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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 From the transition period from  to
 Commission File Number: 333-139042
 SHOPOFF PROPERTIES TRUST, INC.
 (Exact name of registrant as specified in its charter)
 Maryland
    
    20-5882165(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation of Organization)
    
    Identification No.)8951 Research DriveIrvine, California
    
    92618(Address of Principal Executive Offices)
    
    (Zip Code)
 (877) TSG-REIT  (Registrants Telephone Number, Including Area Code)
 N/A  (Former name, former address and former fiscal year, if changed since last report)
  þ o
   Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Financial statements
    
    
    1Condensed Consolidated Balance Sheets as of March 31, 2008 (Unaudited) and December 31, 2007
    
    
    2Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2008
and 2007 and the Period from November 16, 2006 (Inception) to March 31, 2008 (Unaudited)
    
    
    3Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2008
and 2007 and the Period from November 16, 2006 (Inception) to March 31, 2008 (Unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4T. Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22CERTIFICATIONSEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
  1




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SHOPOFF PROPERTIES TRUST, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2008 (Unaudited) and December 31, 2007
 March 31, 2008(Unaudited)
    
    
    December 31, 2007ASSETSCash
    
    $
    200,550
    
    
    $
    200,550Restricted cash
    
    
    2,211,676
    
    
    
    778,765Prepaid Expenses
    
    
    12,342
    
    
    
    20,269Total Assets
    
    $
    2,424,568
    
    
    $
    999,584LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Accounts Payable Due To Related Parties
    
    $
    275,049
    
    
    $
    183,900Total Liabilities
    
    
    275,049
    
    
    
    183,900Minority interest
    
    
    100
    
    
    
    100Stockholders EquityCommon stock, $0.01 par value; 200,000,000
shares authorized; 21,100 shares issued and
outstanding
    
    
    211
    
    
    
    211Common stock issuable upon breaking escrow,
231,767 shares, $0.01 par value
    
    
    2,318
    
    
    
    818Additional paid-in capital
    
    
    2,399,708
    
    
    
    976,521Deficit accumulated during the development stage
    
    
    (252,818
    )
    
    
    (161,966
    )Total Stockholders Equity
    
    
    2,149,419
    
    
    
    815,584Total Liabilities and Stockholders Equity
    
    $
    2,424,568
    
    
    $
    999,584
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SHOPOFF PROPERTIES TRUST, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2008 and 2007 and the
Period from November 16, 2006 (Inception) to March 31, 2008
(Unaudited)
 Period fromThree Months
    
    
    Three Months
    
    
    November 16, 2006Ended
    
    
    Ended
    
    
    (Inception) toMarch 31, 2008
    
    
    March 31, 2007
    
    
    March 31, 2008Revenue:
    
    $
    
    
    
    $
    
    
    
    $
    Expenses:Insurance
    
    
    69,009
    
    
    
    
    
    
    
    202,612Printing
    
    
    
    
    
    
    
    
    
    
    4,874Professional Fee
    
    
    30,068
    
    
    
    
    
    
    
    55,22299,077
    
    
    
    
    
    
    
    262,708Other Income:Interest Income
    
    
    8,225
    
    
    
    
    
    
    
    9,890Net loss
    
    $
    (90,852
    )
    
    $
    
    
    
    $
    (252,818
    )Net Loss per common share, basic and diluted
    
    $
    (4.31
    )
    
    $
    
    
    
    $
    (11.98
    )Weighted-average number of common shares,
issued and outstanding
    
    
    21,100
    
    
    
    21,100
    
    
    
    21,100
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SHOPOFF PROPERTIES TRUST, INC.
(A Development Stage Company)
 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2008 and 2007 and the
Period from November 16, 2006 (Inception) to March 31, 2008
(Unaudited)
 Period fromThree Months
    
    
    Three Months
    
    
    November 16, 2006Ended
    
    
    Ended
    
    
    (Inception) toMarch 31,
    
    
    March 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008Net Cash Flows from Operating ActivitiesNet Loss
    
    $
    (90,852
    )
    
    $
    
    
    
    $
    (252,818
    )Adjustments to reconcile net loss to net cash
provided by operating activities:
    
    
    
    
    
    
    
    
    
    
    Changes in assets and liabilities:
    
    
    
    
    
    
    
    
    
    
    Accounts payable and accrued liabilities
    
    
    91,149
    
    
    
    
    
    
    
    275,049Prepaid Expenses
    
    
    7,928
    
    
    
    
    
    
    
    (12,341
    )Net cash provided by operating activities
    
    
    8,225
    
    
    
    
    
    
    
    9,890Cash Flows from Financing ActivitiesMinority Interest
    
    
    
    
    
    
    
    
    
    
    100Issuance of Common Stock to Sponsor
    
    
    
    
    
    
    
    
    
    
    200,450Common stock issuable upon breaking escrow
    
    
    1,424,687
    
    
    
    
    
    
    
    2,201,787Restricted Cash
    
    
    (1,432,912
    )
    
    
    
    
    
    
    (2,211,677
    )Net cash provided by financing activities
    
    
    (8,225
    )
    
    
    
    
    
    
    190,660Net change in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    200,550Cash and cash equivalents, beginning of period
    
    
    200,550
    
    
    
    200,550
    
    
    
    Cash and cash equivalents, end of period
    
    $
    200,550
    
    
    $
    200,550
    
    
    $
    200,550
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SHOPOFF PROPERTIES TRUST, INC.
(A Development Stage Company)
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1. ORGANIZATION AND NATURE OF BUSINESS
     2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Use of Estimates
  Principles of Consolidation
  Consolidation of Variable Interest Entities
 Consolidation of Variable Interest Entities, an Interpretation of
Accounting Research Bulletin No. 51
 Consolidation of Variable Interest Entities
 Cash and Cash Equivalents
  Income Taxes
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Concentrations of Credit Risk
    Significant Recent Accounting Pronouncements
 Fair
Value Measurements
 The Fair Value Option for Financial Assets
and Financial Liabilities Including an Amendment of FASB Statement No. 115 Accounting for Certain Investments in Debt and Equity Securities
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Business Combinations.
 
    
    Acquisition costs will be generally expensed as incurred;
    
    Noncontrolling interests (formerly known as minority interests  see SFAS No. 160
discussion below) will be valued at fair value at the acquisition date;
    
    Acquired contingent liabilities will be recorded at fair value at the acquisition date
and subsequently measured at either the higher of such amount or the amount determined
under existing guidance for non-acquired contingencies;
    
    In-process research and development will be recorded at fair value as an
indefinite-lived intangible asset at the acquisition date;
    
    Restructuring costs associated with a business combination will be generally expensed
subsequent to the acquisition date; and
    
    Changes in deferred tax asset valuation allowances and income tax uncertainties after
the acquisition date generally will affect income tax expense.
  Noncontrolling Interests in
Consolidated Financial Statements -An Amendment of ARB No. 51
  3. STOCKHOLDERS EQUITY
 Common Stock
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4. OTHER RELATED PARTY TRANSACTIONS
       
    
    Acquisition and Advisory Fees:3% of (i) with respect to any real estate asset acquired
by the Company directly or indirectly other than a real estate related investment, the
contract purchase price of the underlying property, and (ii) with respect to any real estate
related investment acquired by the Company directly or indirectly, the contract purchase
price of the underlying property.
    
    Debt Financing Fee:1% of the amount available under any loan or line of credit made
available to the Company upon the receipt of the proceeds from such loan or line of credit.
    
    Asset Management Fee:a monthly payment equal to one-twelfth of 2% of (i) the aggregate
asset value for operating assets and (ii) the total contract price plus capitalized
entitlement and project related costs for real estate assets held for less than or equal to
one year by the Company, directly or indirectly, as of the last day of the preceding month
other than a real estate-related investment and (iii) the appraised value as determined from
time to time for real estate assets held for greater than one year by the Company, directly
or indirectly,
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as of the last day of the preceding month other than a real estate-related
investment and (iv) the appraised value of the underlying property, for any real
estate-related investment held by the Company directly or indirectly, as of the last day of
the preceding month, in the case of subsection (iv) not to exceed one-twelfth of 2% of the
funds advanced by the Company for the purchase of the real estate-related investment.
    
    Disposition Fees:equal to (i) in the case of the sale of any real estate asset, other
than real estate-related investments, the lesser of (a) one-half of the competitive real
estate commission paid up to 3% of the contract
price or, if none is paid, the amount that customarily would be paid, or (b) 3% of the
contract price of each real estate asset sold, and (ii) in the case of the sale of any real
estate-related investments, 3% of the sales price. Any disposition fee may be paid in addition
to real estate commissions paid to non-affiliates, provided that the total real estate
commissions (including such disposition fee) paid to all persons by the Company for each real
estate asset, upon disposition thereof, shall not exceed an amount equal to the lesser of (i)
6% of the aggregate contract price of each real estate asset or (ii) the competitive real
estate commission for each real estate asset. The Company will pay the disposition fees for a
property at the time the property is sold.
    
    Additional Fees:The Agreement includes certain other fees that will be payable to the
Advisor upon the occurrence of certain potential events such as listing on a national
securities exchange and termination of the Agreement.
 5. SUBSEQUENT EVENTS
   
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
 We are considered a development stage enterprise as of March 31, 2008. Therefore, we do not
have meaningful active operations to discuss for the quarter ended March 31, 2008. You should read
the following discussion and analysis together with our condensed consolidated financial statements
and notes thereto included in this Quarterly Report on Form 10-Q . The following information
contains forward-looking statements, which are subject to risks and uncertainties. Should one or
more of these risks or uncertainties materialize, actual results may differ materially from those
expressed or implied by the forward-looking statements. Please see Special Note Regarding
Forward-Looking Statements below for a description of these risks and uncertainties.
 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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Company Overview and Plan of Operations
       11




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Results of Operations
 Comparison
of Three Months Ended March 31, 2008 to Three Months Ended
March 31, 2007
       Liquidity and Capital Resources
         12




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Distributions
  The Advisory Agreement
   Acquisition and Advisory Fees:
 Debt Financing Fee:
 Asset Management Fees:
 Disposition Fees:
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Subordinated Participation in Distributable Cash:
 Subordinated Incentive Fee Due Upon Listing:
 Subordinated Performance Fee Due Upon Termination:
 Critical Accounting Policies
  Use of Estimates
  Principles of Consolidation
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Cash and Cash Equivalents
  Revenue and Profit Recognition
 Accounting for Sales of Real Estate
    Cost of Real Estate Assets Not Held for Sale
   Impairment
 Property Held for Investment
 Accounting
for the Impairment of or Disposal of Long-Lived Assets
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Property Held for Sale
   
    
    Management, having the authority to approve the action, commits to a plan to sell the
asset;
    
    The asset is available for immediate sale in its present condition, subject only to terms
that are usual and customary for sales of such asset;
    
    An active program to locate a buyer and other actions required to complete the plan to
sell the asset has been initiated;
    
    The sale of the asset is probable, and the transfer of the asset is expected to qualify
for recognition as a completed transaction within one year;
    
    The asset is being actively marketed for sale at a price that is reasonable in relation
to its current estimated fair value; and
    
    Given the actions required to complete the plan to sell the asset, it is unlikely that
significant changes to the plan would be made or that the plan would be abandoned.
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Purchase Price Allocation
     Potential Investments in Partnerships and Joint Ventures.
 Consolidation of
Variable Interest Entities
 
    
    The total equity investment at risk is not sufficient to permit the entity to finance its
activities without additional subordinated financial support from other parties (i.e., the
equity investment at risk is not greater than the expected losses of the entity).
    
    As a group the holders of the equity investment at risk lack any one of the following
three characteristics of a controlling financial interest:
 
    
    The direct or indirect ability to make decisions about an entitys activities
through voting rights or similar rights.
    
    The obligation to absorb the expected losses of the entity if they occur.
    
    The right to receive the expected residual returns of the entity if they occur.
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Income Taxes
   Accounting for
Uncertainty in Income Taxes
 Stock-Based Compensation
 Share-Based Payment
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Significant Recent Accounting Pronouncements
 Fair
    Value Measurements,
 The Fair Value Option for
    Financial Assets and Financial Liabilities  Including
    an Amendment of FASB Statement No. 115. Accounting for
    Certain Investments in Debt and Equity Securities
 Business Combinations.
 
    
    Acquisition costs will be generally expensed as incurred;
    
    Noncontrolling interests (formerly known as minority interests  see SFAS No. 160
discussion below) will be valued at fair value at the acquisition date;
    
    Acquired contingent liabilities will be recorded at fair value at the acquisition date
and subsequently measured at either the higher of such amount or the amount determined under existing guidance
for non-acquired contingencies;
    
    In-process research and development will be recorded at fair value as an
indefinite-lived intangible asset at the acquisition date;
    
    Restructuring costs associated with a business combination will be generally expensed
subsequent to the acquisition date; and
    
    Changes in deferred tax asset valuation allowances and income tax uncertainties after
the acquisition date generally will affect income tax expense.
  Noncontrolling Interests in
Consolidated Financial Statements -An Amendment of ARB No. 51
  19




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
 Item 4T.  Controls and Procedures
   Limitations on the Effectiveness of Internal Controls
  20




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  The real estate markets in California, Nevada, Arizona, Hawaii, and
    Texas are experiencing a significant downturn that may continue
    for an indefinite period and may adversely affect our business
    and your investment.
  The
    tightening of the credit markets in California, Nevada, Arizona,
    Hawaii, and Texas, which may continue for an indefinite period
    of time, may make it increasingly difficult for us to secure
    financing at reasonable rates or at all, which may, limit our
    ability to finance or refinance our real estate properties,
    reduce the number of properties we can acquire, and adversely
    affect your investment.
  
 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
 Exhibit 31.1:
    
    Certificate of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2:
    
    Certificate of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1:
    
    Certificate of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.Exhibit 32.2:
    
    Certificate of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  SHOPOFF PROPERTIES TRUST, INC.(Registrant)Date May 15, 2008
    By:
    /s/ William A. ShopoffWilliam A. ShopoffChief Executive Officer
(Principal Executive Officer)Date May 15, 2008
    By:
    /s/ Kevin M. BridgesKevin M. BridgesChief Financial Officer,
(Principal Financial Officer) 22




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EXHIBIT INDEX
 Exhibit 31.1:
    
    Certificate of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2:
    
    Certificate of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1:
    
    Certificate of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.Exhibit 32.2:
    
    Certificate of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
 23