militaryhousing privatization initiative had not been undertaken at the time ofprevious BRAC rounds, and therefore there is no historical informationregarding the impact of a base closure on a military housing privatizationproject. To date, there has been no indication from the DoD or the BRACCommission that the federal government has factored into its analysis of thepossible effects that a base closure or realignment resulting from BRAC couldhave with respect to the outstanding debt financing for a project. In addition,prior BRAC rounds have shown that even once a base is approved for closure orrealignment, the actual closing or realignment of the base could take several yearsto be completed.  Accordingly, managementcurrently expects that the closure of the Naval Air Station in Brunswick, Mainewill not occur for at least three years. We are unable to determine with any certainty, however, the specificimpact, and the timing of any such impact, that base closures and realignmentsat our projects will have on our military housing operating results, other thanthe possible cessation or reduction of fees related to the affected bases.

**CriticalAccounting Policies**

Management’sDiscussion and Analysis of Financial Condition and Results of Operationsdiscusses the Company’s consolidated financial statements and The GMHPredecessor Entities’ combined financial statements, which have been preparedin accordance with U.S. generally accepted accounting principles. Thepreparation of these financial statements requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities andthe disclosure of contingent liabilities at the date of the financialstatements and the reported amounts of revenues and expenses

30

----

during thereporting period. While the estimates and judgments associated with theapplication of these accounting principles may be affected by differentassumptions or conditions, we believe the estimates and judgments associatedwith the reported amounts are appropriate under the circumstances in which theywere made. In addition, other companies in similar businesses may utilizedifferent estimation policies and methodologies, which may impact thecomparability of our results of operations and financial condition to thosecompanies.

The followingpolicies require significant judgments and estimates on our part in preparingthe consolidated financial statements of the Company and the combined financialstatements of The GMH Predecessor Entities. Changes in these judgments andestimates could have a material effect on these financial statements.

***Revenue Recognition***

*StudentHousing*. Student housing revenue includes rental revenue andother property income, standard and incentive management fees andreimbursements of certain operating expenses. These sources of revenue aredescribed in more detail below:

·             werecognize student housing rental revenue when due over the lease terms, whichare generally 12 months or less;

·             standardmanagement fees are based on a percentage of monthly cash receipts or grossmonthly rental and other revenues generated by the properties managed forothers. We recognize these fees when cash is received by the property or whenrevenue is earned by the managed property, depending upon whether themanagement agreement relating to a student housing property calls for cashversus accrual revenue recognition;

·             weearn incentive management fees as a result of the achievement of certainoperating performance criteria over a specified period by certain managedproperties, including targeted annual debt service coverage ratios, andrecognize these fees at the amount that would be due under the contract if thecontract was terminated on the balance sheet date;

·             expensereimbursements are comprised primarily of salary and related costs of ouremployees working at certain properties we manage for others, the cost of whichis reimbursed by the owners of the related properties. We accrue operatingexpense reimbursements as the related expenses are incurred.

*MilitaryHousing*.  We earn military housing revenues by providingservices to our military housing projects which include the following:

·             standardmanagement fees, based on a percentage of revenue generated by the militaryhousing projects from the basic allowance for housing provided by thegovernment to service members, referred to as BAH, are recognized when therevenue is earned by the military housing projects. Incentive management feesare based upon the satisfaction of certain criteria including, among otherthings, satisfying designated benchmarks relating to emergency work orderresponse, occupancy rates, home turnover and resident satisfaction surveys.Incentive management fees are recognized when the various criteria stipulatedin the management contract have been satisfied;

·             standarddevelopment and construction/renovation fees, based on a percentage ofdevelopment and construction/renovation costs incurred by the military housingprojects including hard and soft costs and financing costs, are recognized on amonthly basis as the costs are incurred by the military housing projects.  Hard costs consist of costs relating to goodssuch as building components, furniture and equipment and other tangible assets;and soft costs consist of costs incurred relating to intangible services suchas consulting, architectural and design services. Incentive development andconstruction/renovation fees are based upon the satisfaction of certaincriteria including, among other things, completing a number of housing unitsaccording to schedule, achieving specific safety records and implementing smallbusiness or minority subcontracting plans. Incentive development andconstruction/renovation fees are recognized when the various criteriastipulated in the contract have been satisfied;

·             revenueson fixed-price renovation contracts are recorded on thepercentage-of-completion method. When the percentage-of-completion method isused, contract revenue is recognized in the ratio that costs incurred to datebear to estimated costs at completion. Adjustments to cost estimates are madein the period in which the facts requiring such revisions become known. Whenthe revised estimates indicate a loss, such loss is currently provided for inits entirety;.

·             businessdevelopment fees are earned from companies with which we have relationships inrecognition of business development efforts and expenses incurred by us inconnection with pursuing military housing projects. The fees consist of(i) a base fee, which is a fee paid to the Company in consideration of theCompany’s ongoing pursuit of additional projects, and paid regardless ofwhether a project is awarded, and (ii) an incentive fee, which is paidover the course of an awarded project based on a percentage of certaindevelopment costs incurred by the project.  The base fees are recognized

31

----

on a straight-line basisover the term of the related business development agreement.  Theincentive fees are recognized as the related costs are incurred by therespective military housing projects;

·             preferredreturns are earned on our investments in military housing projects.  Thepreferred returns are based on a fixed percentage of our investment in militaryhousing projects and are recognized as accrued at the rates specified in theagreements, subject to projected availability of funds in the underlyingproject.  Accrued preferred returns are periodically evaluated forcollectibility; and

Deferred costs aresubject to estimation and judgment. Management makes determinations as to whichcosts are eligible for reimbursement and at what level they will be reimbursed.Management considers various factors in making these estimates and judgments,including the terms of the specific contract and historical experience as towhich costs are recoverable. Costs that are not probable of recovery areexpensed.

***Real Estate Investments and Corporate Assets***

We carry realestate investments and corporate assets at cost, net of accumulateddepreciation. Cost for acquired assets includes the purchase price and relatedclosing costs. We allocate the cost of real estate investments to tangible andidentified intangible assets based on relative fair values in accordance withStatement of Financial Accounting Standards No. 141 (“SFAS 141”),*Business Combinations*. We estimate fairvalue based on information that we obtain from a number of sources, includingour due diligence, marketing and leasing activities, independent appraisalsthat may be obtained in connection with the acquisition or financing of therespective property and other market data.

The value ofin-place leases is based on the difference between (i) the property valuedwith existing in-place leases, and (ii) the property valued as if vacant.As lease terms typically are 12 months or less, rates on in-place leasesgenerally approximate market rental rates. Factors that we consider in thevaluation of in-place leases include an estimate of incremental carrying costsduring the expected lease-up periods considering current market conditions, andthe nature of the tenancy. We amortize the value of in-place leases to expenseover the remaining term of the respective leases.

Purchase prices ofstudent housing properties to be acquired are not expected to be allocated totenant relationships considering the terms of the leases and the expectedlevels of renewals.

We expense routinerepair and maintenance expenditures that do not improve the value of an assetor extend its useful life, including turnover costs such as cleaning andinterior painting. We capitalize expenditures that improve the value and extendthe useful life of an asset. We compute depreciation using the straight-linemethod over the estimated useful lives of the assets, which is 40 yearsfor buildings including student housing properties and the commercial officebuilding, and three to five years for residential furniture and appliances.

In accordance withStatement of Financial Accounting Standards No. 144 (“SFAS 144”),*Accounting for the Impairment or Disposal ofLong-Lived Assets*, we review long-lived assets, such as real estateinvestments and purchased intangibles subject to amortization, for impairmentwhenever events or changes in circumstances indicate that the carrying amountmay not be recoverable. These circumstances may include, but are not limitedto, operational performance, market conditions and competition from otheroff-campus properties and on-campus housing, legal and environmental concerns,and results of appraisals or other information obtained as part of a financingor disposition strategy. We review recoverability of assets to be held and usedthrough a comparison of the carrying amount of an asset to the estimatedundiscounted future cash flows expected to be generated by the asset. If thecarrying amount of an asset exceeds its estimated undiscounted future cashflows, we recognize an impairment charge in the amount by which the carryingvalue of the asset exceeds the fair value of the asset determined usingcustomary valuation techniques, such as the present value of expected futurecash flows. Assets to be disposed of would be separately presented in thebalance sheet and reported at the lower of the carrying amount or fair valueless costs to sell, and no longer would be depreciated.

***Allowance for Doubtful Accounts***

We estimate thecollectibility of receivables generated by rental and other income as a resultof the operation of our student housing properties. If we believe that thecollectibility of certain amounts is questionable, we record a specific reservefor these amounts to reduce the amount outstanding to an amount we believe willbe collectible and a reserve for all other accounts based on a range ofpercentages applied to aging categories. We determine the amount of thisreserve based on historical collection and write-off experience.

We also evaluatethe collectibility of fee income and expense reimbursements generated by themanagement of student housing properties owned by others, and through theprovision of development, construction, renovation and management services toour military housing projects, based upon the individual facts andcircumstances of each situation and record a reserve for specific amounts, ifnecessary. Accounts receivable are stated net of the allowance for doubtfulaccounts.

32

----

***Notes Payable***

Werecord notes payable that we assume in connection with the acquisition ofstudent housing properties at their estimated fair value, with thecorresponding difference between the estimated fair value and assumed carryingvalue of the notes payable recorded as an adjustment to the purchase price ofthe related property. We determine fair value of assumed notes payable based onvarious assumptions related to market conditions, including the type, age andlocation of the acquired property and quoted interest rates for debt withsimilar terms.

***Minority Interest***

Minorityinterest as initially recorded at the date of our initial public offeringrepresented the net equity of the Operating Partnership, including the proceedsreceived from the sale of the warrant to Vornado, multiplied by the ownershippercentage of holders of limited partnership units in the Operating Partnershipother than the Company. The Operating Partnership is obligated to redeem, atthe request of a holder, each unit of limited partnership interest for commonshares on a one-for-one basis, subject to adjustments for share splits,dividends, recapitalizations or similar events. If the minority interest unitholders’ share of a current year loss would cause the minority interest balanceto be less than zero, the minority interest balance will be reported as zerounless there is an obligation of the minority interest holders to fund thoselosses. Any losses in excess of the minority interest will be charged againstequity. If future earnings materialize, equity will be credited for allearnings up to the amount of those losses previously absorbed. Distributions tolimited partnership unit holders other than the Company are recorded as areduction to minority interest.

***Investments in Military Housing Projects***

Weevaluate each of our investments in military housing projects to determine ifthe underlying entity is a variable interest entity (“VIE”) as defined underFASB Financial Interpretation No. 46 (as revised) (“FIN 46”). If an entityis deemed to be a VIE pursuant to FIN 46, the entity that absorbs a majority ofthe expected losses of the VIE is deemed to be the primary beneficiary and mustconsolidate the VIE. If the entity is not a VIE, it is evaluated forconsolidation based on controlling voting interests. If we have the majorityvoting interest with the ability to control operations and where no approval,veto or other important rights have been granted to other holders, the entitywould be consolidated. We are not the primary beneficiary of any VIEs, nor dowe have controlling voting interests in any of our military housing projects.We record investments in military housing projects initially at our cost andsubsequently adjust them to reflect our preferred return and other distributions.

TheCompany entered into a joint venture in August 2005 to develop and constructtwo student housing properties.  TheCompany is accounting for the transaction as a financing arrangement becausethe Company originally owned the land and contributed it to the joint ventureand has the option to purchase the joint venture partner’s interest in thejoint venture within one year of completion of the properties, and because theCompany has provided certain guarantees for the completion of the constructionand for a portion of the construction loans. Therefore, the Company accountsfor its investment in the joint venture by including its assets and liabilitiesin the Company’s consolidated financial statements.  Prior to the restatement, the investment inthis joint venture was accounted for using the equity method.

***Income Taxes***

Weelected to be taxed as a REIT in connection with the filing of our tax returnfor the taxable year ended on December 31, 2004. We have elected to treatcertain subsidiaries of our Operating Partnership as taxable REIT subsidiaries,and may make such elections as to other subsidiaries in the future. In general,a taxable REIT subsidiary may perform real estate and non-real estate-relatedbusiness, except for the operation or management of health care facilities orlodging facilities or the provision to any person, under a franchise, licenseor otherwise, of rights to any brand name under which any lodging facility orhealth care facility is operated.

If wefail to qualify as a REIT in any taxable year, we will be subject to federalincome tax, including any applicable alternative minimum tax, on our taxableincome at regular corporate tax rates.

Wehave elected to treat GMH Military Housing, LLC and College Park ManagementTRS, Inc. as taxable REIT subsidiaries. College Park ManagementTRS, Inc. is a wholly-owned subsidiary of College Park Management, LLC(which is a successor through merger to College Park Management, Inc., oneof The GMH Predecessor Entities). See Note 1 to the financial statementsincluded in this report.

**Results of Operations**

Ourresults of operations represent the operations of our student housing andmilitary housing operating segments. The

33

----

followingsignificant factors affected our results of operations for the three and ninemonths ended September 30, 2005 as compared to the three and nine monthsended September 30, 2004:

·             InNovember 2004, we completed our initial public offering pursuant to whichwe sold an aggregate of 30,350,989 common shares and raised an aggregate of$331.7 million in net proceeds.

·             In 2004, subsequentto the formation of the Trust in May 2004, we acquired 30 student housingproperties containing an aggregate of 5,529 units and 19,085 beds for anaggregate acquisition cost of $634.4 million.  During the three monthsended March 31, 2005, we acquired eight student housing properties with anaggregate of 1,607 units and 4,795 beds for an aggregate acquisition cost ofapproximately $172.8 million.  During the three months ended June 30,2005, we acquired eight student housing properties with an aggregate of 1,464units and 4,740 beds for an aggregate acquisition cost of approximately $147.4million.  During the three months ended September 30, 2005, weacquired six student housing properties with an aggregate of 1,213 units and3,237 beds and two undeveloped parcels of land for an aggregate acquisitioncost of approximately $123.4 million. These student housing propertiescontributed $35.3 million and $90.8 million of rent and other property incomein the three and nine months ended September 30, 2005, respectively.

·             The Fort Stewart andHunter Army Airfield and Fort Carson military housing projects both commencedoperations in the fourth quarter of 2003; the Fort Hamilton military housing projectcommenced operations in the second quarter of 2004; the Walter Reed ArmyMedical Center and Fort Detrick military housing project commenced operationsin the third quarter of 2004; the Fort Eustis/Fort Story and the Navy Northeastmilitary housing projects both commenced operations in the fourth quarter of2004; and the Fort Bliss/White Sands Missile Range military housing projectcommenced operations in the third quarter of 2005.  These military housingprojects contributed $27.8 million and $57.9 million of revenue in the threeand nine months ended September 30, 2005, respectively.

·             InNovember 2004, we entered into a $150 million three-year unsecuredrevolving credit facility with a consortium of banks. During the first, secondand third quarters of 2005, the credit facility has been used to fund studenthousing acquisitions.

Theresults of operations presented below reflect the results of operations of TheGMH Predecessor Entities for the three and nine months ended September 30,2004, and our results of operations for the three and nine months endedSeptember 30, 2005.

***Comparison of the Three Months EndedSeptember 30, 2005 to the Three Months Ended September 30, 2004***
| ** **                                                                                               | ** ** | **Three Months Ended September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **2005 (Company) (as restated)**          | ** ** | **2004 (Predecessor)** | ** ** |
| ** **                                                                                               | ** ** | **Student  Housing**                                     | ** ** | **Military  Housing** | ** ** | **Corporate** | ** ** | **Total** | ** ** | **Student  Housing** | ** ** | **Military  Housing** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| ** **                                                                                               | ** ** | **(in thousands)**                                  | ** ** |
| **Revenue:**                                                                                             | ** ** | ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Rent and other  property income                                                                          |       | $                                                        | 35,349     |   | $ | — |   | $ | 60 |   | $ | 35,409 |   | $ | 6,683 |   | $ | — |   | $ | 70 |   | $ | 6,753 |   |
| Expense  reimbursements:                                                                                 |       |                                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party                                                                                            |       | —                                                   |       | 20,074 |   | 22 |   | 20,096 |   | 367 |   | 7,697 |   | 638 |   | 8,702 |   |
| Third party                                                                                              |       | 1,299                                                    |       | — |   | — |   | 1,299 |   | 1,906 |   | — |   | — |   | 1,906 |   |
| Management fees:                                                                                         |       |                                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party                                                                                            |       | —                                                   |       | 1,755 |   | — |   | 1,755 |   | 348 |   | 619 |   | — |   | 967 |   |
| Third party                                                                                              |       | 611                                                      |       | — |   | — |   | 611 |   | 752 |   | — |   | — |   | 752 |   |
| Other fee  income-related party                                                                          |       | (39                                                      | )          | 5,934 |   | — |   | 5,895 |   | — |   | 2,115 |   | — |   | 2,115 |   |
| Other income                                                                                             |       | 34                                                       |       | 45 |   | 2 |   | 81 |   | 14 |   | 24 |   | 103 |   | 141 |   |
| Total revenue                                                                                            |       | 37,254                                                   |       | 27,808 |   | 84 |   | 65,146 |   | 10,070 |   | 10,455 |   | 811 |   | 21,336 |   |
| **Operating  Expenses:**                                                                                 | ** ** | ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Property  operating expenses                                                                             |       | 17,658                                                   |       | 1,248 |   | — |   | 18,906 |   | 4,773 |   | 1,035 |   | — |   | 5,808 |   |
| Reimbursed  expenses                                                                                     |       | 1,299                                                    |       | 20,074 |   | 22 |   | 21,395 |   | 2,273 |   | 7,697 |   | 638 |   | 10,608 |   |
| Real estate  taxes                                                                                       |       | 3,184                                                    |       | — |   | — |   | 3,184 |   | 490 |   | — |   | — |   | 490 |   |
| Administrative  expenses                                                                                 |       | —                                                   |       | — |   | 2,992 |   | 2,992 |   | — |   | — |   | 2,172 |   | 2,172 |   |
| Profits interest  expense                                                                                |       | —                                                   |       | — |   | — |   | — |   | — |   | — |   | 33,180 |   | 33,180 |   |
| Depreciation and  amortization                                                                           |       | 8,370                                                    |       | 78 |   | 102 |   | 8,550 |   | 1,526 |   | 10 |   | 234 |   | 1,770 |   |
| Interest                                                                                                 |       | 8,715                                                    |       | — |   | 274 |   | 8,989 |   | 1,627 |   | — |   | 95 |   | 1,722 |   |
| Total operating  expenses                                                                                |       | 39,226                                                   |       | 21,400 |   | 3,390 |   | 64,016 |   | 10,689 |   | 8,742 |   | 36,319 |   | 55,750 |   |
| Income (loss)  before equity in earnings of unconsolidated entities, income taxes and  minority interest |       | (1,972                                                   | )          | 6,408 |   | (3,306 | ) | 1,130 |   | (619 | ) | 1,713 |   | (35,508 | ) | (34,414 | ) |
| Equity in earnings  of unconsolidated entities                                                           |       | —                                                   |       | 1,058 |   | — |   | 1,058 |   | — |   | — |   | — |   | — |   |
| Income (loss)  before income taxes and minority interest                                                 |       | (1,972                                                   | )          | 7,466 |   | (3,306 | ) | 2,188 |   | (619 | ) | 1,713 |   | (35,508 | ) | (34,414 | ) |
| Income taxes                                                                                             |       | 110                                                      |       | 2,144 |   | — |   | 2,254 |   | — |   | — |   | — |   | — |   |
| Income (loss)  before minority Interest                                                                  |       | (2,082                                                   | )          | 5,322 |   | (3,306 | ) | (66 | ) | (619 | ) | 1,713 |   | (35,508 | ) | (34,414 | ) |
| Minority  interest                                                                                       |       | (1,063                                                   | )          | 2,716 |   | (1,687 | ) | (34 | ) | — |   | — |   | — |   | — |   |
| **Net  income (loss)**                                                                                   |       | $                                                        | (1,019     | ) | $ | 2,606 |   | $ | (1,619 | ) | $ | (32 | ) | $ | (619 | ) | $ | 1,713 |   | $ | (35,508 | ) | $ | (34,414 | ) |

 

34

----

***Student Housing***

*Revenue*. Of the 52 student housingproperties owned as of September 30, 2005, we acquired 30 of theproperties during the six months ended December 31, 2004, eight propertiesduring the three months ended March 31, 2005, eight properties during thethree months ended June 30, 2005 and the remaining six properties duringthe three months ended September 30, 2005. Rent and other property incomefrom these 52 properties totaled $35.3 million for the three months endedSeptember 30, 2005.

Expensereimbursements from related parties totaled $0.4 million in 2004. There was nota corresponding amount in 2005 because we acquired two student housingproperties to which the expense reimbursements related inMarch 2005.  In addition, we ceased managing one additional studenthousing property to which the expense reimbursements related in March 2005because it was sold to a third party.

Expensereimbursements from third parties decreased to $1.3 million in 2005 from $1.9million in 2004 primarily due to our ceasing to provide services to fivethird-party owned student housing properties following the sale of theproperties. We expect expense reimbursements, which relate to properties wemanage but do not own, to become less significant as a percentage of our overallrevenue as rental revenue earned from the properties that we do own continuesto increase.

Managementfee income from related parties was $0.3 million in 2004. There was not acorresponding amount in 2005 because we acquired two student housing propertiesfrom related parties in March 2005 that we managed prior topurchase.  In addition, in March 2005 we ceased providing managementservices relating to an additional student housing property owned by a relatedparty due to the sale of the property.

Managementfee income from third parties decreased to $0.6 million in 2005 from $0.8million in 2004, primarily as a result of our ceasing to provide managementservices to five student housing properties owned by third parties due to thesale of the properties by the third parties. For the remainder of 2005, weexpect management fees to contribute less significantly to total revenues giventhe expected growth in rental revenue from the operations of properties we own.

*Expenses*.  Property operatingexpenses increased to $17.7 million in 2005 from $4.8 million in 2004,primarily due to expenses attributable to the 52 properties acquired fromJuly 2004 through September 2005.  We expect property operatingexpenses to increase significantly in the future as we acquire additionalproperties.

Reimbursedexpenses decreased to $1.3 million in 2005 from $2.3 million in 2004, primarilydue to our acquisition of the two student housing properties from relatedparties in March 2005 that we managed prior to our purchase.  Inaddition, we ceased providing management services relating to five additionalstudent housing properties owned by third parties due to the sale of theproperties by the third parties.

Realestate taxes increased to $3.2 million in 2005 from $0.5 million in 2004 due tothe acquisition of 52 properties from July 2004 throughSeptember 2005. We expect real estate taxes to increase significantly inthe future as we acquire additional properties.

Depreciationand amortization increased to $8.4 million in 2005 from $1.5 million in 2004 asa result of acquiring 52 properties for an aggregate acquisition cost of$1,078.0 million from July 2004 through September 2005. The $8.4million in 2005 is comprised of $6.7 million of depreciation and $1.7 millionof lease intangible amortization.  We expect depreciation and amortizationto increase significantly in the future as we acquire additional properties.

Interestexpense increased to $8.7 million in 2005 from $1.6 million in 2004 as a resultof incurring debt, including placement of new mortgage debt and the assumptionof existing mortgage debt and borrowings under our line of credit, inconnection with the acquisition of 52 properties from July 2004 throughSeptember 2005.   During the threemonths ended September 30, 2005, we placed $72.6 million of new mortgagedebt and assumed $6.6 million of existing mortgage debt. We expect interestexpense to increase in the future as we incur additional debt to fundacquisitions and as interest rates rise.

Incometaxes of $0.1 million in 2005 related to taxable income in the Company’staxable REIT subsidiary.  There were no taxable REIT subsidiaries duringthe comparable period in 2004.

35

----

***Military Housing***

*Revenue*. Expense reimbursements totaled$20.1 million in 2005 compared to $7.7 million in 2004. Of the 2005amount, $1.9 million related to the Fort Stewart and Hunter Army Airfieldproject and $1.7 million related to the Fort Carson project, both of whichcommenced operations in the fourth quarter of 2003; $0.1 million related tothe Fort Hamilton project, which commenced operations in the second quarter of2004; $1.2 million related to the Walter Reed Army Medical Center and FortDetrick project, which commenced operations in the third quarter of 2004;$1.9 million related to the Fort Eustis/Fort Story project and$10.5 million related to the Navy Northeast project, both of whichcommenced operations in the fourth quarter of 2004; and $2.8 million related tothe Fort Bliss/White Sands Missile Range project, which commenced operations inthe third quarter of 2005.  Of the 2004amount, $5.7 million related to the Fort Carson project, $0.9 million relatedto the Fort Stewart and Hunter Army Airfield project, $0.1 million related tothe Fort Hamilton project, $0.6 million related to the Walter Reed Army MedicalCenter and Fort Detrick project and $0.4 million related to costs incurred inthe development of CDMP for the Fort Eustis/Fort Story project.

Managementfees from related parties totaled $1.8 million in 2005 compared to $0.6 millionin 2004.  Of the 2005 amount, $0.2 million related to the Fort Stewart andHunter Army Airfield project and $0.3 million related to the Fort Carsonproject, both of which commenced operations in the fourth quarter of 2003; $0.1million related to the Fort Hamilton project, which commenced operations in thesecond quarter of 2004; $0.1 million related to the Walter Reed Army MedicalCenter and Fort Detrick project which commenced operations in the third quarterof 2004; $0.1 million related to the Fort Eustis/Fort Story project and$0.8 million related to the Navy Northeast project, both of whichcommenced operations in the fourth quarter of 2004; and $0.2 million related tothe Fort Bliss/White Sands Missile Range project, which commenced operations inthe third quarter of 2005. Of the 2004 amount $0.2 million related to the FortStewart and Hunter Army Airfield project, $0.3 million related to the FortCarson project and $0.1 million related to the Fort Hamilton, Walter Reed ArmyMedical Center and Fort Detrick projects.

Otherfee income – related party totaled $5.9 million in 2005 compared to $2.1million in 2004. Of the 2005 amount, $4.7 million related to development andconstruction/renovation fees, and $1.2 million related to business developmentfees. Of the $4.7 million development and construction/renovation fees, $0.1million related to the Fort Carson project and $1.0 million related to the Fort Stewart and Hunter Army Airfieldproject, both of  which commencedoperations in the fourth quarter of 2003; $0.2 million related to the FortHamilton project, which commenced operations in the second quarterof 2004; $0,3 million related to the Walter Reed Army Medical Center andFort Detrick project which commenced operations in the third quarter of 2004;$0.3 million related to the Fort Eustis/Fort Story project and$1.4 million related to the Navy Northeast project, both of whichcommenced operations in the fourth quarter of 2004; and $1.4 million related tothe Fort Bliss/White Sands Missile Range project, which commenced operations inthe third quarter of 2005.  The 2004 amount consisted of $1.8 million ofdevelopment and construction/renovation fees and $0.3 million of businessdevelopment fees. Of the development and construction/renovation fees, $0.7million related to the Fort Stewart and Hunter Army Airfield project, $0.3million related to the Fort Carson project, $0.1 million related to the FortHamilton project and $0.7 million related to the Walter Reed Army MedicalCenter and Fort Detrick.

Equityin earnings of unconsolidated entities, consisting of equity income andpreferred returns from our military housing project joint ventures, totaled$1.1 million for the three months ended September 30, 2005. Of this amount,$0.2 million related to preferred returns from our Navy Northeast Regionproject, and $0.9 million related to our investment in Fort Carson FamilyHousing, LLC.

*Expenses*.  Property operatingexpenses include costs related to operating the military housing segment of ourbusiness. These costs increased to $1.2 million in 2005 from $1.0 million in2004, primarily due to costs associated with operating the Fort Eustis/FortStory project and the Navy Northeast Region project, both of which commenced operations in the fourth quarter of2004 and the Fort Bliss/White Sands Missile Range project, which commencedoperations in the third quarter of 2005.

Reimbursedexpenses increased to $20.1 million in 2005 from $7.7 million in 2004 primarilydue to increases in payroll and renovation expenses related to the sevenmilitary housing projects in operation as of September 30, 2005 andclosing costs and transition expenses for the Fort Bliss/White Sands MissileRange project.

***Corporate***

Rentalrevenue and expense reimbursements, which were recognized with respect to theportion of our corporate headquarters leased to entities affiliated with GaryM. Holloway, Sr., and payroll and related expenses reimbursed by entitiesaffiliated with Mr. Holloway for the provision of common services, decreasedto $0.1 million in 2005 from $0.7 million in 2004.  The decrease is a result of increased expensereimbursements in 2004 related to our initial public offering.

36

----

Administrativeexpenses, primarily relating to management of our corporate office, accounting,legal, human resources and information technology, increased to $3.0 million in2005 from $2.2 million in 2004 primarily due to increased staffing andadditional costs incurred in connection with becoming a public company andgrowth in our operating segments.

Depreciationand amortization, relating primarily to our corporate headquarters and relatedmortgage, decreased slightly to $0.1 million in 2005 from $0.2 million in 2004primarily due to the sale and transfer of an interest in a corporate aircraftin February 2005.

Interestexpense increased to $0.3 million in 2005 from $0.1 million in 2004 primarilydue to an increase in the interest rate on our corporate headquarters loan.

Compensationexpense was recorded in the three-month period ended September 30, 2004related to profits interests awarded to certain employees.  Theseemployees were eligible to participate in the net proceeds or value received inexcess of the equity investments in such assets upon their sale ordisposition.   These assets included certain student housingproperties and the military business included in The GMH PredecessorEntities.  These employees rendered all services and satisfied allconditions necessary to earn the right to benefit from these profits interestsprior to September 30, 2004. In accordance with Financial AccountingStandards Statement No.5,*Accounting forContingencies*, compensation expense relating to the award of theseprofits interests is required to be recognized by The GMH Predecessor Entitieswhen the sale or disposition of the assets resulting in proceeds received byGary M. Holloway in an amount in excess of his equity investment in such assetsbecomes probable.  This amount became probable during the third quarter of2004 when, in connection with the contribution of the ownership interests inGMH Military Housing LLC, College Park Management, Inc. and other assetsby Mr. Holloway to our operating partnership in anticipation of theinitial public offering of the Company, the remaining profits interests awardswere amended to fix the value of such awards at $33.2 million to be paid tothese employees unconditionally.  Accordingly, this amount was recognizedin the third quarter of 2004 and Mr. Holloway’s obligations regarding theprofits interests were satisfied upon the transfer of $33.2 million of units oflimited partnership in our operating partnership to these employees onNovember 2, 2004, the closing date of our initial public offering.

***Comparison of the Nine Months EndedSeptember 30, 2005 to the Nine Months Ended September 30, 2004***
| ** **                                                                                               | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **2005 (Company) (as restated)**         | ** ** | **2004 (Predecessor)** | ** ** |
| ** **                                                                                               | ** ** | **Student  Housing**                                    | ** ** | **Military  Housing** | ** ** | **Corporate** | ** ** | **Total** | ** ** | **Student  Housing** | ** ** | **Military  Housing** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| ** **                                                                                               | ** ** | **(in thousands)**                                 | ** ** |
| **Revenue:**                                                                                             | ** ** | ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Rent and other  property income                                                                          |       | $                                                       | 90,831     |   | $ | — |   | $ | 182 |   | $ | 91,013 |   | $ | 6,683 |   | $ | — |   | $ | 340 |   | $ | 7,023 |   |
| Expense  reimbursements:                                                                                 |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party                                                                                            |       | 186                                                     |       | 40,134 |   | 232 |   | 40,552 |   | 1,089 |   | 14,845 |   | 735 |   | 16,669 |   |
| Third party                                                                                              |       | 3,876                                                   |       | — |   | — |   | 3,876 |   | 5,475 |   | — |   | — |   | 5,475 |   |
| Management fees:                                                                                         |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party                                                                                            |       | 197                                                     |       | 4,888 |   | — |   | 5,085 |   | 1,163 |   | 1,520 |   | — |   | 2,683 |   |
| Third party                                                                                              |       | 2,156                                                   |       | — |   | — |   | 2,156 |   | 3,430 |   | — |   | — |   | 3,430 |   |
| Other fee  income-related party                                                                          |       | (39                                                     | )          | 12,818 |   | 70 |   | 12,849 |   | — |   | 4,174 |   | — |   | 4,174 |   |
| Other income                                                                                             |       | 109                                                     |       | 69 |   | 70 |   | 248 |   | 58 |   | 70 |   | 365 |   | 493 |   |
| Total revenue                                                                                            |       | 97,316                                                  |       | 57,909 |   | 554 |   | 155,779 |   | 17,898 |   | 20,609 |   | 1,440 |   | 39,947 |   |
| **Operating  Expenses:**                                                                                 | ** ** | ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Property  operating expenses                                                                             |       | 37,866                                                  |       | 3,238 |   | — |   | 41,104 |   | 6,683 |   | 3,168 |   | — |   | 9,851 |   |
| Reimbursed expenses                                                                                      |       | 4,062                                                   |       | 40,134 |   | 232 |   | 44,428 |   | 6,564 |   | 14,845 |   | 735 |   | 22,144 |   |
| Real estate  taxes                                                                                       |       | 8,339                                                   |       | — |   | — |   | 8,339 |   | 490 |   | — |   | — |   | 490 |   |
| Administrative  expenses                                                                                 |       | —                                                  |       | — |   | 8,768 |   | 8,768 |   | — |   | — |   | 4,488 |   | 4,488 |   |
| Profits interest  expense                                                                                |       | —                                                  |       | — |   | — |   | — |   | — |   | — |   | 33,180 |   | 33,180 |   |
| Depreciation and  amortization                                                                           |       | 24,414                                                  |       | 132 |   | 412 |   | 24,958 |   | 1,537 |   | 18 |   | 633 |   | 2,188 |   |
| Interest                                                                                                 |       | 20,508                                                  |       | — |   | 739 |   | 21,247 |   | 1,627 |   | — |   | 253 |   | 1,880 |   |
| Total operating  expenses                                                                                |       | 95,189                                                  |       | 43,504 |   | 10,151 |   | 148,844 |   | 16,901 |   | 18,031 |   | 39,289 |   | 74,221 |   |
| Income (loss)  before equity in earnings of unconsolidated entities, income taxes and  minority interest |       | 2,127                                                   |       | 14,405 |   | (9,597 | ) | 6,935 |   | 997 |   | 2,578 |   | (37,849 | ) | (34,274 | ) |
| Equity in  earnings of unconsolidated entities                                                           |       | —                                                  |       | 1,999 |   | — |   | 1,999 |   | — |   | — |   | — |   | — |   |
| Income (loss)  before income taxes and minority interest                                                 |       | 2,127                                                   |       | 16,404 |   | (9,597 | ) | 8,934 |   | 997 |   | 2,578 |   | (37,849 | ) | (34,274 | ) |
| Income taxes                                                                                             |       | 125                                                     |       | 4,387 |   | — |   | 4,512 |   | — |   | — |   | — |   | — |   |
| Income (loss)  before minority interest                                                                  |       | 2,002                                                   |       | 12,017 |   | (9,597 | ) | 4,422 |   | 997 |   | 2,578 |   | (37,849 | ) | (34,274 | ) |
| Minority  interest                                                                                       |       | 954                                                     |       | 6,023 |   | (4,794 | ) | 2,183 |   | — |   | — |   | — |   | — |   |
| **Net income (loss)**                                                                                    |       | $                                                       | 1,048      |   | $ | 5,994 |   | $ | (4,803 | ) | $ | 2,239 |   | $ | 997 |   | $ | 2,578 |   | $ | (37,849 | ) | $ | (34,274 | ) |

 

37

----

***Student Housing***

*Revenue*. Of the 52 properties owned as ofSeptember 30, 2005, we acquired 30 of the student housing propertiesduring 2004 and the remaining 22 properties during the nine months endedSeptember 30, 2005. Rent from these 52 properties totaled $90.8 millionfor the nine months ended September 30, 2005.

Expensereimbursements from related parties decreased to $0.2 million in 2005 from $1.1million in 2004, primarily due to our acquisition of two student housingproperties from related parties in March 2005, which we managed prior topurchase.  In addition, we ceased managing one student housing propertyowned by a related party in March 2005 because it was sold to a thirdparty.

Expensereimbursements from third parties decreased to $3.9 million in 2005 from $5.5million in 2004, primarily due to our ceasing to provide services to fivestudent housing properties in 2005 owned by third parties upon the sale of theproperties.  We expect expense reimbursements, which relate to propertieswe manage but do not own, to become less significant as a percentage of overallrevenue as rental revenue earned from the properties that we do own continuesto increase.

Managementfee income from related parties decreased to $0.2 million in 2005 from $1.2million in 2004. The decrease in management fee income was primarily due to ouracquisition of two student housing properties from related parties inMarch 2005 that we managed prior to purchase.  In addition, inMarch 2005 we ceased providing management services relating to anadditional student housing property owned by a related party upon the sale ofthe property.

Managementfee income from third parties decreased to $2.2 million in 2005 from $3.4million in 2004, primarily due to our ceasing to manage five student housingproperties owned by third parties upon the sale of the properties.  Forthe remainder of 2005, we expect management fees to contribute lesssignificantly as a percentage of overall revenue given the expected growth inrental revenue from the operations of properties we own.

*Expenses*.  Property operatingexpenses increased to $37.9 million in 2005 from $6.7 million in 2004,primarily due to expenses attributable to the 52 properties acquired fromJuly 2004 through September 2005.  We expect expenses toincrease significantly in the future as we acquire additional properties.

Reimbursedexpenses decreased to $4.1 million in 2005 from $6.6 million in 2004, primarilydue to our acquisition of the two student housing properties from relatedparties in March 2005 that we managed prior to our purchase.  Inaddition, during the nine months ended September 30, 2005, we ceasedproviding management services relating to five student housing properties ownedby third parties and a student housing property owned by a related party uponthe sale of the properties.

Realestate taxes increased to $8.3 million in 2005 from $0.5 million in 2004 due tothe acquisition of 52 properties from July 2004 throughSeptember 2005. We expect real estate taxes to increase significantly inthe future as we acquire additional properties.

Depreciationand amortization increased to $24.4 million in 2005 from $1.5 million in 2004as a result of acquiring 52 properties for an aggregate acquisition cost of$1,078.0 million from July 2004 through September 2005. The $24.4million in 2005 is comprised of $17.4 million of depreciation and $7.0 millionof lease intangible amortization. We expect depreciation and amortization toincrease significantly in the future as we acquire additional properties.

Interestexpense increased to $20.5 million in 2005 from $1.6 million in 2004 as aresult of incurring debt, including placement of new mortgage debt and theassumption of existing mortgage debt, and borrowings under our line of credit,in connection with the acquisition of 52 properties from July 2004 throughSeptember 2005. During the nine months ended September 30, 2005, weplaced $202.0 million of new mortgage debt, assumed $83.3 million of existingmortgage debt, and borrowed $244.0 million and repaid $107.0 million under ourline of credit.  We expect interest expense to increase in the future as weincur additional debt to fund acquisitions and as interest rates rise.

Incometaxes amounted to $0.1 million in 2005 as a result of taxable income in ourtaxable REIT subsidiary. There were no taxable REIT subsidiaries during thecomparable period in 2004.

***Military Housing***

*Revenue*. Expense reimbursements totaled$40.1 million in 2005 compared to $14.8 million in 2004. Of the 2005amount, $8.0 million related to the Fort Stewart and Hunter Army Airfieldproject and $5.3 million related to the Fort Carson project, both of whichcommenced operations in the fourth quarter of 2003; $0.3 million relatedto the Fort Hamilton project, which commenced operations in the second quarterof 2004; $1.7 million related to the Walter Reed Army Medical Center andFort

38

----

Detrickproject, which commenced operations in the third quarter of 2004;$3.1 million related to the Fort Eustis/Fort Story project; and$18.8 million related to the Navy Northeast project, both of whichcommenced operations in the fourth quarter of 2004; and $2.9 million related tothe Fort Bliss/White Sands Missile Range project, which commenced operations inthe third quarter of 2005. Of the 2004 amount, $2.0 million related to the FortStewart and Hunter Army Airfield project, $10.5 million related to the Fort Carsonproject, $0.7 million related to the Fort Hamilton project, $0.6 millionrelated to the Walter Reed Army Medical Center and Fort Detrick project and$1.0 million related to reimbursement of costs incurred in the development ofthe CDMP for the Fort Hamilton Project, Walter Reed Army Medical Center/FortDetrick project and the Fort Eustis/Fort Story project.

Managementfees from related parties totaled $4.9 million in 2005 compared to $1.5 millionin 2004.  Of the 2005 amount, $0.7 million related to the Fort Stewart andHunter Army Airfield project and $1.0 million related to the Fort Carsonproject, both of which commenced operations in the fourth quarter of 2003; $0.2million related to the Fort Hamilton project, which commenced operations in thesecond quarter of 2004; $0.1 million related to the Walter Reed Army MedicalCenter and Fort Detrick project which commenced operations in the third quarterof 2004; $0.4 million related to the Fort Eustis/Fort Story project and$2.3 million related to the Navy Northeast project, both of whichcommenced operations in the fourth quarter of 2004; and $0.2 million related tothe Fort Bliss/White Sands Missile Range project, which commenced operations inthe third quarter of 2005.  Of the 2004amount, $0.7 million related to the Fort Stewart and Hunter Army Airfieldproject, $0.7 million related to the Fort Carson project and $0.1 millionrelated to the Fort Hamilton project and the Walter Reed Army Medical Centerand Fort Detrick project.

Otherfee income totaled $12.8 million in 2005 compared to $4.2 million in 2004. Ofthe 2005 amount, $9.9 million related to development andconstruction/renovation fees earned from related parties, $2.9 million relatedto business development fees. Of the $9.9 million of development andconstruction/renovation fees, $0.3 million related to the Fort Carson projectand $3.1 million related to the Fort Stewart and Hunter Army Airfield project,both of which commenced operations in the fourth quarter of 2003; $0.6 millionrelated to the Fort Hamilton project, which commenced operations inJune 2004; $0.9 million related to the Walter Reed Army Medical Center andFort Detrick project which commenced operations in July 2004; $0.6 millionrelated to the Fort Eustis/Fort Story project and $3.0 million related tothe Navy Northeast project, both of which commenced operations in the fourthquarter of 2004; and $1.4 million related to the Fort Bliss/White Sands MissileRange project, which commenced operations in the third quarter of 2005.  The 2004 amount consisted of $3.2 million ofdevelopment and construction/renovation fees and $1.0 million of businessdevelopment fees. Of the development and construction/renovation fees, $1.5million related to the Fort Stewart and Hunter Army Airfield project, $0.5million related to the Fort Carson project, $0.5 million related to the FortHamilton project and $0.7 million related to the Walter Reed Army MedicalCenter and Fort Detrick project.

Equityin earnings of unconsolidated entities, consisting of equity income andpreferred returns from our military housing project joint ventures, totaled$2.0 million for the nine months ended September 30, 2005.  Of this amunt, $0.6 million related topreferred returns from our Navy Northeast Region project, and $1.4 millionrelated to our investment in the Fort Carson Family Housing, LLC.

*Expenses*.  Property operatingexpenses include costs related to operating the military housing segment of ourbusiness. These costs remained consistent at $3.2 million in both 2005 and in2004.

Reimbursedexpenses increased to $40.1 million in 2005 from $14.8 million in 2004primarily due to payroll and renovation expenses related to the seven militaryhousing projects in operation as of September 30, 2005; closing costs andtransition expenses for the Fort Hamilton, Walter Reed, Fort Detrick, FortEustis/Fort Story, Navy Northeast and Fort Bliss/White Sands projects; andexpenses relating to the Fort Carson project’s management contracts.

***Corporate***

Rentalrevenue and expense reimbursements, which were recognized with respect to theportions of our corporate headquarters leased to entities affiliated with GaryM. Holloway, Sr., and payroll and related expenses reimbursed by entitiesaffiliated with Mr. Holloway for the provision of common services,decreased to $0.4 million in 2005 from $1.1 million in 2004 primarily as aresult of reimbursed expenses in 2004 related to our initial public offering.

Administrativeexpenses, primarily relating to management of our corporate office, accounting,legal, human resources and information technology, and corporate aircraft,increased to $8.8 million in 2005 from $4.5 million in 2004 primarily due toincreased staffing and additional costs incurred in connection with becoming apublic company and growth in our operating segments.

Depreciation,relating primarily to our corporate headquarters, decreased to $0.4 million in2005 from $0.6 million in 2004 primarily due to the sale and transfer of aninterest in a corporate aircraft in February 2005.

39

----

Interestexpense increased to $0.7 million in 2005 from $0.3 million in 2004 primarilydue to an increase in the interest rate on our corporate headquarters loan andthe corporate aircraft loan.

Compensationexpense was recorded in the nine-month period ended September 30, 2004,relating to profits interests awarded by Gary M. Holloway to certain employeesof The GMH Predecessor Entities and other entities affiliated with Gary M.Holloway in recognition of past services. These employees were eligible to participatein the net proceeds or value received by Gary M. Holloway upon the sale ordisposition of certain student housing properties and the military housingbusiness in excess of Mr. Holloway’s equity investments in suchassets.  These employees rendered all services and satisfied allconditions necessary to earn the right to benefit from these profits interestsas of the date that such profits interests were awarded.  In accordancewith Financial Accounting Standards Statement No.5,*Accounting for Contingencies*, compensation expense relatingto the award of these profits interests is required to be recognized by The GMHPredecessor Entities when the sale or disposition of the assets resulting inproceeds received by Gary M. Holloway in an amount in excess of his equityinvestment in such assets becomes probable.  This amount became probableduring the third quarter of 2004 when, in connection with the contribution ofthe ownership interests in GMH Military Housing LLC, College Park ManagementInc. and other assets by Mr. Holloway to our operating partnership inanticipation of the initial public offering of the Company, the remainingprofits interests awards were amended to fix the value of such awards at $33.2million to be paid to these employees unconditionally.  Accordingly, thisamount was recognized in the third quarter of 2004 and Mr. Holloway’sobligations regarding the profits interests were satisfied upon the transfer of$33.2 million of units of limited partnership in our operating partnership to theseemployees on November 2, 2004, the closing date of our initial publicoffering.

**Liquidity and Capital Resources**

Short-termliquidity requirements consist primarily of funds necessary to pay operatingexpenses and other costs. These expenses and costs may include(i) recurring maintenance and capital expenditures to maintain and leaseour properties, (ii) interest expense and scheduled principal payments onoutstanding indebtedness, (iii) real estate taxes and insurance,(iv) corporate salaries, employee benefits and other corporate overheadand administrative expenses and (v) future distributions to shareholdersand partners of our Operating Partnership.

Ourexisting working capital and cash provided by operations, together with amountsavailable to us under our $150.0 million revolving credit facility are expectedto be sufficient to meet our short-term liquidity requirements.  Availability under the credit facility as of September 30, 2005 waslimited to a borrowing base amount equal to the sum of 60% of the value of anunencumbered asset pool as of the end of the previous quarter (which in noevent may contain fewer than five student housing properties) and 50% of theannualized value of our cash flow from our management, development andconstruction/renovation fees in connection with our military housing projectsand from management of our student housing properties in the previousquarter.  As of September 30, 2005,we had $137.0 million in outstanding borrowings under our credit facility, andan additional $13.0 million was available for draw under the facility.Subsequent to the end of the third quarter, and upon completion of our recentfollow-on offering in early October 2005, we used $122.0 million in netproceeds from the offering to repay outstanding borrowings under the facility.

Thecredit facility was obtained by our Operating Partnership inNovember 2004, and the Trust serves as guarantor for the credit facility.Prior to an amendment to our credit facility that was effective as ofAugust 9, 2005, advances under the credit facility bore interest, at theelection of the borrower, at a Eurodollar rate based on LIBOR or a base ratebased on the prime rate announced by Bank of America, N.A., as theadministrative agent of the facility, plus an “Applicable Rate,” ranging from1.50% to 2.00% for Eurodollar rate loans or 0.625% to 1.375% for base rateloans. The Applicable Rate is determined by the ratio of all liabilities to ourtotal asset value, as defined in the credit facility. The credit facility alsorequires that we maintain certain corporate level financial covenants.

Effectiveas of August 9, 2005, we executed a Second Amendment and Waiver to CreditAgreement (“Amendment”), pursuant to which, among other things, the interestrates applicable to borrowings were modified to 1.625% to 2.375% for Eurodollarrate loans and 0.75% to 1.75% for prime rate loans. The credit facility alsorequires that we maintain certain corporate level financial covenants. Underthe Amendment, the calculation of the borrowing base was revised to includecash flow from the military housing construction and development fees and toincrease the total cash flow attributable to annualized fees from themanagement, construction and development of the military housing projects andstudent housing properties from 35% to 50%.  In addition, the Amendmentprovided a formal waiver from the lenders with respect to the Company’snoncompliance with the leverage ratio requirement under the facility as ofJune 30, 2005, and modified the calculation of the leverage ratio andincreased the maximum leverage ratio from 60% to 65% through December 31,2005.  At the end of the first quarter of 2006, the maximum leverage ratiowill revert to 60%.

Weelected to be treated as a REIT for federal income tax purposes in connectionwith the filing of our tax return relating to the fiscal year endedDecember 31, 2004. As a REIT, we are required to distribute at least 90%of our REIT taxable income to our shareholders on an annual basis. Therefore,except as discussed below, as a general matter, a substantial portion of

40

----

cashgenerated by our operations will be used to fund distributions to shareholdersand holders of limited partnership interests in our Operating Partnership, andwill not be available to satisfy our liquidity needs.

Futuredividends and distributions will be declared at the discretion of our board oftrustees and will depend on our actual cash flow, our financial condition,capital requirements, the annual distribution requirements under the REITprovisions of the Code and other such factors as our board of trustees deemsrelevant. We expect that during the remainder of 2005, our cash flow fromoperations will be insufficient to fund our anticipated dividend distributions.Therefore, we expect to rely on amounts available under our credit facility orthrough other third party debt financing in order to fund these distributionsand other capital needs.  In addition, our board of trustees may choose topay a lower distribution in the event we are unable to obtain such financing.Any indebtedness we incur will increase our leverage and decrease our abilityto borrow money for other needs, such as for the acquisition or development ofadditional student housing properties or investments relating to additionalmilitary housing projects.

As ofSeptember 30, 2005, 45 of our student housing properties, our corporateheadquarters, and other assets were encumbered by notes payable aggregating$629.2 million and secured by first liens on the individual assets with anaggregate cost basis of approximately $914.5 million before accumulateddepreciation.  Our notes payable have a weighted-average interest rate of4.98% and mature at various dates between November 2005 and June 2024and require monthly payments of principal and interest or monthly payments ofinterest only. The table below sets forth, for the five succeeding years andthereafter, the aggregate annual principal payments of our notes payable andcredit facility (in thousands):
| 2005                 |   | $       | 7,043   |   |
|----------------------|--------|---------|---------|--------|
| 2006                 |   | 5,188   |    |
| 2007                 |   | 224,960 |    |
| 2008                 |   | 4,708   |    |
| 2009                 |   | 34,076  |    |
| 2010                 |   | 65,954  |    |
| 2011 and  thereafter |   | 424,242 |    |
|                 |   | $       | 766,171 |   |

 

Withregard to our military housing projects, we made a $10.6 million equitycontribution in November 2004 relating to our Navy Northeast project andhave contractually committed to contribute an aggregate of $2.0 million in 2006to our Fort Hamilton project, $5.9 million in 2007 to our Walter Reed ArmyMedical Center/Fort Detrick project, $3.6 million in 2010 for our FortEustis/Fort Story project, $8.0 million in 2011 for our Fort Stewart and HunterArmy Airfield project, and $6.3 million in 2011 for our Fort Bliss/White Sandsproject. These equity contributions help to fund the development, constructionand renovation of housing units at these bases during their respective initialdevelopment periods.

Typically,we are reimbursed for certain payroll expenses relating to the student housingproperties we manage for third parties, for certain costs we incur after we areawarded a military housing project until we enter into agreements for theproject and for transition costs we incur shortly before initiation of ourmanagement of a military housing project. However, we are required to fundthese costs prior to the time we receive the reimbursements. Typically, Armyand Navy projects require approximately $1.0 million to $7.0 million in costsassociated with transition and exclusive negotiations, depending on the size ofthe project. The expenditures typically begin 12 months prior to closing of theaward of the military housing project. Accordingly, these timing differencesadd to our short-term liquidity needs.

Ifcash flows from any of our military housing projects are insufficient to meetthe coverage ratios or benchmarks entitling us to receive fee payments, anyunpaid fees will accumulate and be subsequently paid from operations or upondissolution of the projects to the extent that funds are available and theapplicable thresholds are met. If these thresholds are not met, we will nothave access to certain of the fees we have earned. The unavailability of thesefunds would materially impact our ability to meet our short-term and long-termliquidity needs. We will be required to make equity contributions at the beginningof the initial development period for typical Navy transactions and at the endof the initial development period for typical Army transactions. If cash flowis insufficient, any unpaid equity returns will accumulate as specified in theapplicable project agreement and subsequently be paid from operations or upondissolution of the projects to the extent the funds are available. Based on ourcurrent expectations regarding the terms of the debt funding for our militaryprojects, we expect that the projects will generate sufficient cash flows tofund the reinvestment account and pay anticipated equity returns.

Withregard to our currently owned student housing properties, we do not have anyshort-term capital commitments; however, we will require funds in connectionwith our anticipated acquisitions of additional student housingproperties.  As of October 31, 2005,we had agreements to acquire three student housing properties and one landparcel for development, and non-binding letters of intent to acquire sixstudent housing properties and one land parcel for development.  We will be continuing our due diligenceprocess with respect to these transactions during the remainder of 2005, aswell as continuing to review potential transactions covering additional studenthousing properties that are located in the Company’s targeted

41

----

marketsand that meet management’s underwriting criteria for creating long-term growthpotential.  The timing of any of these acquisitions will be dependent uponvarious factors, including the ability to complete satisfactory due diligence,obtain appropriate financing on the properties and the availability of capital.We intend to fund the equity portion of the purchase price for these additionalstudent housing properties by using funds from our credit facility or fromavailable cash from operations. In addition, we may leverage our existingstudent housing properties in order to have cash available to fund the purchaseprice of additional student housing properties.

Dependingupon the size of the Company’s student housing acquisition pipeline and thetiming of closings on our properties under contract and non-binding letter ofintent, the amount of cash required to fund planned student housingacquisitions during the next twelve months may exceed the maximum capacityavailable under our existing credit facility. We also may pursue additionalfinancing as opportunities arise.  Future financings may include a rangeof different sizes or types of financing, including the sale of additional debtor equity securities.  While we believe we will be able to obtain suchfunds, these funds may not be available on favorable terms or at all. Ourability to obtain additional financing depends on several factors, includingfuture market conditions, our success or lack of success in penetrating ourmarkets, our future creditworthiness, and restrictions contained in agreementswith our investors or lenders, including the restrictions contained in theagreement governing our revolving credit facility.  These financings couldincrease our level of indebtedness or result in dilution to our equity holders.

Long-termliquidity requirements with respect to our student housing and military housingsegments consist primarily of amounts necessary to fund scheduled debtmaturities, renovations and other non-recurring capital expenditures that needto be made periodically at our properties, and the costs associated withacquisitions of student housing properties and awards or acquisitions ofmilitary housing projects that we pursue. Historically, we have satisfied ourlong-term liquidity requirements through various sources of capital, includingexisting working capital, cash provided by operations, long-term mortgageindebtedness, and owner contributions.  We now expect our long-termliquidity requirements to be satisfied primarily through cash generated byoperations that is not used to fund distributions and the additional externalfinancing sources discussed above.

*Inflation*

As amajority of the Company’s student housing leases are 12 months or less, rateson in-place leases generally approximate market rental rates.  The Companybelieves that inflationary increases in expenses will be significantly offsetby rent increases upon renewal.  A majority of the Company’s militaryhousing management fees, construction/renovation fees and business developmentfees are based on a percentage of revenue or expenses generated by the Companyor the military housing projects.  The Company believes that inflationaryincreases in expenses will be significantly offset by increases in revenue.

**Item 3.****                                   Quantitativeand Qualitative Disclosure About Market Risk**

Givencurrent market conditions, our strategy favors fixed-rate, secured debt overvariable-rate debt to minimize our exposure to increases in interest rates. Asof September 30, 2005, 72% of the outstanding principal amount of ournotes payable secured by properties we owned as of such date had fixed interestrates with a weighted-average rate of 4.86%. The remaining 28% of outstandingprincipal amount of our notes payable and line of credit, as ofSeptember 30, 2005, had variable interest rates primarily equal to LIBORplus 1.75% to 2.25%.

Basedon our variable rate debt balance as of September 30, 2005, if interestrates were to increase by 1.0%, our interest expense would increase byapproximately $2.1 million on an annual basis.

As ofSeptember 30, 2005, we had $137.0 million in funds drawn from ourcredit facility, bearing a weighted-average interest rate of 5.90%.  In October 2005, we repaid $122.0million of such outstanding balance on our credit facility using proceeds fromour public offering of common shares that was completed on October 4,2005.

**Item 4.****                                   Controlsand Procedures**

*(a)**                               Evaluation of DisclosureControls and Procedures. * Our management, with the participation ofour Chief Executive Officer and Chief Financial Officer, evaluated theeffectiveness of our disclosure controls and procedures as of the end of theperiod covered by this report. Based on that evaluation, the Chief ExecutiveOfficer and Chief Financial Officer concluded that our disclosure controls andprocedures as of the end of the period covered by this report have beendesigned and are functioning effectively to provide reasonable assurance thatthe information required to be disclosed by us in reports filed under theSecurities Exchange Act of 1934 is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms, and isaccumulated and communicated to our management, including our principalexecutive and financial officers, or persons performing similar functions, asappropriate to allow timely discussions regarding required disclosure. 

42

----

As the Companypreviously disclosed in Part II, Item 9A of its Annual Report on Form 10-K forthe year ended December 31, 2005, in the first quarter of 2006 the AuditCommittee of the Company’s Board of Trustees conducted an investigation ofcertain accounting and financial reporting matters. The investigationidentified material weaknesses in our internal control over financial reportingand in our disclosure controls and procedures as of December 31, 2005. Inconnection with the investigation, we reviewed our previously reportedfinancial statements. Through this review, we identified adjustments that werematerial to the results we previously reported for the quarterly periods endedMarch 31, 2005, June 30, 2005 and September 30, 2005. Morespecifically, the Company determined that the restatements with respect to theconsolidated financial statements for these periods were necessary due to thediscovery of errors in revenue recognition, depreciation and operating expensesrelated to certain transactions reported by the Company and to reclassifyequity in earnings of unconsolidated entities. 

TheCompany’s Chief Executive Officer and Chief Financial Officer have reassessedour disclosure controls and procedures for this Form 10-Q/A. Based on thereassessment, the Chief Executive Officer and Chief Financial Officer concludedthat the Company’s disclosure and procedures were not, as of September 30,2005, effective to provide assurance that the information required to bedisclosed by us in reports filed under the Securities and Exchange Act of 1934,as amended, is recorded, processed, summarized and reported within the timeperiods specified in the SEC’s rules and forms, and that information requiredto be disclosed in the reports we file or submit under the Securities ExchangeAct of 1934, as amended, is accumulated and communicated to our management,including our principal executive and financial officers, or persons performingsimilar functions, as appropriate to allow timely decisions regardingdisclosure. 

*(b)**                               Change in InternalControl over Financial Reporting. * There have been no changes in ourinternal control over financial reporting during our most recent fiscal quarterthat have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.

**PART II— OTHER INFORMATION**

**Item 1.****                           LegalProceedings**

 

None.

 

**Item 2.****                           UnregisteredSales of Equity Securities and Use of Proceeds**

 

None.

 

**Item 3.****                           DefaultsUpon Senior Securities**

 

None.

 

**Item 4.****                           Submissionof Matters to a Vote of Security Holders**

 

None.

 

**Item 5.****                           OtherInformation**

 

*Entry Into a Material Definitive Agreement*

On November 11, 2005, the Company executed anamendment to its Full Service Lease, dated as of November 2, 2004, between353 Associates, L.P. (the “Landlord”) and GMH Capital Partners CommercialRealty Services, LP, GMH Capital Partners Asset Services, LP, GMH PhiladelphiaBarrage, LLC, GMH Construction Company, Inc. and GMH Associates, Inc(collectively, the “Tenants”), which covers the leasing of a portion of theCompany’s corporate headquarters to the Tenants (see Note 1 to the financialstatements included in this report).  353Associates, L.P. is a wholly-owned subsidiary of the Operating Partnership, andeach of the tenants is an entity wholly-owned by Gary M. Holloway, Sr.  Pursuant to the amendment, GMH CapitalPartners Commercial Realty Services, LP will manage the provision of cleaningservices for the entire corporate headquarters building in exchange for amonthly credit of $3,023.26 against monthly installments of rent of $16,004.16.In addition, under the terms of the amendment, GMH Capital Partners CommercialRealty Services, LP will manage the build-out of a portion of the first floorof the building for additional office space and will receive a constructionoversight fee equal to $15,000 in consideration for the provision of suchconstruction oversight services.  Thisconstruction oversight fee is to be paid upon substantial completion of thebuild-out in the form of a credit against monthly installments of rent. A copyof the amendment to the Full Service Lease is attached as Exhibit 10.4 tothis Quarterly Report on Form 10-Q for the period ended September 30,2005.  The form of amendment was approved by the

43

----

AuditCommittee of the Company’s Board of Trustees, in accordance with the Company’sCode of Business Conduct and Ethics.

**Item 6.**                           **Exhibits**

 
| Exhibit | ** ** | **Description of Document**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1    |       | Aircraft Lease Agreement, effective as of  August 11, 2005, by and among Corporate Flight Services, LLC, College  Park Management, LLC, GMH Military Housing Management, LLC and GMH  Communities, LP (incorporated by reference to the Registrant’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2005, as  filed with the SEC on November 14, 2005).                                                                                                                                                                                                                                                                              |
| 10.2    |       | Second Amendment and Waiver to Credit Agreement,  dated August 10, 2005, by and among GMH Communities, LP, GMH Communities  Trust (“Trust”), each subsidiary of the Trust that becomes a borrower, Bank  of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer  and the following lenders: Eurohypo AG, New York Branch, JPMorgan Chase Bank,  Deutsche Bank Trust Company Americas, Merrill Lynch Bank USA, Morgan Stanley  Bank, and Bank Midwest. (incorporated by reference to the Registrant’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2005,  as filed with the SEC on August 12, 2005). |
| 10.3    |       | Full Service Lease, dated November 2, 2004, by  and among 353 Associates; GMH Capital Partners Commercial Realty Services,  LP; GMH Capital Partners Asset Services, LP; GMH Philadelphia Barrage, LLC;  GMH Construction Company, Inc. and GMH Associates, Inc.  (incorporated by reference to the Registrant’s Quarterly Report on  Form 10-Q for the quarter ended September 30, 2005, as filed with  the SEC on November 14, 2005).                                                                                                                                                                                                        |
| 10.4    |       | First Amendment to Lease, effective as of  November 1, 2005, by and among 353 Associates, L.P., GMH Capital  Partners Commercial Realty Services, LP, GMH Capital Partners Asset Services,  LP, GMH Philadelphia Barrage, LLC, GMH Construction Company, Inc. and  GMH Associates, Inc. (incorporated by reference to the Registrant’s  Quarterly Report on Form 10-Q for the quarter ended September 30,  2005, as filed with the SEC on November 14, 2005).                                                                                                                                                                                  |
| 31.1    |       | Certifications of Chief Executive Officer Required  by Rule 13a-14(a) of the Securities Exchange Act of 1934, as  amended.(furnished herewith)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.2    |       | Certifications of Chief Financial Officer Required  by Rule 13a-14(a) of the Securities Exchange Act of 1934, as  amended. (furnished herewith)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 32.1    |       | Certifications of Chief Executive Officer Required  by Rule 13a-14(b) of the Securities Exchange Act of 1934, as  amended. (This exhibit shall not be deemed “filed” for purposes of  Section 18 of the Securities Exchange Act of 1934, as amended, or  otherwise subject to the liability of that section. Further, this exhibit  shall not be deemed to be incorporated by reference into any filing under the  Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,  as amended.)                                                                                                                                        |
| 32.2    |       | Certifications of Chief Financial Officer Required  by Rule 13a-14(b) of the Securities Exchange Act of 1934, as  amended. (This exhibit shall not be deemed “filed” for purposes of  Section 18 of the Securities Exchange Act of 1934, as amended, or  otherwise subject to the liability of that section. Further, this exhibit  shall not be deemed to be incorporated by reference into any filing under the  Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,  as amended.)                                                                                                                                        |

 

44

----

 

SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                                    |   | GMH COMMUNITIES TRUST                  |
|------------------------------------|--------|----------------------------------------|
|                               |   |                                   |
|                               |   |                                   |
| Date:   October 23, 2006 |   | /s/ Gary M.  Holloway, Sr.        |
|                               |   | Gary M.  Holloway, Sr.            |
|                               |   | President and Chief  Executive Officer |
|                               |   |                                   |
|                               |   |                                   |
|                               |   | /s/ J. Patrick O’Grady            |
|                               |   | J. Patrick O’Grady                |
|                               |   | Executive Vice  President              |
|                               |   | and Chief Financial  Officer           |

 

45

----