UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 FORM
10-Q
 (Mark
One)
 /X/
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
                
                FOR
      THE QUARTERLY PERIOD ENDED  SEPTEMBER 30, 2009
                ORTRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
                FOR
      THE TRANSITION PERIOD FROM _______________ TO
      _________________
 Commission
file number 1-14369
 
 AMERICAN
COMMUNITY PROPERTIES TRUST
 (Exact
name of registrant as specified in its charter)
 
 MARYLAND
                (State
      or other jurisdiction of incorporation or organization)
              52-2058165
                (I.R.S.
      Employer Identification No.)
 222
Smallwood Village Center
 St.
Charles, Maryland  20602
 (Address
of principal executive offices)(Zip Code)
 (301)
843-8600
 (Registrant's
telephone number, including area code)
 
 Securities
registered pursuant to Section 12(b) of the Act:
 
 TITLE
      OF EACH CLASS
                Common
      Shares, $.01 par value
              NAME
      OF EACH EXCHANGE ON WHICH REGISTERED
                NYSE
      Amex
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 Yes
/x/                      No
/ /
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).        Yes /x/ No /
/
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 Large
accelerated filer  / /  Accelerated filer  /
/   Non-accelerated filer  /
/    Smaller Reporting Company /x/
 
 Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of
1934).    Yes  /
/    No  /x/
 
 As of
November 1, 2009, there were 5,622,660 common shares outstanding.
 
  -
1 -
 Table of Contents
  
 AMERICAN
COMMUNITY PROPERTIES TRUST
 FORM
10-Q
 SEPTEMBER
30, 2009
 TABLE OF CONTENTS
 
 
 PART I
              FINANCIAL
      INFORMATIONItem 1.
              Consolidated Financial
      StatementsConsolidated Statements of
      Operations for the Nine Months Ended September 30, 2009 (Unaudited) and
      September 30, 2008 (Unaudited)
              3Consolidated Statements of Operations
      for the Three Months Ended September 30, 2009 (Unaudited) and September
      30, 2008 (Unaudited)
              4Consolidated Balance Sheets as of September 30, 2009
      (Unaudited) and December 31, 2008
              5Consolidated Statement of Changes in
      Shareholders' Equity for the Nine Months Ended September 30, 2009
      (Unaudited)
              6Consolidated
      Statements of Cash Flows for the Nine Months Ended September 30, 2009
      (Unaudited) and September 30, 2008 (Unaudited)
              7Notes to Consolidated Financial Statements
      (Unaudited)
              8Item 2.
              Management's Discussion and Analysis of Financial
      Condition and Results of Operations for the Nine and Three Months Ended
      September 30, 2009 and 2008
              35Item 4T.
              Controls and
      Procedures
              52PART II
              OTHER
      INFORMATIONItem 1.
              Legal
      Proceedings
              52Item 1A.
              Risk
      Factors
              53Item 2
              Unregistered Sales of Equity Securities and
      Use of Proceeds
              53Item 3.
              Defaults Upon
      Senior Securities
              53Item 4.
              Submission of Matters to a Vote of Security
      Holders
              53Item 5.
              Other
      Information
              53Item 6.
              Exhibits
              53Signatures
              54
 
  -
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 Table of Contents
  AMERICAN COMMUNITY PROPERTIES
      TRUSTCONSOLIDATED
      STATEMENTS OF OPERATIONSFOR
      THE NINE MONTHS ENDED SEPTEMBER 30,(In
      thousands, except per share amounts)(Unaudited)2009
                
                
                2008RevenuesRental
      property revenues
                
                $
                25,772
                
                
                $
                25,406Community
      development-land sales
                
                
                6,992
                
                
                
                6,457Homebuilding-home
      sales
                
                
                246
                
                
                
                3,476Management
      and other fees, substantially all from related entities
                
                
                219
                
                
                
                208Reimbursement
      of expenses related to managed entities
                
                
                177
                
                
                
                1,106Total
      revenues
                
                
                33,406
                
                
                
                36,653ExpensesRental
      property operating expenses
                
                
                11,454
                
                
                
                11,497Cost
      of land sales
                
                
                5,196
                
                
                
                5,218Cost
      of home sales
                
                
                217
                
                
                
                2,694General,
      administrative, selling and marketing
                
                
                7,304
                
                
                
                7,380Depreciation
                
                
                3,829
                
                
                
                3,855Expenses
      reimbursed from managed entities
                
                
                177
                
                
                
                1,106Total
      expenses
                
                
                28,177
                
                
                
                31,750Operating
      Income
                
                
                5,229
                
                
                
                4,903Other
      income (expense)Interest
      and other income
                
                
                262
                
                
                
                497Equity
      in earnings from unconsolidated entities
                
                
                302
                
                
                
                489Interest
      expense
                
                
                (8,120
                )
                
                
                (7,460)Loss
      before benefit for income taxes
                
                
                (2,327
                )
                
                
                (1,571)Benefit
      for income taxes
                
                
                (1,604
                )
                
                
                (1,037)Loss
      from continuing operations
                
                
                (723)
                
                
                
                (534)Income from
      discontinued operations(less
      applicable income taxes of $797 and $44, respectively)
                
                
                1,338
                
                
                
                224Gain
      on sale of discontinued operations (less applicable income taxes of
      $10,453)
                
                
                25,351
                
                
                
                -Total
      discontinued operations
                
                
                26,689
                
                
                
                224Consolidated
      net income (loss)
                
                
                25,966
                
                
                
                (310)Less:
      Net income attributable to noncontrolling interest
                
                
                704
                
                
                
                1,691Net income (loss)
      attributable to ACPT
                
                $
                25,262
                
                
                $
                (2,001)Income
      (loss) per common share – Basic and DilutedLoss
      from continuing operations
                
                $
                (0.13
                )
                
                $
                (0.11)Discontinued
      operations
                
                
                5.02
                
                
                
                0.05Income
      attributable to noncontrolling interest
                
                
                (0.13
                )
                
                
                (0.32)Income
      (loss) applicable to common shareholders
                
                $
                4.76
                
                
                $
                (0.38)Weighted
      average common shares outstanding:Basic
      and diluted
                
                
                5,312
                
                
                
                5,215Cash
      dividends per common share
                
                $
                -
                
                
                $
                -The
      accompanying notes are an integral part of these consolidated
      statements.
   -
3 -
 Table of Contents
  AMERICAN COMMUNITY PROPERTIES
      TRUSTCONSOLIDATED
      STATEMENTS OF OPERATIONSFOR
      THE THREE MONTHS ENDED SEPTEMBER 30,(In
      thousands, except per share amounts)(Unaudited)2009
                
                
                2008RevenuesRental
      property revenues
                
                $
                8,600
                
                
                $
                8,526Community
      development-land sales
                
                
                3,462
                
                
                
                460Homebuilding-home
      sales
                
                
                246
                
                
                
                494Management
      and other fees, substantially all from related entities
                
                
                109
                
                
                
                68Reimbursement
      of expenses related to managed entities
                
                
                (366
                )
                
                
                344Total
      revenues
                
                
                12,051
                
                
                
                9,892ExpensesRental
      property operating expenses
                
                
                3,981
                
                
                
                3,779Cost
      of land sales
                
                
                2,552
                
                
                
                493Cost
      of home sales
                
                
                197
                
                
                
                394General,
      administrative, selling and marketing
                
                
                2,964
                
                
                
                2,309Depreciation
                
                
                1,249
                
                
                
                1,132Expenses
      reimbursed from managed entities
                
                
                (366
                )
                
                
                344Total
      expenses
                
                
                10,577
                
                
                
                8,451Operating
      Income
                
                
                1,474
                
                
                
                1,441Other
      income (expense)Interest
      and other income
                
                
                56
                
                
                
                136Equity
      in earnings from unconsolidated entities
                
                
                96
                
                
                
                159Interest
      expense
                
                
                (2,614
                )
                
                
                (2,465
                )Loss
      before benefit for income taxes
                
                
                (988
                )
                
                
                (729
                )Benefit
      for income taxes
                
                
                (574
                )
                
                
                (762
                )(Loss)
      income from continuing operations
                
                
                (414
                )
                
                
                33Loss
      from discontinued operations
                  (less
      applicable income taxes of $178 and ($370), respectively)
                
                
                (950
                )
                
                
                (293
                )Gain
      on sale of discontinued operations (less applicable income taxes of
      $10,453)
                
                
                25,351
                
                
                
                -Total
      discontinued operations
                
                
                24,401
                
                
                
                (293
                )Consolidated
      net income (loss)
                
                
                23,987
                
                
                
                (260
                )Less:
      Net (loss) income attributable to noncontrolling interest
                
                
                (588
                )
                
                
                370Net
      income (loss) attributable to ACPT
                
                
                24,575
                
                
                
                (630
                )Earnings
      (loss)  per share –Basic and DilutedLoss
      from continuing operations
                
                $
                (0.07
                )
                
                $
                -Discontinued
      operations
                
                
                4.59
                
                
                
                (0.05
                )(Loss)
      income attributable to noncontrolling interest
                
                
                0.11
                
                
                
                (0.07
                )Income
      (loss) applicable to common shareholders
                
                $
                4.63
                
                
                $
                (0.12
                )Weighted
      average shares outstanding:Basic
      and diluted
                
                
                5,312
                
                
                
                5,222Cash
      dividends per share
                
                $
                -
                
                
                $
                -The
      accompanying notes are an integral part of these consolidated
      statements.
  -
4 -
 Table of Contents
  AMERICAN COMMUNITY PROPERTIES TRUSTCONSOLIDATED BALANCE SHEETS(In
      thousands, except share and per share amounts)As of
                    September
      30,
                    2009
                  
                  
                  As
      of
                    December
      31,
                    2008(Unaudited)ASSETSASSETS:Investments
      in real estate, at cost:Operating
      real estate, net of accumulated depreciationof
      $83,007 and $79,379, respectively
                  
                  $
                  80,506
                  
                  
                  $
                  82,918Land
      and development costs
                  
                  
                  98,357
                  
                  
                  
                  96,266Condominiums
      under construction
                  
                  
                  1,606
                  
                  
                  
                  1,745Rental
      projects under construction or development
                  
                  
                  24,075
                  
                  
                  
                  4,564Investments
      in real estate, net
                  
                  
                  204,544
                  
                  
                  
                  185,493Property
      and related assets held for sale
                  
                  
                  36,961
                  
                  
                  
                  93,628Cash
      and cash equivalents
                  
                  
                  21,507
                  
                  
                  
                  24,035Restricted
      cash and escrow deposits
                  
                  
                  10,127
                  
                  
                  
                  9,500Investments
      in unconsolidated real estate entities
                  
                  
                  6,363
                  
                  
                  
                  5,121Receivable
      from bond proceeds
                  
                  
                  2,525
                  
                  
                  
                  2,052Accounts
      receivable, net
                  
                  
                  1,183
                  
                  
                  
                  992Deferred
      tax assets
                  
                  
                  28,208
                  
                  
                  
                  28,540Property
      and equipment, net of accumulated depreciation
                  
                  
                  630
                  
                  
                  
                  898Deferred
      charges and other assets, net of amortization of$3,823
      and $2,764, respectively
                  
                  
                  7,071
                  
                  
                  
                  4,934Total
      Assets
                  
                  $
                  319,119
                  
                  
                  $
                  355,193LIABILITIES AND SHAREHOLDERS'
      EQUITYLIABILITIES:Non-recourse
      debt
                  
                  $
                  180,148
                  
                  
                  $
                  168,221Recourse
      debt
                  
                  
                  37,596
                  
                  
                  
                  39,416Accounts
      payable and accrued liabilities
                  
                  
                  20,795
                  
                  
                  
                  19,553Deferred
      income
                  
                  
                  1,561
                  
                  
                  
                  200Deferred
      tax liability
                  
                  
                  2,296Accrued
      current income tax liability
                  
                  
                  18,301
                  
                  
                  
                  14,754Liabilities
      related to assets held for sale
                  
                  
                  31,304
                  
                  
                  
                  111,812Total
      Liabilities
                  
                  
                  292,001
                  
                  
                  
                  353,956COMMITMENTS
      AND CONTINGENT LIABILITIES  (NOTE 5)SHAREHOLDERS’
      EQUITYACPT’s
      shareholders equity:Common
      shares, $.01 par value, 10,000,000 shares authorized,5,622,660
      and 5,229,954 shares issued and outstandingas
      of September 30, 2009 and December 31, 2008
                  
                  
                  56
                  
                  
                  
                  52Treasury
      stock, 67,709 shares at cost
                  
                  
                  (376
                  )
                  
                  
                  (376
                  )Additional
      paid-in capital
                  
                  
                  19,224
                  
                  
                  
                  18,144Retained
      earnings (deficit)
                  
                  
                  8,783
                  
                  
                  
                  (16,479
                  )Total
      ACPT shareholders’ equity
                  
                  
                  27,687
                  
                  
                  
                  1,341Noncontrolling
      interests
                  
                  
                  (569
                  )
                  
                  
                  (104)Total  Shareholders’
      Equity
                  
                  
                  27,118
                  
                  
                  
                  1,237Total
      Liabilities and Shareholders’ Equity
                  
                  $
                  319,119
                  
                  
                  $
                  355,193The
      accompanying notes are an integral part of these consolidated
      statements.


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 Table of Contents


AMERICAN COMMUNITY PROPERTIES
      TRUSTCONSOLIDATED STATEMENTS OF CHANGES IN
      SHAREHOLDERS' EQUITY(In
      thousands, except share amounts)ACPT
      Shareholders’ EquityCommon
      Shares
            
            
            
            
            
            Additional
            
            
            
            
            
            Non-
            
            
            TotalPar
            
            
            Treasury
            
            
            Paid-in
            
            
            Retained
            
            
            Controlling
            
            
            Shareholders’Number
            
            
            Value
            
            
            Stock
            
            
            Capital
            
            
            Deficit
            
            
            Interest
            
            
            EquityBalance
      December 31, 2008
            
            
            5,229,954
            
            
            $
            52
            
            
            $
            (376
            )
            
            $
            18,144
            
            
            $
            (16,479
            )
            
            $
            (104
            )
            
            $
            1,237Net
      income attributable to ACPT
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            25,262
            
            
            
            -
            
            
            
            25,262Net
      income attributable to noncontrolling interests
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,150
            
            
            
            5,150Dividends
      paid to noncontrolling interests
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5,615
            )
            
            
            (5,615
            )Issuance
      of common shares
            
            
            392,706
            
            
            
            4
            
            
            
            -
            
            
            
            (4
            )
            
            
            -
            
            
            
            -
            
            
            
            -Equity
      Compensation
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,084
            
            
            
            -
            
            
            
            -
            
            
            
            1,084Balance
      September 30, 2009 (unaudited)
            
            
            5,622,660
            
            
            $
            56
            
            
            $
            (376
            )
            
            $
            19,224
            
            
            $
            8,783
            
            
            $
            (569
            )
            
            $
            27,118The
      accompanying notes are an integral part of these consolidated
      statements.





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AMERICAN
      COMMUNITY PROPERTIES TRUSTCONSOLIDATED STATEMENTS OF CASH
      FLOWSFOR
      THE NINE MONTHS ENDED SEPTEMBER 30,(In
      thousands)(Unaudited)2009
            
            
            
            2008Cash Flows from Operating
      ActivitiesConsolidated
      net income (loss)
            
            $
            25,966
            
            
            $
            (310
            )Adjustments to reconcile consolidated net income (loss) to net cash
      providedby
      (used in) operating activities:Depreciation
            
            
            3,829
            
            
            
            7,511Provision
      (benefit) for deferred income taxes
            
            
            679
            
            
            
            (703
            )Equity
      in earnings from unconsolidated entities
            
            
            (174
            )
            
            
            (489
            )Distribution
      of earnings from unconsolidated entities
            
            
            476
            
            
            
            490Cost
      of land sales
            
            
            5,196
            
            
            
            5,251Cost
      of home sales
            
            
            217
            
            
            
            2,694Write-down of assets
            
            
            882
            
            
            
            -Stock
      based compensation expense
            
            
            1,117
            
            
            
            91Amortization
      of deferred loan costs
            
            
            699
            
            
            
            633Gain
      on sale of discontinued operations, net of income taxes
            
            
            (23,285
            )
            
            
            -Changes
      in accounts receivable
            
            
            (281
            )
            
            
            717Additions
      to land and development costs
            
            
            (10,917
            )
            
            
            (19,992
            )Additions
      to condominiums under construction
            
            
            (78
            )
            
            
            (151
            )Change
      in deferred income
            
            
            1,361
            
            
            
            (197
            )Change
      in deferred charges and other assets
            
            
            (36
            )
            
            
            (248
            )Changes
      in accounts payable, accrued liabilities
            
            
            (3,231
            )
            
            
            (2,265
            )Net
      cash provided by (used in) operating activities
            
            
            2,420
            
            
            
            (6,968
            )Cash
      Flows from Investing ActivitiesInvestment
      in rental projects under construction or development
            
            
            (11,411
            )
            
            
            (2,866
            )Change
      in investments - unconsolidated entities
            
            
            (1,544
            )
            
            
            51Net
      deposits to restricted cash
            
            
            (554
            )
            
            
            (191
            )Additions
      to operating real estate, net
            
            
            (2,844
            )
            
            
            (2,561
            )Proceeds
      received upon sale of discontinued operations
            
            
            7,864
            
            
            
            -Net
      purchase of other assets
            
            
            (3,565
            )
            
            
            (91
            )Net
      cash used in investing activities
            
            
            (12,054
            )
            
            
            (5,658
            )Cash
      Flows from Financing ActivitiesCash
      proceeds from debt financing
            
            
            20,019
            
            
            
            6,386Payment
      of debt
            
            
            (7,541
            )
            
            
            (2,888
            )County
      Bonds proceeds, net of undisbursed funds
            
            
            243
            
            
            
            5,106Payments
      of distributions to noncontrolling interests
            
            
            (5,615
            )
            
            
            (1,587
            )Net
      cash provided by financing activities
            
            
            7,106
            
            
            
            7,017Net
      Decrease in Cash and Cash Equivalents
            
            
            (2,528
            )
            
            
            (5,609
            )Cash
      and Cash Equivalents, Beginning of Period
            
            
            24,035
            
            
            
            24,912Cash
      and Cash Equivalents, End of Period
            
            $
            21,507
            
            
            $
            19,303The accompanying notes are an
      integral part of these consolidated statements.




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 Table of Contents





AMERICAN COMMUNITY PROPERTIES TRUST


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





(1)
            ORGANIZATION





American Community Properties Trust
(“ACPT”) is a self-managed holding company that is primarily engaged in the
business of investing in and managing multifamily rental properties as well as
community development and homebuilding.  ACPT’s operations are
primarily concentrated in the Washington, D.C. metropolitan area and Puerto
Rico and are carried out through its U.S. subsidiaries, American Rental
Properties Trust (“ARPT”), American Rental Management Company ("ARMC "),
American Land Development, Inc. ("ALD") and their subsidiaries and its Puerto
Rican subsidiary, IGP Group Corp. ("IGP Group").





ACPT is
taxed as a U.S. partnership and its income flows through to its
shareholders.  ACPT is subject to Puerto Rico income taxes on IGP Group’s
taxable income, generating foreign tax credits that have been passed through to
ACPT’s shareholders.  A federal tax regulation has been proposed that could
eliminate ACPT’s ability to pass through these foreign tax credits to its
shareholders.  Comments on the proposed regulation are currently being
evaluated, and the final regulation will be effective for tax years beginning
after the final regulation is ultimately published in the Federal
Register.  ACPT’s income consists of (i) certain passive income from
IGP Group, (ii) additional distributions from IGP Group including Puerto Rico
taxes paid on behalf of ACPT and (iii) dividends from ACPT’s U.S.
subsidiaries.  Other than Interstate Commercial Properties (“ICP”), which
is a subsidiary of IGP Group and is taxed as a Puerto Rico corporation, the
income from the remaining Puerto Rico operating entities passes through to IGP
Group or ALD.  Of this income, only the portion attributable to the
profits, losses or gains on the residential land sold in our Parque Escorial
property passes through to ALD.  ALD, ARMC, and ARPT are taxed as U.S.
corporations.





(2)
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES





Basis
of Presentation





The
accompanying consolidated financial statements include the accounts of American
Community Properties Trust and its majority owned subsidiaries and partnerships,
after eliminating all intercompany transactions.  All of the entities
included in the consolidated financial statements are hereinafter referred to
collectively as the "Company" or "ACPT."





The
Company consolidates entities that are not variable interest entities, as
defined by Financial Accounting Standard Board Accounting Standards Codification
(“FASB ASC”) Topic 810, “Consolidation” (FASB
Interpretation No. 46(R)), in which it owns, directly or indirectly, a majority
voting interest in the entity.  In addition, the Company consolidates
entities, regardless of ownership percentage, in which the Company serves as the
general partner and the limited partners do not have substantive kick-out rights
or substantive participation rights in accordance with FASB ASC Topic 810,
“Control of Partnership and
Similar Entities” (Emerging Issues Task Force Issue 04-05)  The
assets of consolidated real estate partnerships not 100% owned by the Company
are generally not available to pay creditors of the Company.





The
consolidated group includes ACPT and its four major subsidiaries, ARPT, ARMC,
ALD, and IGP Group.  In addition, the consolidated group includes the
following other entities:











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American
      Housing Management Company
            
            LDA
      Group, LLCAmerican
      Housing Properties L.P.
            
            Milford
      Station I, LLCBannister
      Associates Limited Partnership
            
            Milford
      Station II, LLCCoachman's
      Apartments, LLC
            
            New
      Forest Apartments, LLCCrossland
      Associates Limited Partnership
            
            Nottingham
      South, LLCEscorial
      Office Building I, Inc.
            
            Owings
      Chase, LLCEssex
      Apartments Associates Limited Partnership
            
            Palmer
      Apartments Associates Limited PartnershipFox
      Chase Apartments, LLC
            
            Prescott
      Square, LLCGleneagles
      Apartments, LLC
            
            St.
      Charles Community, LLCHeaden
      House Associates Limited Partnership
            
            Sheffield
      Greens Apartments, LLCHuntington
      Associates Limited Partnership
            
            Torres
      del Escorial, Inc.Interstate
      Commercial Properties, Inc.
            
            Village
      Lake Apartments, LLCIGP
      Property Holdings, LLC
            
            Wakefield
      Terrace Associates Limited PartnershipLancaster
      Apartments Limited Partnership
            
            Wakefield
      Third Age Associates Limited PartnershipLand
      Development Associates S.E.





The Company’s investments in entities
that it does not control are recorded using the equity method of
accounting.  Refer to Note 3 for further discussion regarding
Investments in Unconsolidated Real Estate Entities.





Interim
Financial Reporting





These
unaudited financial statements have been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP") for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosures
normally included in financial statements prepared in accordance with GAAP have
been condensed or omitted. The Company has no items of other comprehensive
income for any of the periods presented. In the opinion of management, these
unaudited financial statements reflect all adjustments (which are of a normal
recurring nature) necessary to present a fair statement of results for the
interim period. While management believes that the disclosures presented are
adequate to make the information not misleading, these financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report filed on Form 10-K for the year
ended December 31, 2008.  The operating results for the nine and three
months ended September 30, 2009 and 2008, are not necessarily indicative of the
results that may be expected for the full year. Net income (loss) per share is
calculated based on weighted average shares outstanding.





Use
of Estimates





The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the amounts reported in the financial statements, and accompanying
notes and disclosures. These estimates and assumptions are prepared using
management's best judgment after considering past and current events and
economic conditions. Actual results could differ from those estimates and
assumptions.





Sales,
Profit Recognition and Cost Capitalization





In accordance with FASB ASC 360, “Real Estate Sales”, and 976,
“Real Estate – Retail
Land”, (Statement of Financial Accounting Standard (“SFAS”) No. 66, “Accounting for Sales of Real
Estate,”)community development land sales and multifamily rental
property sales are recognized at closing only when sufficient down payments
have been obtained, possession and other attributes of ownership have been
transferred to the buyer, and ACPT has no significant continuing
involvement.  Under the provisions of FASB ASC 360, related to
condominium sales, revenues and costs are to be recognized when construction is
beyond the preliminary stage, the buyer is committed to the extent of being
unable to require a refund except for non-delivery of the unit, sufficient units
in the project have been sold to ensure that the property will not be converted
to rental property, the sales proceeds are collectible and the aggregate sales
proceeds and the total cost of the project can be reasonably
estimated.  Accordingly we recognize revenues and costs upon
settlement with the homebuyer which does not occur until after we receive use
and occupancy permits for the building.





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The costs of developing
the land are allocated to our land assets and charged to cost of sales as the
related inventories are sold using the relative sales value method which rely on
estimated costs and sales values.   In accordance with FASB ASC
970,”Real Estate Project
Costs” (SFAS No. 67 "Accounting for Costs and Initial
Rental Operations of Real Estate Projects"), the costs of acquiring and
developing land are allocated to these assets and charged to cost of sales as
the related inventories are sold. Within our homebuilding operations, the costs
of acquiring the land and construction of the condominiums are allocated to
these assets and charged to cost of sales as the condominiums are
sold.  The cost of sales is determined by the percentage of completion
method.  The Company considers interest expense on all debt available
for capitalization to the extent of average qualifying assets for the
period.  Interest specific to the construction of qualifying assets,
represented primarily by our recourse debt, is first considered for
capitalization.  To the extent qualifying assets exceed debt
specifically identified, a weighted average rate including all other debt is
applied.  Any excess interest is reflected as interest
expense.





Impairment
of Long-Lived Assets and Adjustments to Assets Held for Sale





ACPT
carries its rental properties, homebuilding inventory, land and development
costs at the lower of cost or fair value in accordance with FASB ASC 360, “Impairment or Disposal of Long-Lived
Assets” (SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets.")  For real estate assets such as our
rental properties which the Company plans to hold and use, which includes
property to be developed in the future, property currently under development and
real estate projects that are completed or substantially complete, we evaluate
whether the carrying amount of each of these assets will be recovered from their
undiscounted future cash flows arising from their use and eventual disposition.
 If the carrying value were to be greater than the undiscounted future cash
flows, we would recognize an impairment charge to the extent the carrying amount
is not recoverable.  Our estimates of the undiscounted operating cash flows
expected to be generated by each asset are performed on an individual project
basis and based on a number of assumptions that are subject to economic and
market uncertainties, including, among others, demand for apartment units,
competition, changes in market rental rates, and costs to operate and complete
each project.





Assets
classified as held for sale are measured at the lower of their carrying amount
or fair value less costs to sell and are not depreciated or amortized while
classified as held for sale. Fair value of assets held for sale is based on
estimated future cash flows, which includes expected proceeds to be received.
ACPT recognizes a loss for any initial or subsequent write-down to fair value
less costs to sell and recognizes a gain for any subsequent increase in fair
value less costs to sell, up to the cumulative loss previously recognized.
During the nine months ended September 30, 2009, ACPT recognized a loss on
write-down to fair value less cost to sell of $882,000 related to the
revaluation of the Baltimore properties.   This impairment is
included in income from discontinued operations on the Consolidated Statement of
Operations.  The Company has binding agreements for two of the five
properties (Milford I and II) subject to loan assumption and continues to market
Nottingham, Owings Chase and Prescott Square.  As a result, the
Company revised its estimated sales values determined though discussions with
our broker, which represent Level 3 inputs under the fair value hierarchy in
FASB ASC 820, “Fair Value
Measurements”(SFAS No. 157, “Fair Value Measurements”),
and an asset write-down was required to further reduce the carrying values of
the Baltimore properties to their estimated fair market value less costs to
sell.





The
Company evaluates, on an individual project basis, whether the carrying value of
its substantially completed real estate projects, such as our homebuilding
inventory that are to be sold, will be recovered based on the fair value less
cost to sell.  If the carrying value were to be greater than the fair value
less costs to sell, we would recognize a charge to the extent the carrying
amount is not recoverable.  Our estimates of the fair value less costs to
sell are based on a number of assumptions that are subject to economic and
market uncertainties, including, among others, comparable sales, demand for
commercial and residential lots and competition.  The Company performed
similar reviews for land held for future development and sale considering such
factors as the cash flows associated with future development expenditures.
 Should this evaluation indicate that an impairment has occurred, the
Company will record an impairment charge equal to the excess of the historical
cost over fair value less costs to sell.  There were no impairment
charges for the nine months ended September 30, 2009 and 2008.





Cash
and Cash Equivalents





Cash and
cash equivalents include cash on hand, unrestricted deposits with financial
institutions and short-term investments with original maturities of three months
or less. Restricted cash and escrow deposits include funds held in
restricted escrow accounts used for maintenance and capital improvements with
the approval of the U.S.





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 Department
of Housing and Urban Development (“HUD”) and/or the State Finance
Agency.  The account also includes tenant security deposits as well as
deposits collected within our homebuilding operations as well as funds in an
escrow account that are restricted for the repayment of the Charles County
bonds.





As of
September 30, 2009, the Company had cash and cash equivalents of $21,507,000 and
restricted cash of $10,127,000.  Included in the Company’s cash and
cash equivalents is $3,908,000 of cash located within multifamily apartment
entities, over which the Company does not have direct control.  Cash
flow from our consolidated apartment properties whose mortgage loans are insured
by the Federal Housing Authority ("FHA"), or financed through the housing
agencies in Maryland, Virginia or Puerto Rico (the "Financing Agencies,") are
subject to guidelines and limits established by the apartment partnerships'
regulatory agreements with HUD and the State Financing Agencies.





Depreciable
Assets and Depreciation





The
Company's operating real estate is stated at cost and includes all costs related
to acquisitions, development and construction.  The Company makes
assessments of the useful lives of our real estate assets for purposes of
determining the amount of depreciation expense to reflect on our income
statement on an annual basis. The assessments, all of which are judgmental
determinations, are as follows:





·
              Buildings and improvements are depreciated over five to forty years using
      the straight-line or double declining balance methods;·
              Furniture, fixtures and equipment are depreciated over five to seven years
      using the straight-line method;·
              Leasehold improvements are capitalized and depreciated over the lesser of
      the life of the lease or their estimated useful
    life; and·
              Maintenance and other repair costs are charged to operations as
      incurred.


Operating
Real Estate





The table
below presents the major classes of depreciable assets as of September 30, 2009
and December 31, 2008 (in thousands):


September
      30, 2009
            
            
            December
      31, 2008(Unaudited)Building
            
            $
            131,192
            
            
            $
            135,067Building
      improvements
            
            
            10,020
            
            
            
            8,313Equipment
            
            
            9,892
            
            
            
            6,912151,104
            
            
            
            150,292Less:Accumulated
      depreciation
            
            
            83,007
            
            
            
            79,37968,097
            
            
            
            70,913Land
            
            
            12,409
            
            
            
            12,005Operating
      properties, net
            
            $
            80,506
            
            
            $
            82,918


Other
Property and Equipment





In
addition, the Company owned other property and equipment of $630,000 and
$920,000, net of accumulated depreciation of $2,001,000 and $2,553,000,
respectively, as of September 30, 2009 and December 31, 2008,
respectively.  The balance at December 31, 2008 includes $22,000 which
has been reallocated to property and related assets held for sale.





Depreciation





Total
depreciation expense was $3,829,000 and $7,511,000 for the nine months
ended September 30, 2009 and 2008, respectively.  For the nine months
ended September 30, 2008, $3,656,000 has been reclassified as discontinued
operations. Total depreciation expense was $1,249,000 and $2,469,000 for
the three months ended





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 September
30, 2009 and 2008, respectively.  For the three months ended September
30, 2008, $1,337,000 has been reclassified as discontinued
operations.





Impact
of Recently Adopted Accounting Standards




In June
2009, the FASB made the FASB Accounting Standards Codification (“Codification”)
(FASB ASC 105 / SFAS No. 168) the single source of authoritative literature for
U.S. accounting and reporting standards. The Codification is not meant to change
existing GAAP but rather provide a single source for all literature. FASB ASC
was effective for the interim period ending September 30, 2009, and
required us to change certain disclosures in our financial statements to reflect
Codification references rather than references to FASB Statements, Staff
Positions or Emerging Issues Task Force Abstracts. The adoption of FASB ASC did
not have a material impact on our consolidated financial
statements.


In
September 2006, the FASB issued FASB ASC 820, which defines fair
value, establishes a framework for measuring fair value in GAAP, and expands
disclosures about fair value measurements. FASB ASC 820 applies to accounting
pronouncements that require or permit fair value measurements, except for
share-based payments under FASB ASC 718, “Stock Compensation”( SFAS No.
123(R)). We adopted the recognition and disclosure provisions of FASB ASC 820
for financial assets and financial liabilities and for nonfinancial assets and
nonfinancial liabilities that are re-measured at least annually effective
January 1, 2008; the adoption did not have a material impact on our financial
position, results of operations or cash flows. Effective January 1, 2009, we
adopted the provisions for all other nonfinancial assets and nonfinancial
liabilities which did not have a material impact on our financial position,
results of operations or cash flows.





In
December 2007, the FASB issued FASB ASC 810,"Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51"("SFAS
160") which replaces the concept of minority interest with noncontrolling
interests in subsidiaries.  Noncontrolling interests are now reported
as a component of equity in the consolidated statement of financial
position.  Earnings attributable to noncontrolling interests will
continue to be reported as a part of consolidated earnings; however, FASB ASC
requires that income attributable to both controlling and noncontrolling
interests be presented separately on the face of the consolidated income
statement.  In addition, FASB ASC provides that when losses
attributable to noncontrolling interests exceed the noncontrolling interest’s
basis, losses continue to be attributed to the noncontrolling interest as
opposed to being absorbed by the consolidating entity.  It requires
retroactive adoption of the presentation and disclosure requirements for
existing minority interests. All other requirements of FASB ASC 810 shall be
applied prospectively.   The Company adopted FASB ASC 810 on
January 1, 2009.  The effect of adoption was a reclassification
of Minority Interest, historically shown in liabilities, to a new line item,
Noncontrolling Interests, included in shareholders’ equity, and the
reclassification of Minority Interest from Retained Deficit as it represented
distributions and losses in excess of basis.





The
following table illustrates the pro forma amounts of loss from continuing
operations, discontinued operations and net income that would have been
attributed to the Company’s shareholders for the nine and three months ended
September 30, 2009, prior to their amendment by FASB ASC 810 (in thousands,
except per unit amounts):





Nine
      months
            
            
            Three
      MonthsLoss
      from continuing operations
            
            $
            (2,207
            )
            
            $
            (1,211
            )Income
      from discontinued operations
            
            
            26,689
            
            
            
            26,600Pro
      forma net income attributable to ACPT’s shareholders
            
            $
            24,482
            
            
            $
            25,389Basic
      and diluted earnings (loss) per common shareLoss
      from continuing operations
            
            $
            (0.41
            )
            
            $
            (0.23
            )Income
      from discontinued operations
            
            
            5.02
            
            
            
            5.01Pro
      forma net income attributable to ACPT’s shareholders
            
            $
            4.61
            
            
            $
            4.78





The FASB
issued FASB ASC 805, “Business
Combinations” (“SFAS 141R”).  This statement changes the
accounting for acquisitions specifically eliminating the step acquisition model,
changing the recognition of contingent consideration from being recognized when
it is probable to being recognized at the time of acquisition, disallowing the
capitalization of transaction costs and delays when restructurings related to
acquisitions can be recognized.  The Company adopted these changes on
January 1, 2009, and it did not have a material impact on the Company’s results
from operations.





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In
December 2008, the FASB issued FASB ASC 860, “Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities” (FSP No. FAS 140-4 and FIN 46(R)-8). This requires public
entities to provide additional disclosures about transfers of financial assets
and requires public enterprises, including sponsors that have a variable
interest in a variable interest entity, to provide additional disclosures about
their involvement with variable interest entities. See Note 3 for the required
disclosures.





In April
2009, the FASB updated FASB ASC 820, “Fair Value Measurements and
Disclosures” (“FSP FAS 157-4”) which provides additional guidance for
determining the fair value of assets and liabilities when the volume and level
of activity for the asset or liability have significantly decreased. The update
also provides guidance on identifying circumstances that indicate an observed
transaction used to determine fair value is not orderly and, therefore, is not
indicative of fair value.  The Company adopted these updates effective
April 1, 2009.  There was not a material impact on its results of
operations, cash flows or financial condition.





In
April 2009, the FASB also updated FASB ASC 820, “Fair Value Measurements
and Disclosures”, (FSP
FAS 107-1 and APB 28-1)
to expand the fair value disclosure requirements to include interim periods and
require these disclosures in summarized financial information in interim
reporting periods. The Company adopted these updates effective April 1,
2009.  In August 2009, ASC No. 2009-05 was issued amending Subtopic
820-10, Fair Value Measurements and Disclosures, to provide clarity and guidance
on the fair value measurement of liabilities.





The
balance sheet carrying amounts of cash and cash equivalents, receivables and
other current assets approximate fair value due to the short-term nature of
these items and represents Level 1 under the fair value hierarchy in FASB ASC
820.





The fair
value of our non-recourse and recourse debt is sensitive to fluctuations in
interest rates.  As of September 30, 2009, the book value of long-term
fixed rate debt was $242,231,000, and the fair value of total debt was
$260,426,000.  As of December 31, 2008, the book value of long-term
fixed rate debt was $294,721,000, and the fair value of total debt was
$343,076,000.  Fair value was determined by discounting future
cash flows using borrowing rates currently available to the Company for debt
with similar terms and maturities.  This represents Level 3 under the
fair value hierarchy FASB ASC 820.





In May
2009, the FASB updated FASB ASC 855, “Subsequent Events” (SFAS No.
165) to establish general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or available to be issued.  This statement details the period
after the balance sheet date during which management shall evaluate events or
transactions, the circumstances under which an entity shall recognize events or
transactions in its financial statements, and the disclosures that an entity
shall make about events and transactions that occurred after the balance sheet
date.  We adopted these updates effective April 1,
2009.  See Note 13 for required disclosures.





In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)” (“SFAS No. 167”), which provides certain changes to
the evaluation of a variable interest entity (“VIE”) including requiring a
qualitative rather than quantitative analysis to determine the primary
beneficiary of a VIE, continuous assessments of whether an enterprise is the
primary beneficiary of a VIE, and enhanced disclosures about an enterprise’s
involvement with a VIE. The statement is effective January 1, 2010, and is
applicable to all entities in which an enterprise has a variable interest. We
are currently evaluating the impact SFAS No. 167 will have on our
consolidated financial statements.








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(3)
            INVESTMENT
      IN UNCONSOLIDATED REAL ESTATE
ENTITIES





The
Company accounts for investments in unconsolidated real estate entities that are
not considered VIEs under FASB ASC 810 (FIN 46R) in accordance with FASB ASC
970, (SOP 78-9) and FASB ASC 323 (APB Opinion No. 18).  Under this guidance,
an entity would be required to consolidate a VIE if it has (i) the power to
direct the activities that most significantly impact the entity’s economic
performance, and (ii) the obligation to absorb losses of the VIE or the
right to receive benefits from the VIE that could be significant to the
VIE.  For the entities that are considered VIEs, the Company performs
an assessment to determine the primary beneficiary of the entity based on a
probability weighted cash flow analysis.  The Company accounts for VIEs in
which the Company is not a primary beneficiary and does not bear a majority of
the risk of expected loss in accordance with the equity method of
accounting.





Apartment
Partnerships





The
unconsolidated apartment partnerships as of September 30, 2009 and 2008 included
Brookside Gardens Limited Partnership (“Brookside”) and Lakeside Apartments
Limited Partnership (“Lakeside”) that collectively represent 110 rental
units.  We have determined that these two entities are
VIEs.  However, the Company is not required to consolidate the
partnerships due to the fact that the Company is not the primary beneficiary and
does not bear the majority of the risk of expected losses.  The Company
holds an economic interest in Brookside and Lakeside but, as a general partner,
we have significant influence over operations of these entities that is
disproportionate to our economic ownership.  In accordance with FASB
ASC, these investments are accounted for under the equity method.  The
Company is exposed to losses consisting of our net investment, loans and unpaid
fees for Brookside of $264,000 and $246,000 and for Lakeside of $135,000
and $165,000 as of September 30, 2009 and December 31, 2008,
respectively.  All amounts are fully reserved and, accordingly, there
is no carrying value associated with the Company’s investments in these
unconsolidated real estate entities for the periods presented.  Pursuant to
the partnership agreement for Brookside, the Company, as general partner, is
responsible for providing operating deficit loans to the partnership in the
event that it is not able to generate sufficient cash flows from its operating
activities.  The Company’s involvement with Brookside and Lakeside has
not had a material affect on the Company’s financial position, financial
performance and cash flows.





Commercial
Partnerships





The
Company holds a limited partner interest in a commercial property in Puerto Rico
that it accounts for under the equity method of accounting.  ELI, S.E.
("ELI"), is a partnership formed for the purpose of constructing a building for
lease to the State Insurance Fund of the Government of Puerto
Rico.  ACPT contributed the land in exchange for $700,000 and a 27.82%
ownership interest in the partnership's assets, equal to a 45.26% interest in
cash flow generated by the 30 year lease of the building.





Land
Development/Homebuilding Joint Ventures





In
October 2008, the Company entered into an agreement with Surrey Homes, LLC
(“Surrey Homes”) to contribute $2,000,000, which was paid as of September 30,
2009, in exchange for a 50% ownership interest of the Series A Units in Surrey
Homes.  Surrey Homes’ business model is focused on providing
affordable quality homes with the lowest ongoing cost of maintenance through
energy efficiency and other green initiatives.  Surrey Homes is
establishing itself as a low overhead, lot option home builder.





We have
determined that our investment in Surrey Homes is a VIE under FASB ASC 810;
however, we are not required to consolidate Surrey Homes as the Company is not
the primary beneficiary and does not bear the majority of the risk of expected
losses.  In accordance with FASB ASC, this investment is accounted for
under the equity method, and as of September 30, 2009 and December 31, 2008,
represented $1,778,000 and $489,000 of the Company’s investments in
unconsolidated real estate entities, respectively.  The Company is
exposed to total losses consisting of our cumulative initial investment of
$2,000,000.  Other than funding the equity investment, the Company’s
involvement in Surrey Homes has not materially affected the Company’s financial
position, financial performance and cash flows.





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The
following table summarizes the financial data and principal activities of the
unconsolidated real estate entities, which the Company accounts for under the
equity method.  The information is presented to segregate the
apartment partnerships from the commercial partnerships as well as our 50%
ownership interest in the land development joint venture and homebuilding
operation, which are all accounted for as “investments in unconsolidated real
estate entities” on the balance sheet.




Apartment
            
            
            CommercialProperties
            
            
            Property
            
            
            Homebuilding
            
            
            Total(in
      thousands)Summary
      of Financial PositionTotal
      AssetsSeptember
      30, 2009
            
            $
            4,688
            
            
            $
            27,411
            
            
            $
            4,035
            
            
            $
            36,134December
      31, 2008
            
            
            4,781
            
            
            
            27,005
            
            
            
            2,478
            
            
            
            34,264Total
      Non-Recourse DebtSeptember
      30, 2009
            
            
            3,072
            
            
            
            22,375
            
            
            
            -
            
            
            
            25,447December
      31, 2008
            
            
            3,123
            
            
            
            22,380
            
            
            
            -
            
            
            
            25,503Total
      Other LiabilitiesSeptember
      30, 2009
            
            
            984
            
            
            
            382
            
            
            
            17
            
            
            
            1,383December
      31, 2008
            
            
            960
            
            
            
            153
            
            
            
            -
            
            
            
            1,113Total
      EquitySeptember
      30, 2009
            
            
            631
            
            
            
            4,654
            
            
            
            3,580
            
            
            
            8,865December
      31, 2008
            
            
            698
            
            
            
            4,472
            
            
            
            2,478
            
            
            
            7,648Company's
      Investment, net (1)September
      30, 2009
            
            
            -
            
            
            
            4,584
            
            
            
            1,778
            
            
            
            6,362December
      31, 2008
            
            
            -
            
            
            
            4,632
            
            
            
            489
            
            
            
            5,121Summary
      of OperationsTotal
      RevenueNine
      months ended September 30, 2009
            
            
            623
            
            
            
            2,587
            
            
            
            29
            
            
            
            3,239Nine
      months ended September 30, 2008
            
            
            620
            
            
            
            2,653
            
            
            
            -
            
            
            
            3,273Three
      months ended September 30, 2009
            
            
            206
            
            
            
            850
            
            
            
            5
            
            
            
            1,061Three
      months ended September 30, 2008
            
            
            202
            
            
            
            864
            
            
            
            -
            
            
            
            1,066Net
      Income (Loss)Nine
      months ended September 30, 2009
            
            
            (66
            )
            
            
            1,301
            
            
            
            (422
            )
            
            
            813Nine
      months ended September 30, 2008
            
            
            (97
            )
            
            
            1,339
            
            
            
            -
            
            
            
            1,242Three
      months ended September 30, 2009
            
            
            (16
            )
            
            
            425
            
            
            
            (196
            )
            
            
            213Three
      months ended September 30, 2008
            
            
            (30
            )
            
            
            430
            
            
            
            -
            
            
            
            400Company's
      recognition of equity in Earnings (Loss)Nine
      months ended September 30, 2009
            
            
            -
            
            
            
            513
            
            
            
            (211
            )
            
            
            302Nine
      months ended September 30, 2008
            
            
            -
            
            
            
            490
            
            
            
            -
            
            
            
            490Three
      months ended September 30, 2009
            
            
            -
            
            
            
            157
            
            
            
            (98
            )
            
            
            59Three
      months ended September 30, 2008
            
            
            -
            
            
            
            159
            
            
            
            -
            
            
            
            159Summary
      of Cash FlowsCash
      flows from operating activitiesNine
      months ended September 30, 2009
            
            
            130
            
            
            
            1,595
            
            
            
            (405
            )
            
            
            1,320Nine
      months ended September 30, 2008
            
            
            61
            
            
            
            1,627
            
            
            
            42
            
            
            
            1,730Three
      months ended September 30, 2009
            
            
            24
            
            
            
            646
            
            
            
            (108
            )
            
            
            562Three
      months ended September 30, 2008
            
            
            11
            
            
            
            650
            
            
            
            40
            
            
            
            701





-
15 -
 Table of Contents


Company's
      share of cash flows from operating activitiesNine
      months ended September 30, 2009
            
            
            1
            
            
            
            722
            
            
            
            (202
            )
            
            
            521Nine
      months ended September 30, 2008
            
            
            1
            
            
            
            736
            
            
            
            21
            
            
            
            758Three
      months ended September 30, 2009
            
            
            -
            
            
            
            293
            
            
            
            (103
            )
            
            
            190Three
      months ended September 30, 2008
            
            
            -
            
            
            
            294
            
            
            
            20
            
            
            
            314Operating
      cash distributionsNine
      months ended September 30, 2009
            
            
            
            
            
            
            1,115
            
            
            
            -
            
            
            
            1,115Nine
      months ended September 30, 2008
            
            
            -
            
            
            
            1,194
            
            
            
            -
            
            
            
            1,194Three
      months ended September 30, 2009
            
            
            -
            
            
            
            409
            
            
            
            -
            
            
            
            409Three
      months ended September 30, 2008
            
            
            -
            
            
            
            421
            
            
            
            -
            
            
            
            421Company's
      share of operatingcash
      distributionsNine
      months ended September 30, 2009
            
            
            
            
            
            
            524
            
            
            
            -
            
            
            
            524Nine
      months ended September 30, 2008
            
            
            -
            
            
            
            541
            
            
            
            -
            
            
            
            541Three
      months ended September 30, 2009
            
            
            -
            
            
            
            186
            
            
            
            -
            
            
            
            186Three
      months ended September 30, 2008
            
            
            -
            
            
            
            191
            
            
            
            -
            
            
            
            191





Notes:


(1)
            Represents
      the Company's net investment, including assets and accrued liabilities in
      the consolidated balance sheet for unconsolidated real estate
      entities.(4)
            DEBT





The
Company's outstanding debt is collateralized primarily by land, land
improvements, homebuilding assets, receivables, investment properties,
investments in partnerships, and rental properties.  The following
table summarizes the indebtedness of the Company at September 30, 2009 and
December 31, 2008 (in thousands):





Maturity
            Interest
            Outstanding
      as ofDates
            Rates
            September
      30,
            December
      31,From/To
            From/To
            2009
            2008(Unaudited)
            (Audited)Recourse
      DebtCommunity
      Development (a)(b)(c)(d)
            03-31-10/06-01-23
            3.25%/8%
            $         37,483
            $           39,232General
      obligations (e)
            02-21-12/03-13-12
            Non-interestbearing/8.55%
            113
            184Total
      Recourse Debt
            
            
            37,596
            39,416Non-Recourse
      Debt(f)(g)(h)Investment
      Properties
            12-01-13/07-01-50
            4.95%/7.33%
            180,148
            168,221Held for
      Sale – Non-Recourse Debt
            11-01-14/05-01-16
            5.3%/5.9%
            29,889
            107,899Total
      Non-Recourse Debt
            
            
            210,037
            276,120Total
    Debt
            
            
            $       247,633
            $         315,536





a.
            As
      of September 30, 2009, $25,948,000 of the community development recourse
      debt is owed to the Charles County Commissioners and relates to the
      general obligation bonds issued by the Charles County government, that
      have 15 year amortization of maturities with the earliest occurring in
      June, 2019, as described in detail under the heading "Financial
      Commitments" in Note 5.  As of September 30, 2009, the Company has a
      receivable balance related to the bonds of $2,525,000.b.
            On
      April 14, 2006, the Company closed a three year, $14,000,000 revolving
      acquisition and development loan (“the Revolver”) secured by a first lien
      deed of trust on property located in St. Charles,
      Maryland.  During the first quarter of 2009, the Company
      renegotiated the terms of the agreement.  The loan bears
      interest at Prime plus 1.25% (4.5% at September 30, 2009) and matures on
      March 31, 2010.  As of September 30, 2009, $1,946,000 was
      outstanding on the Revolver.





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 Table of Contents


c.
            Land
      Development Associates, S.E (“LDA”) had a $10,000,000 revolving line of
      credit that matured on August 31, 2009 but was extended to December 31,
      2010.  As part of the extension, the Company agreed to reduce
      the overall facility limit to $7,500,000 with the available credit to be
      used to fund remaining Hilltop development, certain retainage due
      and  up to $500,000 to be used to fund future interest payments
      due under the facility.  In addition, the facility now bears
      interest at Prime plus 1.5% but not less than 5.5%.  The
      outstanding balance of this facility on September 30, 2009, was
      $6,247,000.d.
            On
      April 2, 2008, the Company secured a two-year, $3,600,000 construction
      loan for the construction of a commercial restaurant/office building
      within the O’Donnell Lake Restaurant Park.  The facility is
      secured by the land along with any improvements constructed and bears
      interest at Wall Street Journal published Prime Rate (3.25% at September
      30, 2009).  At the end of the two-year construction period, the
      Company may convert the loan to a 5-year permanent loan, amortized over a
      30-year period at a fixed interest rate to be determined.  As of
      September 30, 2009, $3,342,000 was outstanding under this facility leaving
      $258,000 available to fund completion of the building.  However,
      the lender requested that the outstanding balance of the loan be reduced
      to 80% of the “as-is” value of the building, requesting a reduction of
      $782,000 before November 20, 2009.


e.
              The
      general recourse debt outstanding as of September 30, 2009 is made up of
      various capital leases outstanding within our U.S. and Puerto Rico
      operations, as well as installment loans for vehicles and other
      miscellaneous equipment.


f.
            The
      non-recourse debt related to the investment properties is collateralized
      by the multifamily rental properties and the office building in Parque
      Escorial.  As of September 30, 2009, approximately $76,279,000
      of this debt was secured by the Federal Housing Administration ("FHA") or
      the Maryland Housing Fund.


g.
              On
      May 12, 2008, IGP agreed to provide a fixed charge and debt service
      guarantee related to the Escorial Office Building I, Inc. (“EOB”)
      mortgage.  The fixed charge and debt service guarantee requires
      IGP Group to contribute capital in cash in such amounts required to cause
      EOB to comply with the related financial covenants.  The
      guarantee will remain in full force until EOB has complied with the
      financial covenants for four consecutive
  quarters.


h.
            On
      January 28, 2009, the Company completed the initial closing of a 6.9%,
      $25,045,000 non-recourse construction loan to fund the construction costs
      for a new apartment property in St. Charles' Fairway Village (“Fairway
      Village”).  As of September 30, 2009, the balance on the loan was
      $13,654,000.





The Company’s loans contain various
financial, cross collateral, cross default, technical and restrictive
provisions.  With the exception of a loan to value covenant related to
the office building construction loan as noted in footnote d. above, as of
September 30, 2009, the Company is in compliance with its financial
covenants.





(5)
            COMMITMENTS
      AND CONTINGENT LIABILITIES





Financial
Commitments





Pursuant
to an agreement reached between ACPT and the Charles County Commissioners in
2002, the Company agreed to accelerate the construction of two major roadway
links to the Charles County (the "County") road system.  As part of the
agreement, the County agreed to issue general obligation public improvement
bonds (the “Bonds”) to finance $20,000,000 of this construction guaranteed by
letters of credit provided by Lennar Corporation (“Lennar”) as part of a
residential lot sales contract for 1,950 lots in Fairway Village.  The
Bonds were issued in three installments with the final $6,000,000 installment
issued in March 2006.  The Bonds bear interest rates ranging from 4% to 8%,
for a blended lifetime rate for total Bonds issued to date of 5.1%, and call for
semi-annual interest payments and annual principal payments and mature in 15
years.  Under the terms of Bond repayment agreements between the
Company and the County, the Company is obligated to pay interest and principal
to the County based on the full amount of the Bonds; as such, the Company
recorded the full amount of the debt and a receivable from the County
representing the remaining Bond proceeds to be advanced to the Company as major
infrastructure development within the project occurs.  As part of the
agreement, the Company will pay the County a monthly payment equal to one-sixth
of the semi-annual interest payments and one-twelfth of the annual principal
payment.  The County and the Lennar agreement require ACPT to fund an
escrow account from lot sales to be used to repay the principal portion of these
Bonds.





In August
2005, the Company signed a memorandum of understanding ("MOU") with the Charles
County Commissioners regarding a land donation that is now the site of a minor
league baseball stadium and entertainment





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17 -
 Table of Contents
 
 complex. 
Under the terms of the MOU, the Company donated 42 acres of land in St. Charles
to the County on December 31, 2005.  The Company also agreed to
expedite off-site utilities, storm-water management and road construction
improvements that will serve the entertainment complex and future portions of
St. Charles so that the improvements will be completed concurrently with the
entertainment complex.  In return, the County agreed to issue
$12,000,000 of general obligation bonds to finance the infrastructure
improvements.  In March 2006, $4,000,000 of bonds were issued for this
project, with an additional $3,000,000 issued in both March 2007 and March 2008
and $2,000,000 in March 2009.  These bonds bear interest rates ranging
from 4.9% to 8%, for a blended rate of 5.3%, call for semi-annual interest
payments and annual principal payments, and mature in 15 years.  The
terms of the bond repayment agreement are similar to those noted
above.  In addition, the County agreed to issue an additional 100
school allocations a year to St. Charles commencing with the issuance of
bonds.





During
2006, the Company reached an agreement with the County whereby the Company
receives interest payments on any undistributed bond proceeds held in escrow by
the County.  The agreement covers the period from July 1, 2005 through
the last draw made by the Company.





As of September 30, 2009, ACPT had
purchased $11,904,000 of surety bonds for the completion of land development
projects with Charles County with maturity dates ranging from November 6, 2009
to November 8, 2010; substantially all of which are for the benefit of the
Charles County Commissioners.





Consulting
Agreements and Severance Arrangements





ACPT entered into a consulting
agreement with Carlos Rodriguez, the former Executive Vice President and Chief
Executive Officer for IGP Group, a wholly owned Puerto Rico subsidiary of ACPT,
effective July 1, 2008.  Under the terms of this consulting agreement,
the Company will pay Mr. Rodriguez $100,000 per year through June
2010.  Payments under this consulting agreement were fully accrued as
of December 31, 2008.





On October 1, 2008, Mr. Edwin L. Kelly
notified the Company that he would retire as the Company’s President and Chief
Operating Officer effective December 1, 2008.  Pursuant to his
employment agreement, Mr. Kelly received a severance payment of
$1,500,000.  The Company has also agreed to enter into a consulting
agreement with Mr. Kelly providing compensation for his services at a rate of
$10,000 per month, for an initial term of one year.  Payments under this
consulting agreement were fully accrued as of December 31, 2008.





Gleneagles
Construction Contract





On
January 28, 2009, the Company completed the initial closing of a 6.9%,
$25,045,000 non-recourse construction loan to fund the construction costs for a
new apartment property in Fairway Village.  As of September 30, 2009, the
balance on the loan was $13,654,000.  The Company has entered into a
construction contract valued at $18,291,000 to complete the construction of this
property.





Guarantees





ACPT and
its subsidiaries typically provide guarantees for another subsidiary's loans. In
many cases more than one company guarantees the same debt. Since all of these
companies are consolidated, the debt or other financial commitment made by the
subsidiaries to third parties and guaranteed by ACPT, is included within ACPT's
consolidated financial statements.  As of September 30, 2009,
ACPT had guaranteed $37,483,000 of such debt.  The guarantees
will remain in effect until the debt service is fully repaid by the respective
borrowing subsidiary.  The terms of the debt service guarantees
outstanding range from one to nine years.   We do not expect any
of these guarantees to impair the individual subsidiary or the Company's ability
to conduct business or to pursue its future development plans.





Legal
Matters





On
September 25, 2009, the Company announced that it had entered into an agreement
and plan of merger whereby FCP Fund I, L.P. (“FCP”) would acquire 100% of the
outstanding common shares of the Company for a price of $7.75 per share, payable
in cash, for aggregate consideration of approximately $43,600,000.  On
October 2, 2009, Pennsylvania Avenue Funds, a purported Company shareholder,
filed a class action complaint in the Circuit





-
18 -
 Table of Contents
 
 Court for
Charles County, Maryland, against the Company, the Board of Trustees and
FCP.  The complaint alleges that the trustees breached their fiduciary
duties in connection with the merger.  The complaint further alleges
that FCP aided and abetted those breaches of fiduciary duty.  The
complaint seeks to enjoin consummation of the merger and also seeks attorneys’
fees and expenses.  On October 23, 2009, Joseph M. Sullivan, a
purported Company shareholder, filed a class action complaint in the Circuit
Court for Charles County, Maryland, against the Company, the Board of Trustees,
FCP and FCP/ACPT Acquisition Company, Inc. (“FCP/ACPT Acquisition Company”). The
complaint alleges that the trustees breached their fiduciary duties in
connection with the merger.  The complaint further alleges that FCP
and FCP/ACPT Acquisition Company aided and abetted those breaches of fiduciary
duty.  The complaint seeks to enjoin consummation of the merger and
also seeks attorneys’ fees and expenses.





Due to
the inherent uncertainties of the judicial process, we are unable to either
predict the outcome of or estimate a range of potential loss associated with
certain matters discussed above.  While we intend to vigorously defend
these matters and believe we have meritorious defenses available to us, there
can be no assurance that we will prevail.  If these matters are not
resolved in our favor, we believe we are insured for potential losses unless
otherwise stated.  Any amounts that exceed our insurance coverage
could have a material adverse effect on our financial condition and results of
operations.





In
addition, the Company and/or its subsidiaries have been named as defendants,
along with other companies, in tenant-related lawsuits.  The Company
carries liability insurance against these types of claims that management
believes meets industry standards.  To date, payments made to the
plaintiffs of the settled cases were covered by our insurance policy.  The
Company believes it has strong defenses to these ordinary course claims, and
intends to continue to defend itself vigorously in these matters.





In the
normal course of business, ACPT is involved in various pending or unasserted
claims. In the opinion of management, these are not expected to have a material
impact on the financial condition or future operations of ACPT.





(6)
            RELATED
      PARTY TRANSACTIONS





Certain
officers and trustees of ACPT have ownership interests in various entities that
conduct business with the Company.  The financial impact of the
related party transactions on the accompanying consolidated financial statements
is reflected below (in thousands):





-19-


Table of Contents


CONSOLIDATED STATEMENT OF
      INCOME:
            
            
            Nine
      months Ended
              September
      30,
            
            
            Three
      Months Ended
              September
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008Management and Other FeesUnconsolidated
      subsidiaries with third party partners
            (A)
            
            $
            31
            
            
            $
            32
            
            
            $
            10
            
            
            $
            11Rental Property Revenues
            (B)
            
            $
            -
            
            
            $
            36
            
            
            $
            -
            
            
            $
            6Interest and Other IncomeUnconsolidated
      real estate entities with third party partners
            
            
            $
            7
            
            
            $
            6
            
            
            $
            2
            
            
            $
            2General and Administrative
      ExpenseReserve
      additions (reductions) and other write-offs-Unconsolidated
      real estate entities with third party partners
            (A)
            
            $
            5
            
            
            $
            (2
            )
            
            $
            (3
            )
            
            $
            7Reimbursement
      to IBC for ACPT's share of J. Michael Wilson's salary
            
            
            
            318
            
            
            
            311
            
            
            
            106
            
            
            
            104Reimbursement
      of administrative costs-Affiliates
      of J. Michael Wilson, Chairman
            
            
            
            (11
            )
            
            
            (14
            )
            
            
            (3
            )
            
            
            (4
            )Consulting
      Fees-James
      J. Wilson, IGC Chairman and Director
            (C1)
            
            
            --
            
            
            
            150
            
            
            
            --
            
            
            
            50Thomas
      J. Shafer, Trustee
            (C2)
            
            
            5
            
            
            
            45
            
            
            
            --
            
            
            
            15$
            317
            
            
            $
            490
            
            
            $
            100
            
            
            $
            172




BALANCE
      SHEET:
              
              
              Balance
                September
      30,  2009
              
              
              Balance
      December 31, 2008Other AssetsReceivables
      – All unsecured and due on demandUnconsolidated
      subsidiaries
              
              
              $
              3
              
              
              $
              10Affiliate
      of J. Michael Wilson, Chairman
              
              
              
              3
              
              
              
              2Total
              
              
              $
              6
              
              
              $
              12Additional
      Paid-in Capital
              (C3)
              
              $
              354
              
              
              $
              95




(A)
            Management and Other
    Services


The
Company provides management and other support services to its unconsolidated
subsidiaries and other affiliated entities in the normal course of
business.  The fees earned from these services are typically collected
on a monthly basis, one month in arrears.  Receivables are unsecured
and due on demand.  Certain partnerships experiencing cash shortfalls
have not paid timely.  Generally, receivable balances of these
partnerships are fully reserved, until satisfied or the prospect of
collectibility improves.  The collectability of management fee receivables
is evaluated quarterly.  Any increase or decrease in the reserves is
reflected accordingly as additional bad debt expenses or recovery of such
expenses.





(B)
            Rental Property
  Revenue


On
September 1, 2006, the Company, through one of its Puerto Rican subsidiaries,
Escorial Office Building I, Inc. (“Landlord”), executed a lease with Caribe
Waste Technologies, Inc. (“CWT”), a company owned by the J. Michael Wilson
Family.  The lease provides for 1,842 square feet of office space to
be leased by CWT for five years at $19.00 per rentable square
foot.  The Company provided CWT with an allowance of $9,000 in tenant
improvements which are being amortized over the life of the lease.  On
February 25, 2008, CWT executed its rights under the lease and provided six
months written notice of its intention to terminate the lease, effective August
24,


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20 -
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 2008. The
lease agreement is unconditionally guaranteed by Interstate Business Corporation
(“IBC”), a company owned by the J. Michael Wilson Family.





(C)
            Other


Other transactions with related
parties are as follows:


1)
            Represents
      fees paid to James J. Wilson pursuant to a consulting and retirement
      agreement.  At Mr. Wilson's request, payments are made to
      Interstate Waste Technologies, Inc. (“IWT”).2)
            Represents
      fees paid to Thomas J. Shafer, a Trustee, pursuant to a consulting
      agreement.


3)
              A
      primary shareholder of the Company agreed in principle to provide the
      Company’s Chief Executive Officer with the economic benefit of 185,550
      shares of their common stock as of October 1, 2008 in accordance with the
      five-year vesting schedule. According to FASB ASC 718, any share-based
      payments awarded to an employee of the reporting entity by a related party
      for services provided to the entity are share-based payment transactions
      unless the transfer is clearly for a purpose other than compensation for
      services to the reporting entity.  Therefore, in essence, the
      economic interest holder makes a capital contribution to the reporting
      entity, and the reporting entity makes a share-based payment to its
      employee in exchange for services rendered.   The Company
      recognized $354,000 and $95,000 in compensation expense in the nine and
      three months ended September 30, 2009, respectively, related to this
      grant.







(7)
            INCOME
      TAXES





ACPT’s
subsidiaries, ARMC, ALD and ARPT, are subject to federal and state income
tax.  ACPT is subject to Puerto Rico income tax on its Puerto Rico
source income.





The
United States effective tax rates for the nine months ended September 30, 2009
and 2008 were 36% and 30%, respectively.  The United States effective tax
rates for the three months ended September 30, 2009 and 2008 were 22% and 37%,
respectively.  The statutory tax rate is 40%.  The difference in the
statutory tax rate and the effective tax rate for the pre-tax loss during the
nine and three months ended September 30, 2009 was primarily due to accrued
taxes and penalties on uncertain tax positions, certain non-deductible
compensation expenses and the change in the deferred tax asset valuation
allowance.  The difference in the statutory tax rate and the effective tax
rate for the pre-tax loss during the nine and three months ended September 30,
2008 was primarily due to a relatively small net loss reported, the related
benefit for which was partially offset by accrued taxes and penalties on
uncertain tax positions.





The
effective tax rates on the Puerto Rico source income for the nine months ended
September 30, 2009 and 2008 were 28% and (71%), respectively. The effective
tax rates on the Puerto Rico source income for the three months ended September
30, 2009 and 2008 were 29% and 21%, respectively.  The statutory tax
rate is 29%.   The difference in the statutory tax rate and the
effective tax rate for the pre-tax income during the nine and three months ended
September 30, 2009, was primarily due to tax exempt income and the change in the
deferred tax asset valuation allowance offset in part by deferred items for
which no current benefit may be recognized.  The difference in the
statutory tax rate and the effective tax rate for the pre-tax loss during the
nine and three months ended September 30, 2008, was primarily due to tax exempt
income offset in part by the double taxation on the earnings of our wholly-owned
corporate subsidiary, ICP, and deferred items for which no current benefit may
be recognized.


Due to the
potential variability in the anticipated effective tax rate on non-discrete
activity and/or discrete taxable events, the company has computed its
intraperiod income tax provision for the discrete taxable events and
non-discrete activity using a discrete period computation.


The total
amount of unrecognized tax benefits as of September 30, 2009, was
$13,920,000.  Included in the balance at September 30, 2009, were
$40,000 of tax positions that, if recognized, would affect the effective tax
rate.  A reconciliation of the beginning and ending amount of
unrecognized tax benefit (in thousands) is as follows:





Unrecognized tax benefit at
      December 31, 2008
            
            $
            15,543Change
      attributable to tax positions taken during a prior period
            
            
            (1,600
            )Change
      attributable to tax positions taken during the current
    period
            
            
            -Decrease attributable to
      settlements with taxing authorities
            
            
            -Decrease attributable to lapse of
      statute of limitations
            
            
            (23)Unrecognized tax benefit at
      September 30, 2009
            
            $
            13,920


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21 -
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In
accordance with our accounting policy, we present accrued interest related to
uncertain tax positions as a component of interest expense and accrued penalties
as a component of income tax expense on the Consolidated Statement of
Income.  Our Consolidated Statements of Income for the nine months
ended September 30, 2009 and 2008, included interest expense of $932,000 and
$1,031,000, respectively, and penalties of ($41,000) and $58,000,
respectively.  Our Consolidated Statements of Income for the three
months ended September 30, 2009 and 2008, included interest expense of $287,000
and $298,000, respectively, and penalties of ($15,000) and $20,000,
respectively.  Our Consolidated Balance Sheets as of September 30,
2009 and December 31, 2008, included accrued interest of $5,148,000 and
$3,844,000, respectively, and accrued penalties of $1,073,000 and $1,143,000,
respectively.





The
Company currently does not have any tax returns under audit by the United States
Internal Revenue Service or the Puerto Rico Treasury
Department.  However, the tax returns filed in the Unites States for
the years ended December 31, 2006 through 2008 remain subject to
examination.  For Puerto Rico, the tax returns for the years ended
December 31, 2005 through 2008 remain subject to examination.  Within
the next twelve months, the Company does not anticipate any payments related to
settlement of any tax examinations.  There is a reasonable possibility
within the next twelve months the amount of unrecognized tax benefits will
decrease by $608,000 when the related statutes of limitations expire and certain
payments are recognized as taxable income.





Additionally,
as a result of holding our partnership interests in certain U.S. multifamily
apartment properties over many years there is approximately $45,000,000 of
distributions in excess of our partnership basis, related to these
holdings.   Should a triggering event take place, such as sale or
liquidation of the underlying partnership assets or interests, the Company would
be required to recognize taxable income related to this low basis and pay tax
accordingly.





(8)
            HELD
      FOR SALE ASSETS





A real
estate investment held for sale is carried at the lower of its carrying amount
or estimated fair value, less the cost of a potential sale.  Depreciation
is suspended during the period the property is held for sale.  The Company
has binding agreements for two of the five properties (Milford I and II) subject
to loan assumption and continues to market Nottingham, Owings Chase and Prescott
Square.  The Company intends to sell all five of these properties and
accordingly, believes that held for sale presentation is
appropriate.





On August
31, 2009, the Company completed the sale of its wholly-owned subsidiary,
Interstate General Properties, LP (“IGP”) to Partners Business Equities, LLC
(“PBE”) and its associates for $14,300,000 which was a significant portion of
the Company’s Puerto Rican Operating Real Estate segment.  Prior to the
sale, IGP was restructured to include only the Company’s general and limited
partnership interests in nine partnerships which own twelve properties with
2,653 subsidized apartments in Puerto Rico, as well as the Section 8 affordable
housing management contracts.  Included in the sale was $39,805,000 in
investments in real estate and $81,051,000 in non-recourse debt as of August 31,
2009.  The Company realized a net gain on the transaction of
approximately $25,351,000 and deferred revenues of
$1,224,000.  $974,000 in notes receivable has been deferred until paid
as the receivable is contingent on PBE refinancing the apartment mortgages, and
$250,000 has been deferred as it represents monies held in escrow to cover
warranties.  In accordance with FASB ASC 360 (SFAS 144), the Puerto
Rican Properties’ assets and related liabilities had been classified as “held
for sale” on the Company’s consolidated balance sheet as of December 31,
2008.





As of
September 30, 2009, the major classes of assets related to the Baltimore
properties included in assets held for sale are $34,674,000 in investments in
real estate, $1,130,000 in restricted cash and escrow balances, and $1,149,000
in deferred charges and other assets.  Liabilities related to assets
held for sale includes $29,889,000 in non-recourse debt.





In
addition, the properties’ results of operations have been classified as
“discontinued operations” for all periods presented in the consolidated
statements of operations.  The following is a summary of the
components of income from discontinued operations for the nine and three months
ended September 30, 2009 and 2008, respectively:





-
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 Table of Contents





For the nine months ended
      September 30,
              
              2009
              
              
              2008RevenuesRental
      property revenues
              
              $
              19,794
              
              
              $
              21,267Management
      and other fees
              
              
              273
              
              
              
              360Total
      revenues
              
              
              20,067
              
              
              
              21,627ExpensesRental
      property operating expenses
              
              
              9,756
              
              
              
              10,794General,
      administrative, selling, and marketing
              
              
              1,153
              
              
              
              1,590Write-down
      of assets
              
              
              882
              
              
              
              -Depreciation
      expense
              
              
              -
              
              
              
              3,656Total
      expenses
              
              
              11,791
              
              
              
              16,040Operating
      income
              
              
              8,276
              
              
              
              5,587Other
      income (expense)Gain
      on sale of discontinued operations (less applicable taxes of
      $10,453)
              
              
              25,351
              
              
              
              -Other
      expenses
              
              
              (4,914
              )
              
              
              (5,319
              )Total income (expense)
              
              
              20,437
              
              
              
              (5,319
              )Income before
      provision for income taxes
              
              
              28,713
              
              
              
              268Provision
      for income taxes
              
              
              797
              
              
              
              44Income from
      discontinued operations
              
              
              27,916
              
              
              
              224Noncontrolling
      interest in consolidated entities
              
              
              (1,227)
              
              
              
              (1,306
              )Income
      (loss) from discontinued operations attributable to ACPT
              
              $
              26,689
              
              
              $
              (1,082
              )
 
 For the three months ended
      September 30,
              
              2009
              
              
              2008RevenuesRental
      property revenues
              
              $
              5,388
              
              
              $
              7,210Management
      and other fees
              
              
              30
              
              
              
              119Total
      revenues
              
              
              5,418
              
              
              
              7,329ExpensesRental
      property operating expenses
              
              
              2,812
              
              
              
              3,595General,
      administrative, selling, and marketing
              
              
              584
              
              
              
              611Write-down
      of assets
              
              
              43
              
              
              
              -Depreciation
      expense
              
              
              -
              
              
              
              1,337Total
      expenses
              
              
              3,439
              
              
              
              5,543Operating
      Income
              
              
              1,979
              
              
              
              1,786Other
      income (expense)Gain
      on sale of discontinued operations (less applicable income taxes
      of
                $10,453)
              
              
              25,351
              
              
              
              -Other
      expenses
              
              
              (1,524
              )
              
              
              (1,760
              )Total other income (expense)
              
              
              23,827
              
              
              
              (1,760
              )Income before
      provision for income taxes
              
              
              25,806
              
              
              
              26Provision
      for income taxes
              
              
              178
              
              
              
              319Income
      (loss) from discontinued operations
              
              
              25,628
              
              
              
              (293
              )Noncontrolling
      interest in consolidated entities
              
              
              (1,227
              )
              
              
              (370
              )Income
      (loss) from discontinued operations attributable to ACPT
              
              $
              24,401
              
              
              $
              (663
              )


-
23 -
 Table of Contents




(9)
            SEGMENT
      INFORMATION





ACPT operates in two principal lines of
business: Operating Real Estate and Land Development.  The Operating
Real Estate segment is comprised of ACPT’s investments in rental properties and
property management services; whereas, the Land Development segment is comprised
of ACPT’s community development and homebuilding services.  This represents
a change from ACPT’s historical financial reporting practice of evaluating the
company solely based on geographical location.  During the fourth
quarter of 2008, the Company had a change in senior
management.   The chief operating decision maker emphasizes net
operating income as a key measurement of segment profit or
loss.  Segment net operating income is generally defined as segment
revenues less direct segment operating expenses. Management is now
evaluating the Company based on its operating lines of business, Operating Real
Estate and Land Development.  While ACPT continues to report operating
results on a consolidated basis, it also now reports separately the operating
results of its two lines of business.  The Company has reclassified
its segment presentation for 2008 to include the results of these
segments.  The accounting policies of the segments are the same as
those described in the summary of significant accounting policies.





Operating
Real Estate





The
Operating Real Estate segments in the U.S. and Puerto Rico are comprised of
investments in rental properties and property management
services.  The Operations are managed through ARPT, ARMC, and IGP, a
wholly owned subsidiary of IGP Group Corp., which is a wholly owned subsidiary
of ACPT.  ARPT and its subsidiaries hold the general and limited
partnership interests in our U.S. Operating Real Estate apartment property
portfolio.  The apartment properties are individually organized into
separate entities.  ARPT's ownership in these entities ranges from 0.1% to
100%.  The U.S. Operating Real Estate operations also include the
management of apartment properties in which we have an ownership interest and
one apartment property owned by a third party in 2008.  The Company
has entered into binding purchase agreements for two of the five properties
(Milford I and II) which are subject to certain closing conditions and continues
to market Nottingham, Owings Chase and Prescott Square.  The financial
impact of these properties has been included as “Held for Sale” and
“Discontinued Operations” in the segment disclosures below.





For
      the nine months endedU.S.
      Operating Real Estate:
            
            September
      30, 2009
            
            
            September
      30, 2008Operating
      revenues
            
            $
            25,022
            
            
            $
            25,107Operating
      expenses
            
            
            10,943
            
            
            
            11,034Net
      operating income
            
            
            14,079
            
            
            
            14,073Management
      and other fees, substantially all from related entities
            
            
            58
            
            
            
            117General,
      administrative, selling and marketing
            
            
            (1,346
            )
            
            
            (1,063
            )Depreciation
            
            
            (3,534
            )
            
            
            (3,734
            )Operating
      income
            
            
            9,257
            
            
            
            9,393Other
      expense
            
            
            (6,452
            )
            
            
            (5,944
            )Income
      before provision for income taxes
            
            
            2,805
            
            
            
            3,449Provision
      for income taxes
            
            
            131
            
            
            
            366Income from
      continuing operations
            
            
            2,674
            
            
            
            3,083Discontinued
      operations
            
            
            (533
            )
            
            
            (357
            )Net
      income
            
            $
            2,141
            
            
            $
            2,726








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 Table of Contents







For
      the three months endedU.S.
      Operating Real Estate:
            
            September
      30, 2009
            
            
            September
      30, 2008Operating
      revenues
            
            $
            8,295
            
            
            $
            8,423Operating
      expenses
            
            
            3,795
            
            
            
            3,612Net
      operating income
            
            
            4,500
            
            
            
            4,811Management
      and other fees, substantially all from related entities
            
            
            10
            
            
            
            38General,
      administrative, selling and marketing
            
            
            (487
            )
            
            
            (334
            )Depreciation
            
            
            (1,204
            )
            
            
            (1,205
            )Operating
      income
            
            
            2,819
            
            
            
            3,310Other
      expense
            
            
            (2,255
            )
            
            
            (2,075
            )Income
      before benefit for income taxes
            
            
            564
            
            
            
            1,235Benefit
      for income taxes
            
            
            (212
            )
            
            
            (81
            )Income from
      continuing operations
            
            
            776
            
            
            
            1,316Discontinued
      operations
            
            
            29
            
            
            
            (108
            )Net
      income
            
            $
            805
            
            
            $
            1,208





As
      of
            
            
            As
      ofU.S.
      Operating Real Estate Balance Sheet:
            
            September
      30,
              2009
            
            
            December
      31, 2008ASSETSInvestments
      in real estate, net
            
            $
            93,275
            
            
            $
            75,120Cash
      and cash equivalents
            
            
            4,773
            
            
            
            7,008Restricted
      cash and escrow deposits
            
            
            8,215
            
            
            
            6,996Deferred
      tax assets
            
            
            7,905
            
            
            
            8,743Deferred
      charges and other assets, net of amortization
            
            
            53,817
            
            
            
            53,049Property
      and related assets, held for sale
            
            
            36,961
            
            
            
            37,498Total
      Assets
            
            $
            204,946
            
            
            $
            188,414LIABILITIES
      AND SHAREHOLDERS' EQUITYLIABILITIESNon-recourse
      debt
            
            $
            171,822
            
            
            $
            159,822Recourse
      debt
            
            
            247
            
            
            
            257Other
      liabilities
            
            
            12,780
            
            
            
            6,589Accrued
      income tax liability-current
            
            
            (573
            )
            
            
            (1,047
            )Liabilities
      related to assets held for sale
            
            
            31,304
            
            
            
            31,310Total
      Liabilities
            
            
            215,580
            
            
            
            196,931Total
      Shareholders' Equity
            
            
            (10,634
            )
            
            
            (8,517
            )Total
      Liabilities and Shareholders' Equity
            
            $
            204,946
            
            
            $
            188,414





The Puerto Rican Operating Real Estate operations provides property management
services to multifamily rental properties in Puerto Rico in which we have an
ownership interest, apartment properties owned by third parties, our commercial
properties, and home-owner associations related to our planned
communities.  This segment also provides management services for our
homebuilding and community development operations.  During the three
months ended March 31, 2009, the Company executed a definitive agreement to sell
the Puerto Rico apartment properties.  The financial impact of these
properties has been included as “Held for Sale” and “Discontinued Operations” in
the segment disclosures below.  On August 31, 2009, the Company
completed the sale of IGP to PBE and its associates for $14,300,000.  Prior
to the sale, IGP was restructured to include only the





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 Table of Contents





Company’s
general and limited partnership interests in nine partnerships which own twelve
properties with 2,653 subsidized apartments in Puerto Rico, as well as the
Section 8 affordable housing management contracts.  IGP Property
Holdings, Inc. was established to hold the ownership interests of the two
commercial properties ranging from 28% to 100%.





For
      the nine months endedPuerto
      Rican Operating Real Estate:
            
            September
      30,
              2009
            
            
            September
      30,
              2008Operating
      revenues
            
            $
            750
            
            
            $
            299Operating
      expenses
            
            
            511
            
            
            
            479Net
      operating income
            
            
            239
            
            
            
            (180
            )Management
      and other fees, substantially all from related entities
            
            
            164
            
            
            
            111General,
      administrative, selling and marketing
            
            
            (443
            )
            
            
            (754
            )Depreciation
            
            
            (171
            )
            
            
            (170
            )Operating
      loss
            
            
            (211
            )
            
            
            (993
            )Other
      expense
            
            
            (207
            )
            
            
            (458
            )Loss
      before benefit for income taxes
            
            
            (418
            )
            
            
            (1,451
            )Benefit
      from income taxes
            
            
            -
            
            
            
            (14
            )Loss
      from continuing operations
            
            
            (418
            )
            
            
            (1,437
            )Discontinued
      operations
            
            
            1,871
            
            
            
            581Gain
      on sale of discontinued operations, net of income taxes
            
            
            25,351
            
            
            
            -Total
      discontinued operations
            
            
            27,222
            
            
            
            581Net
      income (loss)
            
            $
            26,804
            
            
            $
            (856
            )







For
      the three months endedPuerto
      Rican Operating Real Estate:
            
            September
      30,
              2009
            
            
            September
      30,
              2008Operating
      revenues
            
            $
            305
            
            
            $
            103Operating
      expenses
            
            
            175
            
            
            
            173Net
      operating income
            
            
            130
            
            
            
            (70
            )Management
      and other fees, substantially all from related entities
            
            
            88
            
            
            
            37General,
      administrative, selling and marketing
            
            
            3
            
            
            
            (192
            )Depreciation
            
            
            (2
            )
            
            
            (57
            )Operating
      income (loss)
            
            
            219
            
            
            
            (282
            )Other
      income (expense)
            
            
            96
            
            
            
            (150
            )Income
      (loss) before provision (benefit) for income taxes
            
            
            315
            
            
            
            (432
            )Provision
      (benefit) for income taxes
            
            
            612
            
            
            
            (292
            )Loss from
      continuing operations
            
            
            (297
            )
            
            
            (140
            )Discontinued
      operations
            
            
            (979
            )
            
            
            (185
            )Gain
      on sale of discontinued operations, net of income taxes
            
            
            25,351
            
            
            
            -Total
      discontinued operations
            
            
            24,372
            
            
            
            (185
            )Net
      income (loss)
            
            $
            24,075
            
            
            $
            (325
            )








-
26 -
 Table of Contents





As
      of
            
            
            As
      ofPuerto
      Rican Operating Real Estate Balance Sheet:
            
            September
      30,
              2009
            
            
            December
      31, 2008ASSETSInvestments
      in real estate
            
            $
            9,353
            
            
            $
            9,524Cash
      and cash equivalents
            
            
            12,788
            
            
            
            6,825Restricted
      cash and escrow deposits
            
            
            8
            
            
            
            103Investments
      in unconsolidated real estate entities
            
            
            17,522
            
            
            
            17,311Deferred
      charges and other assets, net of amortization
            
            
            19,051
            
            
            
            16,613Property
      and related assets, held for sale
            
            
            -
            
            
            
            45,636Total
      Assets
            
            $
            58,722
            
            
            $
            96,012LIABILITIES
      AND SHAREHOLDERS' EQUITYLIABILITIESNon-recourse
      debt
            
            $
            8,326
            
            
            $
            8,399Other
      liabilities
            
            
            19,031
            
            
            
            6,801Accrued
      income tax liability-current
            
            
            4,074
            
            
            
            4,259Liabilities
      related to assets held for sale
            
            
            -
            
            
            
            80,502Total
      Liabilities
            
            
            31,431
            
            
            
            99,961Total
      Shareholders' Equity
            
            
            27,291
            
            
            
            (3,949
            )Total
      Liabilities and Shareholders' Equity
            
            $
            58,722
            
            
            $
            96,012





Land
Development





The Land
Development Operation involves community development and homebuilding services
in the U.S. and Puerto Rico.  The Land Development Operations are
managed through ALD and LDA.  ALD and its subsidiary comprise the U.S.
Land Development Operations and own and develop our land holdings in St.
Charles, Maryland. St. Charles is a 9,000 acre planned community consisting of
residential, commercial, recreational and open space land.  We also
remain open to construction and acquisition of additional properties that will
add value to our existing investment assets.


For the nine months endedU.S.
      Land Development Operations:
            
            September
      30,
              2009
            
            
            September
      30,
              2008Operating
      revenuesCommunity
      development - land sales
            
            $
            6,992
            
            
            $
            6,457Operating
      expensesCost
      of land sales
            
            
            5,195
            
            
            
            5,218General,
      administrative, selling and marketing
            
            
            2,619
            
            
            
            2,541Depreciation
            
            
            7
            
            
            
            4Total
      expenses
            
            
            7,821
            
            
            
            7,763Operating
      loss
            
            
            (829
            )
            
            
            (1,306
            )Other
      expense
            
            
            (1,762
            )
            
            
            (1,940
            )Loss
      before benefit for income taxes
            
            
            (2,591
            )
            
            
            (3,246
            )Benefit
      for income taxes
            
            
            (1,611
            )
            
            
            (1,396
            )Net
      loss
            
            $
            (980
            )
            
            $
            (1,850
            )










-
27 -
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For
      the three months endedU.S.
      Land Development Operations:
            
            September
      30,
              2009
            
            
            September
      30,
              2008Operating
      revenuesCommunity
      development - land sales
            
            $
            3,462
            
            
            $
            460Operating
      expensesCost
      of land sales
            
            
            2,551
            
            
            
            493General,
      administrative, selling and marketing
            
            
            844
            
            
            
            909Depreciation
            
            
            3
            
            
            
            1Total
      expenses
            
            
            3,398
            
            
            
            1,403Operating
      income (loss)
            
            
            64
            
            
            
            (943
            )Other
      expense
            
            
            (515
            )
            
            
            (581
            )Loss
      before benefit for income taxes
            
            
            (451
            )
            
            
            (1,524
            )Benefit
      for income taxes
            
            
            (690
            )
            
            
            (569
            )Net
      income (loss)
            
            $
            239
            
            
            $
            (955
            )





As
      of
            
            
            As
      ofU.S.
      Land Development Balance Sheet:
            
            September
      30,
              2009
            
            
            December
      31, 2008ASSETSInvestments
      in real estate
            
            $
            80,144
            
            
            $
            81,821Cash
      and cash equivalents
            
            
            3,469
            
            
            
            10,140Restricted
      cash and escrow deposits
            
            
            1,651
            
            
            
            2,399Deferred
      tax assets
            
            
            19,948
            
            
            
            19,151Deferred
      charges and other assets, net of amortization
            
            
            2,966
            
            
            
            1,129Total
    Assets
            
            $
            108,178
            
            
            $
            114,640LIABILITIES
      AND SHAREHOLDERS' EQUITYLIABILITIESRecourse
      debt
            
            $
            32,587
            
            
            $
            37,542Other
      liabilities
            
            
            9,857
            
            
            
            13,383Payable
      to U.S. operating real estate segment
            
            
            40,646
            
            
            
            38,305Accrued
      income tax liability-current
            
            
            14,608
            
            
            
            15,803Total
      Liabilities
            
            
            97,698
            
            
            
            105,033Total
      Shareholders' Equity
            
            
            10,450
            
            
            
            9,607Total
      Liabilities and Shareholders' Equity
            
            $
            108,178
            
            
            $
            114,640





Puerto
Rican Land Development operations hold our community development assets in
Puerto Rico, consisting of two planned communities, owned by LDA.  The
first planned community, Parque Escorial, is currently under development and
consists of residential, commercial and recreation land similar to our U.S.
operations but on a smaller scale.  Our second planned community,
Parque El Commandante, is currently in the planning stages.  Our
homebuilding operation builds condominiums for sale on land located in its
planned communities.  Each homebuilding project is organized into
separate entities, all wholly owned by IGP and LDA.  LDA also retained
a limited partner interest in two commercial buildings in Parque Escorial opened
in 2001 and 2005 which were built on land contributed by LDA.





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28 -
 Table of Contents


For
      the nine months endedPuerto
      Rican Land Development Operations:
            
            September
      30, 2009
            
            
            September
      30, 2008Operating
      revenuesHomebuilding
      – home sales
            
            $
            246
            
            
            $
            3,476Operating
      expensesCost
      of home sales
            
            
            217
            
            
            
            2,694General,
      administrative, selling and marketing
            
            
            289
            
            
            
            251Total
      expenses
            
            
            506
            
            
            
            2,945Operating
      (loss) income
            
            
            (260
            )
            
            
            531Other
      income
            
            
            484
            
            
            
            537Income
      before benefit for income taxes
            
            
            224
            
            
            
            1,068Benefit
      for income taxes
            
            
            (124
            )
            
            
            -Net
      income
            
            $
            348
            
            
            $
            1,068






For
      the three months endedPuerto
      Rican Land Development Operations:
              
              September
      30, 2009
              
              
              September
      30, 2008Operating
      revenuesHomebuilding
      – home sales
              
              $
              246
              
              
              $
              494Operating
      expensesCost
      of home sales
              
              
              197
              
              
              
              394General,
      administrative, selling and marketing
              
              
              101
              
              
              
              69Total
      expenses
              
              
              298
              
              
              
              463Operating
      (loss) income
              
              
              (52
              )
              
              
              31Other
      income
              
              
              174
              
              
              
              120Income
      before benefit for income taxes
              
              
              122
              
              
              
              151Benefit
      for income taxes
              
              
              (124
              )
              
              
              -Net
      income
              
              $
              246
              
              
              $
              151






As
      of
              
              
              As
      ofPuerto
      Rican Land Development Balance Sheet:
              
              September
      30,
                2009
              
              
              December
      31,
                2008ASSETSInvestments
      in real estate
              
              $
              24,134
              
              
              $
              20,310Cash
      and cash equivalents
              
              
              478
              
              
              
              64Investments
      in unconsolidated real estate entities
              
              
              14,789
              
              
              
              14,234Deferred
      charges and other assets, net of amortization
              
              
              13,255
              
              
              
              13,863Total
      Assets
              
              $
              52,656
              
              
              $
              48,471LIABILITIES
      AND SHAREHOLDERS' EQUITYLIABILITIESRecourse
      debt
              
              $
              6,247
              
              
              $
              4,327Accrued
      income tax liability – current
              
              
              (162
              )
              
              
              -Accrued
      income tax liability – deferred
              
              
              2,296
              
              
              
              (644
              )Accounts
      payable and accrued liabilities
              
              
              26,743
              
              
              
              24,767Total
      Liabilities
              
              
              35,124
              
              
              
              28,450Total
      Shareholders' Equity
              
              
              17,532
              
              
              
              20,021Total Liabilities and
      Shareholders' Equity
              
              $
              52,656
              
              
              $
              48,471






-
29 -
 Table of Contents





Corporate





The
Company’s Corporate segment consists of the general and administrative expenses
necessary to operate as a public company.  These costs have not been
allocated to the apartment rental and land development divisions.





The
following tables reconcile the segment reporting to the financial
statements.





For
the nine months ended September 30, 2009:


Revenues
            
            
            Expenses
            
            
            Operating
      Income
            
            
            Other
      Income/
              (Expense)
            
            
            Income Before Provision
      (Benefit) for Income Taxes
            
            
            Provision
      (Benefit) for Income Taxes
            
            
            Income
              (Loss)
      from Continuing Operations
            
            
            Discontinued
              Operations
            
            
            Consolidated
      Net Income (Loss)Operating
      Real EstateU.S.
            
            $
            25,257
            
            
            $
            16,000
            
            
            $
            9,257
            
            
            $
            (6,452
            )
            
            $
            2,805
            
            
            $
            131
            
            
            $
            2,674
            
            
            $
            (533
            )
            
            $
            2,141P.R.
            
            
            914
            
            
            
            1,125
            
            
            
            (211
            )
            
            
            (207
            )
            
            
            (418
            )
            
            
            -
            
            
            
            (418
            )
            
            
            27,222
            
            
            
            26,804Total
      Operating Real Estate
            
            
            26,171
            
            
            
            17,125
            
            
            
            9,046
            
            
            
            (6,659
            )
            
            
            2,387
            
            
            
            131
            
            
            
            2,256
            
            
            
            26,689
            
            
            
            28,945Land
      DevelopmentU.S.
            
            
            6,992
            
            
            
            7,821
            
            
            
            (829
            )
            
            
            (1,762
            )
            
            
            (2,591
            )
            
            
            (1,611
            )
            
            
            (980
            )
            
            
            -
            
            
            
            (980
            )P.R.
            
            
            246
            
            
            
            506
            
            
            
            (260
            )
            
            
            484
            
            
            
            224
            
            
            
            (124
            )
            
            
            348
            
            
            
            -
            
            
            
            348Total
      Land Development
            
            
            7,238
            
            
            
            8,327
            
            
            
            (1,089
            )
            
            
            (1,278
            )
            
            
            (2,367
            )
            
            
            (1,735
            )
            
            
            (632
            )
            
            
            
            
            
            
            (632
            )Corporate
            
            
            -
            
            
            
            3,459
            
            
            
            (3,459
            )
            
            
            1,480
            
            
            
            (1,979
            )
            
            
            -
            
            
            
            (1,979
            )
            
            
            -
            
            
            
            (1,979
            )Intersegment
            
            
            (3
            )
            
            
            (734
            )
            
            
            731
            
            
            
            (1,099
            )
            
            
            (368
            )
            
            
            -
            
            
            
            (368
            )
            
            
            -
            
            
            
            (368
            )$
            33,406
            
            
            $
            28,177
            
            
            $
            5,229
            
            
            $
            (7,556
            )
            
            $
            (2,327
            )
            
            $
            (1,604
            )
            
            $
            (723
            )
            
            $
            26,689
            
            
            $
            25,966














-
30 -
 Table of Contents




For
the nine months ended September 30, 2008:


Revenues
            
            
            Expenses
            
            
            Operating
      Income
            
            
            Other
      Income/
              (Expense)
            
            
            Income Before
      Provision (Benefit) for Income Taxes
            
            
            Provision
      (Benefit) for Income Taxes
            
            
            Income
              (Loss)
      from Continuing Operations
            
            
            Discontinued
              Operations
            
            
            Consolidated
      Net Income (Loss)Operating
      Real EstateU.S.
            
            $
            25,602
            
            
            $
            16,209
            
            
            $
            9,393
            
            
            $
            (5,944
            )
            
            $
            3,449
            
            
            $
            366
            
            
            $
            3,083
            
            
            $
            (357
            )
            
            $
            2,725P.R.
            
            
            1,138
            
            
            
            2,131
            
            
            
            (993
            )
            
            
            (458
            )
            
            
            (1,451
            )
            
            
            (14)
            
            
            
            (1,437
            )
            
            
            581
            
            
            
            (855
            )Total
      Operating Real Estate
            
            
            26,740
            
            
            
            18,340
            
            
            
            8,400
            
            
            
            (6,402
            )
            
            
            1,998
            
            
            
            352
            
            
            
            1,646
            
            
            
            224
            
            
            
            1,870Land
      DevelopmentU.S.
            
            
            6,457
            
            
            
            7,763
            
            
            
            (1,306
            )
            
            
            (1,940
            )
            
            
            (3,246
            )
            
            
            (1,396
            )
            
            
            (1,850
            )
            
            
            -
            
            
            
            (1,850
            )P.R.
            
            
            3,476
            
            
            
            2,945
            
            
            
            531
            
            
            
            537
            
            
            
            1,068
            
            
            
            -
            
            
            
            1,068
            
            
            
            -
            
            
            
            1,068Total
      Land Development
            
            
            9,933
            
            
            
            10,708
            
            
            
            (775)
            
            
            
            (1,403
            )
            
            
            (2,178
            )
            
            
            (1,396
            )
            
            
            (782)
            
            
            
            
            
            
            
            (782
            )Corporate
            
            
            -
            
            
            
            3,825
            
            
            
            (3,825
            )
            
            
            (1,491
            )
            
            
            (5,316
            )
            
            
            (117
            )
            
            
            (5,199
            )
            
            
            -
            
            
            
            (5,199
            )Intersegment
            
            
            (20
            )
            
            
            (1,123
            )
            
            
            1,103
            
            
            
            2,822
            
            
            
            3,925
            
            
            
            124
            
            
            
            3,801
            
            
            
            -
            
            
            
            3,801$
            36,653
            
            
            $
            31,750
            
            
            $
            4,903
            
            
            $
            (6,474
            )
            
            $
            (1,571
            )
            
            $
            (1,037
            )
            
            $
            (534
            )
            
            $
            224
            
            
            $
            (310
            )





For
the three months ended September 30, 2009:


Revenues
            
            
            Expenses
            
            
            Operating
      Income
            
            
            Other
      Income/
              (Expense)
            
            
            Income
      Before Provision (Benefit) for Income Taxes
            
            
            Provision
      (Benefit) for Income Taxes
            
            
            Income
              (Loss)
      from Continuing Operations
            
            
            Discontinued
              Operations
            
            
            Consolidated
      Net Income (Loss)Operating
      Real EstateU.S.
            
            $
            8,349
            
            
            $
            5,530
            
            
            $
            2,819
            
            
            $
            (2,255
            )
            
            $
            564
            
            
            $
            (212
            )
            
            $
            776
            
            
            $
            29
            
            
            $
            805P.R.
            
            
            393
            
            
            
            174
            
            
            
            219
            
            
            
            96
            
            
            
            315
            
            
            
            612
            
            
            
            (297
            )
            
            
            24,372
            
            
            
            24,075Total
      Operating Real Estate
            
            
            8,742
            
            
            
            5,704
            
            
            
            3,038
            
            
            
            (2,159
            )
            
            
            879
            
            
            
            400
            
            
            
            479
            
            
            
            24,401
            
            
            
            24,880Land
      DevelopmentU.S.
            
            
            3,462
            
            
            
            3,398
            
            
            
            64
            
            
            
            (515
            )
            
            
            (451
            )
            
            
            (690
            )
            
            
            239
            
            
            
            -
            
            
            
            239P.R.
            
            
            246
            
            
            
            298
            
            
            
            (52
            )
            
            
            174
            
            
            
            122
            
            
            
            (124
            )
            
            
            246
            
            
            
            -
            
            
            
            246Total
      Land Development
            
            
            3,708
            
            
            
            3,696
            
            
            
            12
            
            
            
            (341
            )
            
            
            (329
            )
            
            
            (814
            )
            
            
            485
            
            
            
            -
            
            
            
            485Corporate
            
            
            (409
            )
            
            
            1,341
            
            
            
            (1,750
            )
            
            
            1,746
            
            
            
            (4
            )
            
            
            (120
            )
            
            
            116
            
            
            
            -
            
            
            
            116Intersegment
            
            
            10
            
            
            
            (164
            )
            
            
            174
            
            
            
            (1,708
            )
            
            
            (1,534
            )
            
            
            (40
            )
            
            
            (1,494
            )
            
            
            -
            
            
            
            (1,494
            )$
            12,051
            
            
            $
            10,577
            
            
            $
            1,474
            
            
            $
            (2,462
            )
            
            $
            (988
            )
            
            $
            (574
            )
            
            $
            (414
            )
            
            $
            24,401
            
            
            $
            23,987








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31 -
 Table of Contents








For
the three months ended September 30, 2008:





Revenues
            
            
            Expenses
            
            
            Operating
      Income
            
            
            Other
      Income/
              (Expense)
            
            
            Income
      Before Provision (Benefit) for Income Taxes
            
            
            Provision
      (Benefit) for Income Taxes
            
            
            Income
              (Loss)
      from Continuing Operations
            
            Discontinued
              Operations
            
            Consolidated
      Net Income (Loss)Operating
      Real EstateU.S.
            
            $
            8,577
            
            
            $
            5,267
            
            
            $
            3,310
            
            
            $
            (2,075
            )
            
            $
            1,235
            
            
            $
            (81
            )
            
            $
            1,316
            
            $
            (108
            )
            $
            1,208P.R.
            
            
            368
            
            
            
            650
            
            
            
            (282
            )
            
            
            (150
            )
            
            
            (432
            )
            
            
            (292
            )
            
            
            (140
            )
            
            (185
            )
            
            (325)Total
      Operating Real Estate
            
            
            8,945
            
            
            
            5,917
            
            
            
            3,028
            
            
            
            (2,225
            )
            
            
            803
            
            
            
            (373
            )
            
            
            1,176
            
            
            (293
            )
            
            883Land
      DevelopmentU.S.
            
            
            460
            
            
            
            1,403
            
            
            
            (943
            )
            
            
            (581
            )
            
            
            (1,524
            )
            
            
            (569
            )
            
            
            (955
            )
            
            -
            
            
            (955)P.R.
            
            
            494
            
            
            
            463
            
            
            
            31
            
            
            
            120
            
            
            
            151
            
            
            
            -
            
            
            
            151
            
            
            -
            
            
            151Total
      Land Development
            
            
            954
            
            
            
            1,866
            
            
            
            (912
            )
            
            
            (461
            )
            
            
            (1,373
            )
            
            
            (569
            )
            
            
            (804
            )
            
            -
            
            
            (804)Corporate
            
            
            -
            
            
            
            1,147
            
            
            
            (1,147
            )
            
            
            301
            
            
            
            (846
            )
            
            
            22
            
            
            
            (868
            )
            
            -
            
            
            (868)Intersegment
            
            
            (7
            )
            
            
            (479
            )
            
            
            472
            
            
            
            215
            
            
            
            687
            
            
            
            158
            
            
            
            529
            
            
            -
            
            
            529$
            9,892
            
            
            $
            8,451
            
            
            $
            1,441
            
            
            $
            (2,170
            )
            
            $
            (729
            )
            
            $
            (762
            )
            
            $
            33
            
            $
            (293
            )
            $
            (260)








As
of September 30, 2009:


Investment
      in Real Estate
            
            
            Total
      Assets
            
            
            Recourse
      Debt
            
            
            Non-recourse
      Debt
            
            
            Total
      LiabilitiesOperating
      Real EstateU.S.
            
            $
            93,275
            
            
            $
            204,946
            
            
            $
            247
            
            
            $
            171,822
            
            
            $
            215,580P.R.
            
            
            9,353
            
            
            
            58,722
            
            
            
            -
            
            
            
            8,326
            
            
            
            31,431Total
      Operating Real Estate
            
            
            102,628
            
            
            
            263,668
            
            
            
            247
            
            
            
            180,148
            
            
            
            247,011Land
      DevelopmentU.S.
            
            
            80,144
            
            
            
            108,178
            
            
            
            32,587
            
            
            
            -
            
            
            
            97,698P.R.
            
            
            24,134
            
            
            
            52,656
            
            
            
            6,247
            
            
            
            -
            
            
            
            35,124Total
      Land Development
            
            
            104,278
            
            
            
            160,834
            
            
            
            38,834
            
            
            
            -
            
            
            
            132,822Corporate
            
            
            -
            
            
            
            19,715
            
            
            
            -
            
            
            
            -
            
            
            
            1,731Intersegment
            
            
            (2,362
            )
            
            
            (162,059
            )
            
            
            (1,485
            )
            
            
            -
            
            
            
            (120,867
            )Held
      for sale
            
            
            -
            
            
            
            36,961
            
            
            
            -
            
            
            
            -
            
            
            
            31,304$
            204,544
            
            
            $
            319,119
            
            
            $
            37,596
            
            
            $
            180,148
            
            
            $
            292,001








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 Table of Contents





As
of December 31, 2008:


Investment
      in Real Estate
            
            
            Total
      Assets
            
            
            Recourse
      Debt
            
            
            Non-recourse
      Debt
            
            
            Total
      LiabilitiesOperating
      Real EstateU.S.
            
            $
            75,120
            
            
            $
            150,916
            
            
            $
            257
            
            
            $
            159,822
            
            
            $
            165,621P.R.
            
            
            9,524
            
            
            
            35,623
            
            
            
            -
            
            
            
            8,399
            
            
            
            15,199Total
      Operating Real Estate
            
            
            84,644
            
            
            
            186,539
            
            
            
            257
            
            
            
            168,221
            
            
            
            180,820Land
      DevelopmentU.S.
            
            
            81,821
            
            
            
            114,640
            
            
            
            37,542
            
            
            
            -
            
            
            
            105,033P.R.
            
            
            20,310
            
            
            
            48,471
            
            
            
            4,327
            
            
            
            -
            
            
            
            28,450Total
      Land Development
            
            
            102,131
            
            
            
            163,111
            
            
            
            41,869
            
            
            
            -
            
            
            
            133,483Corporate
            
            
            -
            
            
            
            12,663
            
            
            
            -
            
            
            
            -
            
            
            
            -Intersegment
            
            
            (1,282
            )
            
            
            (100,748
            )
            
            
            (2,710
            )
            
            
            -
            
            
            
            (72,159
            )Held
      for Sale
            
            
            -
            
            
            
            93,628
            
            
            
            -
            
            
            
            -
            
            
            
            111,812$
            185,493
            
            
            $
            355,193
            
            
            $
            39,416
            
            
            $
            168,221
            
            
            $
            353,956








(10)
            SUPPLEMENTAL
      CASH FLOW INFORMATION





For the
nine months ended September 30 (in thousands):


2009
            
            
            2008Interest
      paid, net of amounts capitalized of $1,020,000 and
    $1,246,000
            
            $
            9,999
            
            
            $
            9,194Income
      taxes paid
            
            $
            107
            
            
            $
            96Non-cash
      investing activity:Purchases
      of rental projects under construction or development included in accounts
      payable and accrued liabilities
            
            $
            4,472
            
            
            $
            1,216





(11)
            SHARE
      GRANTS AND APPRECIATION RIGHTS





On June 3, 2009 at ACPT’s Annual Shareholder Meeting, ACPT adopted a share
incentive plan (the "Share Incentive Plan") to provide for share-based incentive
compensation for officers, key employees and trustees.  ACPT’s prior
employee share incentive plan and trustee share incentive plan expired on July
7, 2008.





Under the Share Incentive Plan, the Compensation Committee of the Board of
Trustees (the "Compensation Committee") is authorized to grant options, share
appreciation rights and other equity-based awards.   Each type of
award may be granted alone or together with other awards under the Share
Incentive Plan.  The Compensation Committee was also authorized to
determine the duration and vesting criteria for awards, including whether
vesting will be accelerated upon a change in control of ACPT. A total of 750,000
registered shares have been reserved for issuance under the Share Incentive
Plan.





Trustee Share
Grants


On August 28, 2006, the Company awarded 8,000 shares to each of its four
non-employee Trustees pursuant to the Trustee Share Plan.  The shares vest
annually at a rate of 1,600 shares per year, per Trustee, with the initial
tranche of shares vesting immediately at the grant date. In June 2008, the
Company accelerated the vesting of the shares of two trustees, who did not
return to the Board of Trustees, with all previously unvested shares vesting as
of September 30, 2008. In accordance with FASB ASC 718 (SFAS 123(R)), the
Company measured compensation cost at $643,000, which represents the grant date
fair value.  The Company will recognize compensation expense over the
vesting period and, accordingly, recognized $48,000 and $16,000 for the nine and
three month periods ended September 30, 2009, respectively, compared to $143,000
and $32,000 for the same periods of 2008, respectively.





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 Table of Contents








On
February 5, 2009, the Company’s Board of Trustees amended Article III, Section
10 of the Company’s Amended and Restated Bylaws, as amended (the “Bylaws”), to
simplify and standardize the overall non-employee Trustee compensation effective
January 1, 2009. Trustees are eligible to participate in any share incentive
plan adopted for such purpose by the Company, and shall each receive,
immediately following each annual meeting of shareholders, an annual grant of
restricted shares valued at $30,000 based on the terms of the Company's share
incentive plan, which shall entitle the holder to any dividends declared on the
Company's common shares and shall become fully vested on the first anniversary
of the grant date.  In accordance with FASB ASC 718 (SFAS 123(R)), the
Company began accruing compensation cost based on the current fair value using a
grant date of June 3, 2009, the date the 2009 Share Incentive Plan was approved
at the annual shareholders meeting.   These shares were issued by
the Compensation Committee during September 2009.  The Company
recognized compensation expense of $104,325 and $87,000 for the nine and three
month periods ended September 30, 2009, respectively.





Employee Share
Grants


During
the fourth quarter of 2008, the Company and the Chief Executive Officer entered
into an employment agreement, which included restricted shares with both
performance and time vesting criteria.  Pursuant to this agreement, ACPT
agreed to award the Chief Executive Officer 363,743 in common shares with 50%
subject to time vesting equally over the five years beginning on the first
anniversary of the grant date and 50% subject to performance vesting over a
period not to exceed five years from the first anniversary of the grant
date.  While the Share Incentive Plan has been approved, the Compensation
Committee has not yet established the performance vesting
criteria.   In accordance with FASB ASC 718 (SFAS 123(R)), the
Company measured compensation cost as $1,855,000, which represents the grant
date fair value of the time vesting component of the grant.  The Company
will recognize compensation expense over the vesting period and, accordingly,
recognized $331,000 and $177,000 for the nine and three month periods ended
September 30, 2009, respectively.   For the remaining portion of the
award, the performance criteria have not yet been established or approved. 
However, on September 9, 2009, the Company finalized a Restricted Share Award
Agreement with the Chief Executive Officer pursuant to which he was granted
36,374 restricted shares for his performance over the past year and provided an
outline for the remaining 145,498 performance vesting shares.  If the
Compensation Committee and the Board of Trustees of the Company have not
approved performance-based vesting provisions within six months, 36,374
performance based shares will be vested on September 30 of each of 2010, 2011
and 2012.  As the granted shares vested as of September 30, 2009, the
Company recognized $246,000 for the nine and three month periods ended September
30, 2009.





Share Appreciation
Rights


In April 2001, 140,000 share appreciation rights were granted to
employees.  These rights bear a $4 per share base price, and vested in
equal increments over a five-year period that commenced on April 2002.  As
of September 30, 2009, there were 10,400 outstanding rights which are all
exercisable and expire on April 30, 2011.  The Company recognized $34,000
and $21,000 for the nine and three month periods ended September 30, 2009,
respectively, compared to ($190,000) and ($34,000) for the same periods of 2008,
respectively, of compensation expense in connection with the outstanding
rights.





(12)
            EARNINGS
      PER SHARE





Basic
earnings per share is computed by dividing net income by the weighted-average
number of common shares outstanding during the period.  Diluted
earnings per share is computed by dividing net income by the weighted-average
number of common shares and dilutive potential common shares outstanding during
the period.





For the
nine and three month periods ending September 30, 2009, 159,079 unvested common
shares were not included in the computation of diluted net earnings per share as
their effect would have been antidilutive.





(13)
            SUBSEQUENT
      EVENTS





Management has reviewed all subsequent
events through November 16, 2009 to determine whether these events or
transactions should be included in either the financial statement or the
footnote disclosures.





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34 -
 Table of Contents











ITEM
      2.
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF
OPERATION





Special
Note Regarding Forward – Looking Statements





This
Quarterly Report on Form 10-Q contains various “forward-looking
statements.”  Forward-looking statements relate to expectations,
beliefs, projections, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical
facts.  In some cases, you can identify forward-looking statements by
the use of forward-looking terminology such as “believes,” “expects,” “may,”
“will,” “would,” “could,” “should,” “seeks,” “intends,” “plans,” “projects,”
“estimates” or anticipates” or the negative of these words and phrases or
similar words or phrases.  Statements regarding the following subjects
may be impacted by a number of risks and uncertainties:





·
            our business and investment strategy;·
            our projected results of
operations;


·
              our ability to manage our anticipated growth;·
              our ability to obtain future financing
  arrangements;
 ·
              our estimates relating to, and our ability to pay, future
      distributions;·
              our understanding of our competition and our ability to compete
      effectively;
 ·
              real estate market and industry trends in the United States, and
      particularly in the St. Charles, Maryland marketplace and its surrounding
      areas, and Puerto Rico;·
              projected capital and operating
expenditures;
 ·
              availability and creditworthiness of current and prospective
      tenants;·
              interest rates; and
 ·
              lease rates and terms.




The
forward-looking statements are based on our beliefs, assumptions and
expectations of our future performance, taking into account all information
currently available to us.  These beliefs, assumptions and
expectations are subject to risks and uncertainties and can change as a result
of many possible events or factors, not all of which are known to
us.  If a change occurs, our business, financial condition, liquidity
and results of operations may vary materially from those expressed in our
forward-looking statements.





The
following discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing in Item 1 of this Quarterly
Report on Form 10-Q.





GENERAL





ACPT is a
self managed holding company that is primarily engaged in the business of
investing in and managing multifamily rental properties as well as community
development and homebuilding through its consolidated
subsidiaries.  ACPT operates in two principal lines of business,
Operating Real Estate and Land Development, and conducts its operations in both
the United States and Puerto Rico.





U.S.
Operating Real Estate





Our
U.S. Operating Real Estate business is managed through American Rental
Properties Trust ("ARPT") and American Rental Management Company
("ARMC").  ARPT holds the general and limited partnership interests in
our single-purpose entities that own the U.S. Apartment
Properties.  ARPT's ownership in these entities ranges from 0.1% to
100%.  Our U.S. Operating Real Estate business operations also
includes the management of apartment properties in which we have an ownership
interest and one third-party owned apartment
property.





Puerto
Rican Operating Real Estate





Our Puerto
Rican Operating Real Estate business had been conducted through IGP Group
Corporation (“IGP Group”) until August 31, 2009, when the Company completed the
sale of a subsidiary to IGP Group, Interstate General Properties Limited
Partnership S.E (“IGP”) to Partners Business Equities, LLC (“PBE”) and
its





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 associates.  Prior
to the sale, IGP was restructured to include only the Company’s general and
limited partnership interests in nine partnerships which own twelve properties
with 2,653 subsidized apartments in Puerto Rico, as well as the Section 8
affordable housing management contracts.  IGP Property Holdings, Inc.
(“IGPPH”) was established to hold the ownership interests of the two commercial
properties ranging from 28% to 100%.  IGPPH also provides management
services for our Puerto Rican homebuilding and community
development.





U.S.
Land Development





Our U.S.
Land Development operations are managed through American Land Development, Inc.
("ALD").  ALD owns and develops our land holdings in St. Charles,
Maryland (“St. Charles”), which consists of a 9,000 acre planned community
consisting of residential, commercial, recreational and open space land.
 ALD also had a 50% interest in a land development joint venture formed to
develop land for an active adult community in St. Charles until we sold our
interest in the venture in November 2008.  In October 2008, the
Company entered into an agreement with Surrey Homes, LLC (“Surrey Homes”) to
contribute $2,000,000, which was paid as of September 30, 2009, in exchange for
a 50% ownership interest in Surrey Homes.





Puerto
Rican Land Development





Our
Puerto Rican Land Development operations are conducted through Land Development
Associates, S.E. (“LDA”).  LDA holds our community development assets
in Puerto Rico, which consists of two planned communities.  The first
planned community, Parque Escorial, is currently under development and consists
of residential, commercial and recreational land similar to our U.S. land
development operations but on a smaller scale.  Our second planned
community, Parque El Commandante, is currently in the planning stages with the
rezoning of the first 80 acres nearly completed.  Our homebuilding
operation builds condominiums for sale on land located in its planned
communities.  LDA retained a limited partnership interest in two
commercial buildings in Parque Escorial opened in 2001 and 2005, which were
built on land contributed by LDA.





Income
Taxes





ACPT is
taxed as a U.S. partnership and its income flows through to its
shareholders.  ACPT is subject to Puerto Rico taxes on IGP Group’s
taxable income, generating foreign tax credits that have been passed through to
ACPT’s shareholders. A Federal tax regulation has been proposed that could
eliminate the ability to pass through these foreign tax credits to ACPT’s
shareholders.  Comments on the proposed regulation are currently being
evaluated with the final regulation effective for tax years beginning after the
final regulation is ultimately published in the Federal
Register.   ACPT’s income consists of (i) certain passive income
from IGP Group, a controlled foreign corporation, (ii) distributions from IGP
Group and (iii) dividends from ACPT’s U.S. subsidiaries.  Other than
Interstate Commercial Properties (“ICP”), which is taxed as a Puerto Rico
corporation, the income from the remaining Puerto Rico operating entities passes
through to IGP Group or ALD.  Of this income, only the portion
attributable to the profits on the residential land sold in Parque Escorial
passes through to ALD.  ALD, ARMC, and ARPT are taxed as U.S.
corporations.  The taxable income from the U.S. apartment properties
flows through to ARPT.





Additionally,
as a result of holding our partnership interests in certain U.S. multifamily
apartment properties over many years there is approximately $45,000,000 of
distributions in excess of our partnership basis, related to these
holdings.   Should a triggering event take place, such as sale or
liquidation of the underlying partnership assets or interests, the Company would
be required to recognize taxable income related to this low basis and pay tax
accordingly.





RECENT
DEVELOPMENTS





On
September 25, 2009, the Company entered into an Agreement and Plan of Merger
(the “Merger Agreement”) with FCP Fund I, L.P., a Delaware limited partnership
(“FCP”), and FCP/ACPT Acquisition Company, Inc., a Maryland corporation and an
indirect wholly-owned subsidiary of FCP (“Merger Sub”).  Pursuant to
the Merger Agreement, at closing, Merger Sub will merge with and into the
Company, with the Company continuing as the surviving company and an indirect
subsidiary of FCP (the “Merger”).





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Under the terms of the
Merger Agreement, at the effective time of the Merger, each common share of the
Company, issued and outstanding immediately prior to the effective time of the
Merger, other than common shares owned by the Company, FCP, Merger Sub or any
subsidiary of the Company or FCP, will be cancelled and automatically converted
into the right to receive $7.75 (the “Per-Share Amount”) in cash, without
interest.  In addition, at the effective time of the Merger, each of
the outstanding share appreciation rights will be cancelled and converted into
the right to receive an amount in cash equal to the product of (i) the excess,
if any, of the Per-Share Amount over the base price per common share underlying
such share appreciation right multiplied by (ii) the number of common shares
subject to such share appreciation right.  In addition, each unvested
restricted common share of the Company that, by its terms, vests automatically
upon the consummation of the Merger will fully vest in accordance with its terms
and be considered an outstanding common share for all purposes, including the
right to receive the Per-Share Amount.  Any unvested restricted common
shares that, by their terms, do not vest automatically upon the consummation of
the Merger, will be cancelled and retired without any consideration for such
shares.





Consummation of the Merger is not
subject to a financing condition, but is subject to other conditions, including,
among other things, (i) the receipt of the affirmative vote of the holders of
two-thirds of the outstanding common shares in favor of the Merger, (ii) receipt
of certain third-party consents, (iii) the distribution to the Company of
certain earnings and profits from a wholly-owned subsidiary of the Company, (iv)
the determination by FCP that there is not a substantial risk that the Company
does not qualify or has not qualified as a partnership for tax purposes,
provided that, in the event of such determination, a tax opinion of legal
counsel would satisfy such condition, and (v) other customary closing
conditions.  The parties currently expect to close the transaction
prior to March 31, 2010, subject to the satisfaction of the foregoing
conditions.




For
more information regarding the Merger Agreement and the Merger, see the
Company’s Current Report on Form 8-K filed on September 28, 2009.





EXECUTIVE
SUMMARY FOR THE THIRD QUARTER 2009 RESULTS





Consolidated
operating revenues are derived primarily from rental revenue, community
development land sales and home sales.





For the
nine and three months ended September 30, 2009, our consolidated rental revenues
increased $366,000 and $74,000, or 1%, to $25,772,000 and $8,600,000,
respectively, as compared to $25,406,000 and $8,526,000, respectively, for the
same periods ended September 30, 2008.  The increase was primarily
attributable to increased leasing in the Company’s Puerto Rico commercial office
building as well as overall rent increases at comparable properties in both the
United States and Puerto Rico offset by an increase in
vacancies.  Consolidated net operating income (“NOI”), defined as
rental property revenues less rental property operating expenses, is the primary
performance measure we use to assess the results of our
operations.  We provide NOI as a supplement to net income calculated
in accordance with generally accepted accounting principles (“GAAP”). NOI does
not represent net income calculated in accordance with GAAP.  As such,
it should not be considered an alternative to net income as an indication of our
operating performance.  ACPT’s NOI increased $409,000, or 3%, to
$14,318,000 during the nine months ended September 30, 2009 and decreased
$128,000, or 3%, to $4,619,000 during the three months ended September 30, 2009,
as compared to $13,909,000 and $4,747,000, respectively, for the same periods in
2008.  This represents ACPT’s annual rent increase of 3% and the
impact of our costs saving initiatives offset by increases in vacancy rates
during the third quarter of 2009.





Community
development land sales for the nine and three months ended September 30, 2009
increased $535,000 and $3,002,000, or 8% and 653%, to $6,992,000 and $3,462,000,
respectively, as compared to $6,457,000 and $460,000, respectively, for the same
periods ended September 30, 2008.  During the nine months ended
September 30, 2009, the Company sold 85 lots compared to 69 lots in the same
period of 2008.  During the three months ended September 30, 2009, the
Company sold 44 lots compared to no lot sales for the same period in
2008.





There was
one home sale during the nine and three months ended September 30, 2009 for
$246,000 as compared to $3,476,000 and $494,000, respectively, for the same
periods of 2008.  The Company closed 12 units during the nine months
ended September 30, 2008 with three units closed in the three months ended
September 30, 2008.





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The
Company pools its overhead costs, including accounting, human resources, office
management, technology and executive office costs, and allocates those costs to
its segments based on percentages of management’s allocated
time.  General, administrative, selling and marketing costs for the
nine and three months ended September 30, 2009, decreased $76,000 and increased
$660,000, or (1%) and 29%, to $7,304,000 and $2,969,000, respectively, as
compared to $7,380,000 and $2,309,000, respectively, for the same periods ended
September 30, 2008.  The decrease during the nine months ended
September 30, 2009 was the result the reorganization and costs saving
initiatives implemented in the three months ended December 31, 2008 offset by
increased legal and accounting costs, accruals for share-based compensation
issued to the Chief Executive Officer and non-employee Trustees, and consulting
costs related to the Merger.





During
the three months ended March 31, 2009, the Company decided to sell the five U.S.
apartment properties in Baltimore, Maryland and is currently working with a
broker to complete the five Baltimore transactions.  In accordance
with FASB ASC 360 (SFAS No. 144), the carrying value of the Baltimore
Properties’ assets had been classified as “held for sale” on the Company’s
consolidated balance sheets at September 30, 2009 and December 31, 2008, and the
properties’ results of operations had been classified as “discontinued
operations” for all periods presented in the consolidated statements of
income.  Depreciation is suspended during the period the property is
classified as held for sale.





During
the three months ended March 31, 2009, the Company executed a definitive
agreement to sell the Puerto Rico apartment properties.  The financial
impact of these properties has also been included as “held for sale” and
“Discontinued Operations” in the segment disclosures below.  On August
31, 2009, the Company completed the sale of IGP to PBE and its associates for
$14,300,000.  Prior to the sale, IGP was restructured to include only the
Company’s general and limited partnership interests in nine partnerships which
own twelve properties with 2,653 subsidized apartments in Puerto Rico, as well
as the Section 8 affordable housing management contracts.  While all
of the assets and liabilities have been derecognized on the balance sheet at
September 30, 2009, eight months of operations have been included in
“Discontinued Operations” in the Puerto Rican Operating Real Estate segment with
the net gain of $25,351,000 included in “Gain on Sale of Discontinued
Operations” on the Statement of Income.





In the
nine and three month periods ending September 30, 2009, ACPT recognized a loss
on write-down of fair value less costs to sell of $882,000 and $43,000,
respectively, related to the Baltimore properties currently classified as held
for sale.  The Company has entered into binding purchase agreements
for two of the five properties (Milford I and II), which are subject to certain
closing conditions, and continues to market Nottingham, Owings Chase and
Prescott Square.  As a result, the Company determined that an
impairment charge was required to further reduce the carrying values of the
Baltimore properties to their estimated fair market value.





On a
consolidated basis, the Company reported net income attributable to ACPT of
$25,262,000 and $24,575,000 for the nine and three months ended September 30,
2009, respectively, inclusive of the net gain on sale of
$24,867,000.  The net income attributable to ACPT for the nine months
ended September 30, 2009 included a total provision for income taxes of
$9,646,000 consisting of a $1,604,000 tax benefit related to losses before
discontinued operations and a $11,250,000 tax provision included in discontinued
operations.  As a result, the total consolidated effective tax rate
attributable to ACPT was approximately (28%).  The total consolidated
effective rate was impacted by the change in the deferred tax asset valuation
allowance and accrued taxes and penalties related to uncertain tax
positions.  For further discussion of these items, see “Results of
Operations-Income Taxes – Provision for (Benefit from) Income Taxes” and Note 7
of our Consolidated Financial Statements in Item 1 of this Quarterly Report on
Form 10-Q.





CRITICAL
ACCOUNTING POLICIES





The Securities and Exchange Commission
defines critical accounting policies as those that are most important to the
portrayal of our financial condition and results of operations.  The
preparation of financial statements in conformity with GAAP requires management
to use judgment in the application of accounting policies, including making
estimates and assumptions.  These judgments affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts of
revenue and expenses during the reporting periods.  If our judgment or
interpretation of the facts and





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circumstances
relating to various transactions had been different, it is possible that
different accounting policies would have been applied resulting in a different
presentation of our financial statements.  Below is a discussion of
accounting policies which we consider critical in that they may require complex
judgment in their application or require estimates about matters which are
inherently uncertain.





Refer to
the Company’s 2008 Annual Report on Form 10-K for a discussion of critical
accounting policies, which include sales, profit recognition and cost
capitalization, investment in unconsolidated real estate entities, impairment of
long lived assets, depreciation of investments in real estate, income taxes and
contingencies.  For the nine and three months ended September 30,
2009, there were no material changes to our policies.





RESULTS
OF OPERATIONS





The
following discussion is based on the consolidated financial statements of the
Company.  It compares the components of the results of operations of
the Company by segment for the nine and three months ended September 30,
2009 and 2008 (unaudited).  Historically, the Company’s financial
results have been significantly affected by the cyclical nature of the real
estate industry.  Accordingly, the Company’s historical financial
statements may not be indicative of future results.  This discussion should
be read in conjunction with the accompanying consolidated financial statements
and notes included elsewhere in this report and within our Annual Report on Form
10-K.





OPERATING
REAL ESTATE





For the
nine and three months ended September 30, 2009, our Operating Real Estate line
of business generated NOI of $14,318,000 and $4,630,000, an increase of $425,000
and a decrease of ($111,000), respectively, compared to $13,893,000 and
$4,741,000, respectively, of NOI generated by that line of business for the same
periods in 2008.  Additional information and analysis of the U.S.
Operating Real Estate and Puerto Rican Operating Real Estate operations can be
found in the tables below.





U.S.
Operating Real Estate Operations





For
      the nine months endedU.S.
      Operating Real Estate:
            
            September
      30, 2009
            
            
            September
      30, 2008Operating
      revenues
            
            $
            25,022
            
            
            $
            25,107Operating
      expenses
            
            
            10,943
            
            
            
            11,034Net
      operating income
            
            
            14,079
            
            
            
            14,073Management
      and other fees, substantially all from related entities
            
            
            58
            
            
            
            117General,
      administrative, selling and marketing
            
            
            (1,346
            )
            
            
            (1,063
            )Depreciation
            
            
            (3,534
            )
            
            
            (3,734
            )Operating
      income
            
            
            9,257
            
            
            
            9,393Other
      expense
            
            
            (6,452
            )
            
            
            (5,944
            )Income
      before provision for income taxes
            
            
            2,805
            
            
            
            3,449Provision
      for income taxes
            
            
            131
            
            
            
            366Income from
      continuing operations
            
            
            2,674
            
            
            
            3,083Discontinued
      operations
            
            
            (533
            )
            
            
            (357)Net income
            
            $
            2,141
            
            
            $
            2,726Depreciation
            
            
            3,534
            
            
            
            4,564FFO
            
            $
            5,675
            
            
            $
            7,790








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For
      the three months endedU.S.
      Operating Real Estate:
            
            September
      30, 2009
            
            
            September
      30, 2008Operating
      revenues
            
            $
            8,295
            
            
            $
            8,423Operating
      expenses
            
            
            3,795
            
            
            
            3,612Net
      operating income
            
            
            4,500
            
            
            
            4,811Management
      and other fees, substantially all from related entities
            
            
            10
            
            
            
            38General,
      administrative, selling and marketing
            
            
            (487
            )
            
            
            (334
            )Depreciation
            
            
            (1,204
            )
            
            
            (1,205
            )Operating
      income
            
            
            2,819
            
            
            
            3,310Other
      expense
            
            
            (2,255
            )
            
            
            (2,075
            )Income
      before benefit for income taxes
            
            
            564
            
            
            
            1,235Benefit
      for income taxes
            
            
            (212
            )
            
            
            (81
            )Income from
      continuing operations
            
            
            776
            
            
            
            1,316Discontinued
      operations
            
            
            29
            
            
            
            (108
            )Net income
            
            $
            805
            
            
            $
            1,208Depreciation
            
            
            1,203
            
            
            
            1,485FFO
            
            $
            2,008
            
            
            $
            2,693





NOI
increased $6,000 and decreased $311,000, or 1% and (6%), to $14,079,000 and
$4,500,000 during the nine and three months ended September 30, 2009,
respectively, as compared to $14,073,000 and $4,811,000 for the same periods in
2008, respectively.  As described below, NOI has remained relatively
consistent during the nine month periods ending September 30, 2009 and 2008 as
overall rental property operating expenses due to management’s cost saving
initiatives were offset in three months ended September 30, 2009 by significant
increases in vacancies as well as increases in advertising and concessions
expenses to increase leasing activity.





Rental
Property Revenues and Operating Expenses





Rental
property operating revenues decreased $85,000 and $128,000, or 1% and 2%, for
the nine and three months ended September 30, 2009, to $25,022,000 and
$8,295,000, respectively, compared to $25,107,000 and $8,423,000, respectively,
for the same periods of 2008.  In 2009, annual rent increases have
been offset by an increase in vacancies. Gross rental revenues remained
relatively consistent with a 1% increase over the prior year while vacancies
increased from 5% to 6%.





Rental
property operating expenses decreased $91,000, or 1%, for the nine months ended
September 30, 2009 and increased $183,000, or 5%, for the three months ended
September 30, 2009 to $10,943,000 and $3,795,000, respectively, compared to
$11,034,000 and $3,612,000, respectively, for the same periods of
2008.  The overall decrease in rental property operating expenses was
primarily the result of management’s cost saving initiatives with significant
decreases in spending on salaries and benefits, repairs and
maintenance, office expenses, and vehicle expenses offset by increases in
advertising and concessions in the third quarter to remediate the increase in
vacancies.





General,
Administrative, Selling and Marketing Expenses





The
primary component of the general, administrative, selling and marketing expenses
is the corporate overhead allocation.  General, administrative,
selling and marketing expenses increased $283,000 and $153,000, or 27% and 46%,
to $1,346,000 and $487,000 during the nine and three months ended September 30,
2009, respectively, as compared to $1,063,000 and $334,000 and for the same
periods in 2008, respectively.  Overall, general and administrative
expenses decreased for the consolidated Company.  However, the
increase for this segment was due to the methodology by which the Company
allocates general and administrative expenses between segments.  See
“Results of Operations – Corporate.”





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Our
unconsolidated and managed-only apartment properties reimburse the Company for
certain corporate overhead costs that are attributable to the operations of
those properties.  In accordance with FASB ASC 605 (EITF Topic 01-14),
the cost and reimbursement of these costs are not included in general and
administrative expenses, but rather they are reflected as separate line items on
the consolidated income statement.





Depreciation





Depreciation
decreased $200,000, or 6%, for the nine months ended September 30, 2009 to
$3,534,000 compared to $3,734,000 for the same period of 2008 as a result of a
depreciation catch-up adjustment that was recorded in the first quarter of 2008
related to the Sheffield Green apartments.  For the three months ended
September 30, 2009 and 2008, depreciation expense slightly decreased by $1,000
to $1,204,000 from $1,205,000 as a result of a decrease in depreciable
assets.





Interest
and other income





Interest
and other income decreased $1,218,000 and $427,000, or 48% and 70%, during the
first nine and three months ended September 30, 2009 to $1,328,000 and $187,000,
respectively, as compared to $2,546,000 and $614,000, respectively, for the same
periods of 2008 as a result of decreased deposits due to the higher than
anticipated vacancies as well as a decline in interest rates from 2008 to
2009.





Interest
Expense





For 2009
and 2008, interest expense primarily consisted of interest incurred on the
non-recourse debt from our investment properties.  Interest expense
decreased $710,000 and $247,000, or 8%, to $7,780,000 and $2,442,000 for the
nine and three months ended September 30, 2009, respectively, as compared to
$8,490,000 and $2,689,000, respectively, for the same periods
in 2008.  The decrease in interest expense resulted from routine
amortization of our loans.





Discontinued
Operations





Discontinued
operations decreased by $176,000 to ($533,000) for the nine months ended
September 30, 2009 compared to ($357,000) for the same period of
2008.   While the rental operating revenues remained consistent
from the prior year, operating expenses have increased by $148,000 year over
year for concessions, bad debts, and repairs and maintenance.  In
addition, the net affect of recognizing the loss on write-down to fair
value less costs to sell of $882,000 was slightly offset by
the ceasing the recording of depreciation expense on the Baltimore
properties which were classified as discontinued operations in the three months
ended September 30, 2009.  In 2008, we recorded $829,000 of
depreciation expenses related to these properties.  Discontinued
operations increased by $137,000 to $29,000 for the three months ended September
30, 2009 compared to ($108,000) for the same period of
2008.   The increase was primarily the result of ceasing the
recording of depreciation expense on the Baltimore properties, which had
$280,000 in depreciation expenses for the three months ended September 30, 2008,
offset by a $43,000 write-down to fair value during the three months ended
September 30, 2009.





Funds
from Operations





Funds
from Operations (“FFO”) is a non-GAAP financial measure that we believe, when
considered with the financial statements prepared in accordance with GAAP, is
helpful to investors in understanding our performance because it captures
features particular to real estate performance by recognizing that real estate
generally appreciates over time or maintains residual value to a much greater
extent than do other depreciable assets such as machinery, computers or other
personal property.  FFO is defined as net income (loss), computed in
accordance with GAAP, excluding gains (or losses) from sales of depreciable
property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures.





FFO
decreased $2,115,000 and $685,000, or 27% and 25%, to $5,675,000 and
$2,008,000 for the nine and three months ended September 30, 2009, respectively,
compared to $7,790,000 and $2,693,000, respectively, for the same periods in
2008.  The decrease was driven by the impact of the loss on write-down to
fair value less costs to sell and the increase in other expenses.




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Puerto
Rican Operating Real Estate Operations


For
      the nine months endedPuerto
      Rican Operating Real Estate:
            
            September
      30,
              2009
            
            
            September
      30,
              2008Operating
      revenues
            
            $
            750
            
            
            $
            299Operating
      expenses
            
            
            511
            
            
            
            479Net
      operating income
            
            
            239
            
            
            
            (180
            )Management
      and other fees, substantially all from related entities
            
            
            164
            
            
            
            111General,
      administrative, selling and marketing
            
            
            (443
            )
            
            
            (754
            )Depreciation
            
            
            (171
            )
            
            
            (170
            )Operating
      loss
            
            
            (211
            )
            
            
            (993
            )Other
      expense
            
            
            (207
            )
            
            
            (458
            )Loss
      before provision for income taxes
            
            
            (418
            )
            
            
            (1,451
            )Provision
      for income taxes
            
            
            -
            
            
            
            (14
            )Loss
      from continuing operations
            
            
            (418
            )
            
            
            (1,437
            )Discontinued
      operations
            
            
            1,871
            
            
            
            581Gain
      on sale of discontinued operations
            
            
            25,351
            
            
            
            -Total
      discontinued operations
            
            
            27,222
            
            
            
            581Net
      income (loss)
            
            $
            26,804
            
            
            $
            (856
            )Gain
      on sale of discontinued operations
            
            
            (25,351
            )Depreciation
            
            
            243
            
            
            
            2,827FFO
            
            $
            1,696
            
            
            $
            (1,971
            )





For
      the three months endedPuerto
      Rican Operating Real Estate:
            
            September
      30,
              2009
            
            
            September
      30,
              2008Operating
      revenues
            
            $
            305
            
            
            $
            103Operating
      expenses
            
            
            175
            
            
            
            173Net
      operating income
            
            
            130
            
            
            
            (70
            )Management
      and other fees, substantially all from related entities
            
            
            88
            
            
            
            37General,
      administrative, selling and marketing
            
            
            3
            
            
            
            (192
            )Depreciation
            
            
            (2
            )
            
            
            (57
            )Operating
      income (loss)
            
            
            219
            
            
            
            (282
            )Other
      income (expense)
            
            
            96
            
            
            
            (150
            )Income
      (loss) before provision (benefit) for income taxes
            
            
            315
            
            
            
            (432
            )Provision
      (benefit) for income taxes
            
            
            612
            
            
            
            (292
            )Income
      (loss) from continuing operations
            
            
            (297
            )
            
            
            (140
            )Discontinued
      operations
            
            
            (979
            )
            
            
            (185
            )Gain
      on sale of discontinued operations
            
            
            25,351
            
            
            
            -Total
      discontinued operations
            
            
            24,372
            
            
            
            (185
            )Net
      income (loss)
            
            $
            24,075
            
            
            $
            (325
            )Gain
      on sale of discontinued operations
            
            
            (25,351
            )
            
            
            -Depreciation
            
            
            2
            
            
            
            944FFO
            
            $
            (1,274
            )
            
            $
            619





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Net
Operating Income





NOI
increased $419,000 and $200,000, or 233% and 286%, to $239,000 and $130,000
during the nine and three months ended September 30, 2009, respectively, as
compared to ($180,000) and ($70,000) for the same periods in 2008,
respectively.  With the Puerto Rican apartment properties classified
as held for sale during the nine months ended September 30, 2009, the continuing
Puerto Rican Operating Real Estate Operations consisted of the Puerto Rico
commercial rental property in the community of Parque Escorial, known as
Escorial Building One.   The Company has leased approximately 76%
of Escorial Building One.  The increase in the NOI is the result of an
increase in leasing of this building.





Rental
Property Revenues and Operating Expenses





Rental
property revenues increased $451,000 and $202,000, or 151% and 196%, to $750,000
and $305,000 for the nine and three months ended September 30, 2009,
respectively, compared to $299,000 and $103,000 and for the same periods of
2008, respectively.  The increase in our rental property revenues was
the result of an increase in leasing of Escorial Building One.  In
addition, we anticipate future rental revenue increases as a result of the sale
of IGP.  Prior to the sale, rental revenue for approximately 10,500
square feet of space was eliminated in consolidation.  As the new
owners of IGP assumed the balance of the lease term, and IGP is no longer a
consolidated entity, rental revenues will not be eliminated in the
future.





Rental
property operating expenses increased $32,000 and $2,000, or 7% and 1%, to
$511,000 and $175,000 for the nine and three months ended September 30, 2009,
respectively, compared to $479,000 and $173,000 and for the same periods of
2008, respectively.  The increase was the result of increased
occupancy.





Management
and other fees





Management
and other fees increased $53,000 and $51,000, or 48% and 138%, for the nine and
three months ended September 30, 2009 to $164,000 and $88,000, respectively, as
compared to $111,000 and $37,000 for the same periods in 2008,
respectively.





General,
Administrative, Selling and Marketing Expenses





The
primary component of general, administrative, selling and marketing expenses is
the corporate overhead allocation.  General, administrative, selling
and marketing expenses decreased $311,000 and increased $195,000, or (41%) or
102%, to $443,000 and ($3,000) during the nine and three months ended September
30, 2009, respectively, as compared to $754,000 and $192,000 for the same
periods in 2008, respectively.  The decrease was primarily due to a
decrease in overall corporate overhead expenses while the corporate allocation
percentage decreased for the fiscal year with more general, administrative,
selling and marketing expenses being incurred by the Discontinued
Operations.  See “Results of Operations – Corporate.”





The
apartment properties reimburse IGP for certain costs, including accounting,
human resources, office management and technology, incurred at IGP’s office that
are attributable to the operations of those properties.  In accordance
with FASB ASC 605 (EITF 01-14), the costs and reimbursement of these costs are
not considered general, administrative, selling, and marketing expenses but
rather, are reflected as separate line items on the consolidated income
statement.





Interest
Expense





Interest
expense decreased $276,000 and $207,000, or 42% and 99%, for the nine and three
months ended September 30, 2009 to $378,000 and $2,000, respectively, as
compared to $654,000 and $209,000 for the same periods in 2008,
respectively.  The decrease in interest expense resulted from routine
amortization of our loans.








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Discontinued
Operations





Total
discontinued operations of $26,428,000 and $24,344,000 for the nine and three
months ended September 30, 2009, respectively, includes a net gain of
$25,411,000 related to the sale of IGP as of August 31,
2009.  Discontinued operations increased $1,290,000 and decreased
($794,000) to $1,871,000 and ($979,000) for the nine and three months ended
September 30, 2009, respectively, compared to $581,000 and $185,000 for the same
periods in 2008, respectively.  The increase was primarily driven by
ceasing the recording of depreciation expense on the Puerto Rican apartment
properties which were classified as discontinued operations in the nine months
ended September 30, 2009.  We recorded $2,658,000 and $888,000 in
depreciation expenses for these properties for the nine and three months ended
September 30, 2008, respectively.





Funds from
Operations





FFO
decreased $275,000 and $2,062,000 to $1,696,000 and ($1,274,000) for the nine
and three months ended September 30, 2009, respectively, compared to $1,971,000
and $619,000 for the same periods in 2008, respectively.  For the nine
months ended September 30, 2009, the decrease primarily related to the NOI
decrease within the discontinued operations.  For the three months
ended September 30, 2009, the decrease resulted primarily from a decrease in NOI
of $914,000 and an increase in the tax provision of $860,000.





LAND
DEVELOPMENT





Our Land
Development line of business generated ($1,089,000) and $7,000 of operating
losses and income for the nine and three months ended September 30, 2009,
respectively, compared to ($775,000) and $(912,000) of operating losses
generated by the line of business for the same periods in 2008,
respectively.  This line of business includes both land and home sales
for our U.S. and Puerto Rican operations. Additional information and analysis of
the U.S and Puerto Rican Land Development operations can be found
below.





U.S.
Land Development Operations





For
      the nine months endedU.S.
      Land Development Operations:
            
            September
      30,
              2009
            
            
            September
      30,
              2008Operating
      revenuesCommunity
      development - land sales
            
            $
            6,992
            
            
            $
            6,457Operating
      expensesCost
      of land sales
            
            
            5,195
            
            
            
            5,218General,
      administrative, selling and marketing
            
            
            2,619
            
            
            
            2,541Depreciation
            
            
            7
            
            
            
            4Total
      expenses
            
            
            7,821
            
            
            
            7,763Operating
      loss
            
            
            (829
            )
            
            
            (1,306
            )Other
      expense
            
            
            (1,762
            )
            
            
            (1,940
            )Loss
      before benefit for income taxes
            
            
            (2,591
            )
            
            
            (3,246
            )Benefit
      for income taxes
            
            
            (1,611
            )
            
            
            (1,396
            )Net
      loss
            
            $
            (980
            )
            
            $
            (1,850
            )








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For
      the three months endedU.S.
      Land Development Operations:
            
            September
      30,
              2009
            
            
            September
      30,
              2008Operating
      revenuesCommunity
      development - land sales
            
            $
            3,462
            
            
            $
            460Operating
      expensesCost
      of land sales
            
            
            2,551
            
            
            
            493General,
      administrative, selling and marketing
            
            
            844
            
            
            
            909Depreciation
            
            
            3
            
            
            
            1Total
      expenses
            
            
            3,398
            
            
            
            1,403Operating
      income
            
            
            64
            
            
            
            (943
            )Other
      expense
            
            
            (515
            )
            
            
            (581
            )Loss
      before benefit for income taxes
            
            
            (451
            )
            
            
            (1,524
            )Benefit
      for income taxes
            
            
            (690
            )
            
            
            (569
            )Net
      income (loss)
            
            $
            239
            
            
            $
            (955
            )





Community
Development Land Sales Revenue





Land
sales revenue in any one period is affected by the mix of lot sizes and, to a
greater extent, the mix between residential and commercial
sales.  Community development land sales revenue increased $535,000
and $3,002,000, or 8% and 653%, to $6,992,000 and $3,462,000 for the nine and
three months ended September 30, 2009 compared to $6,457,000 and $460,000 for
the same periods in 2008, respectively.  The increase is primarily the
result of an increase in the number of lots sold from 69 lots in the nine months
ended September 30, 2008 to 86 lots during 2009.   The Company
sold 1.85 commercial acres in the nine months ended September 30, 2009 compared
to 0.99 commercial acres during 2008.





Residential
Land Sales





Residential
land sales increased $401,000 and $3,375,000, or 7% and 100%, to $6,398,000 and
$3,375,000 for the nine and three months ended September 30, 2009 compared to
$5,997,000 for the same periods in 2008, respectively. During the three months
ended September 30, 2009, 26 town home lots and nine single-family lots were
delivered to Lennar Corporation (“Lennar”) and nine single-family lots were
delivered to NVR, Inc. This resulted in the recognition of revenues of
$3,260,000, $80,000 per single-family lot and $70,000 per town home lot, plus
$2,600 per lot of water and sewer fees, road fees and other off-site
fees.  There were no lots delivered during the third quarter of
2008.





During
the nine and three months ended September 30, 2009, we also recognized $41,000
and $3,000, respectively, of additional revenue for lots that were previously
sold to Lennar.  During the same periods in 2008, we recognized
$424,000 and $211,000, respectively, of additional revenue based on the final
settlement price of the homes as provided by our agreement with
Lennar.





Commercial
Land Sales





For the
nine months ended September 30, 2009, commercial land sales increased $143,000,
or 40% to $593,000 as compared to $362,000 for the same period in
2008.    For the nine months ended September 30, 2009, we
sold 0.99 commercial acres in St. Charles compared to 1.89 commercial acres of
land in St. Charles during the same periods of 2008.  The sale in 2009
was within the Town Center North development.  No commercial land
sales were completed during the three months ended September 30, 2009. For the
three months ended September 30, 2008, we sold 0.90 commercial acres in St.
Charles for $178,000.





Gross Margin on Land Sales





The gross
margin on land sales was 26% and 26% for the nine and three months ended
September 30, 2009, respectively, as compared to 19% and (7%), respectively, for
the same periods in 2008, respectively.  Our gross





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 margins
on land sales in the U.S. can fluctuate based on changes in the mix of
residential and commercial land sales.   For the nine months
ended September 30, 2009 and 2008, residential land sales at 31% and 27%
margins, respectively, made up the bulk of revenues.  The gross margin
on residential land sales increased as a result of the increase in the number of
lots sold and the increase in minimum sales price.





General,
Administrative, Selling and Marketing





The
primary component of general, administrative, selling and marketing expenses is
the corporate overhead allocation.  General, administrative, selling
and marketing expenses increased $78,000, or 3%, to $2,619,000 during
the nine months ended September 30, 2009 as compared to $2,541,000 for the
same period of 2008. General, administrative, selling and marketing
expenses decreased $65,000, or 7%, to $844,000 during the three months
ended September 30, 2009 as compared to $909,000 for the same period of
2008.   Overall, the Company’s general and administrative
expenses decreased.  However, the increase for this segment was due to
the methodology by which the Company allocates general and administrative
expenses between segments.  See “Results of Operations –
Corporate.”





Puerto
Rican Land Development Operations




For
      the nine months endedPuerto
      Rican Land Development Operations:
            
            September
      30, 2009
            
            
            September
      30, 2008Operating
      revenuesHomebuilding
      – home sales
            
            $
            246
            
            
            $
            3,476Operating
      expensesCost
      of home sales
            
            
            217
            
            
            
            2,694General,
      administrative, selling and marketing
            
            
            289
            
            
            
            251Total
      expenses
            
            
            506
            
            
            
            2,945Operating
      (loss) income
            
            
            (260
            )
            
            
            531Other
      income
            
            
            484
            
            
            
            537Income
      before provision for income taxes
            
            
            224
            
            
            
            1,068Provision
      for income taxes
            
            
            (124
            )
            
            
            -Net
      income
            
            $
            348
            
            
            $
            1,068





For
      the three months endedPuerto
      Rican Land Development Operations:
            
            September
      30, 2009
            
            
            September
      30, 2008Operating
      revenuesHomebuilding
      – home sales
            
            $
            246
            
            
            $
            494Operating
      expensesCost
      of home sales
            
            
            197
            
            
            
            394General,
      administrative, selling and marketing
            
            
            101
            
            
            
            69Total
      expenses
            
            
            298
            
            
            
            463Operating
      (loss) income
            
            
            (52
            )
            
            
            31Other
      income
            
            
            174
            
            
            
            120Income
      before benefit for income taxes
            
            
            122
            
            
            
            151Benefit
      for income taxes
            
            
            (124
            )
            
            
            -Net
      income
            
            $
            246
            
            
            $
            151





Community
Development Land Sales


There
were no community development land sales during the nine and three months ended
September 30, 2009 and 2008.





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Homebuilding





Homebuilding
revenues decreased $3,230,000 and $248,000, or 93% and 50%, to $246,000 for the
nine and three months ended September 30, 2009, respectively, compared to
$3,476,000 and $494,000 for the same periods in 2008, respectively. During the
nine and three months ended September 30, 2009, one unit within the Torres del
Escorial, Inc. project was closed.  For the nine and three months
ended September 30, 2008, there were 14 and 2 units sold,
respectively.  The average selling price per unit has remained
constant.  As of September 30, 2009, five units within the Torres del
Escorial, Inc. project remain available for sale.





General,
Administrative, Selling and Marketing Expenses





The
primary component of the general, administrative, selling and marketing expenses
is the corporate overhead allocation.  There were no significant
changes in general, administrative, selling and marketing expenses for the nine
and three months ended September 30, 2009 as compared to the same periods in
2008.    See “Results of Operations –
Corporate.”





CORPORATE
- Results of Operations:





The
Company pools its overhead costs, including accounting, human
resources, office management and technology as well as corporate and other
executive office costs, by geographical location as it is more effective for
allocating to the Company’s lines of business.  Corporate costs are
allocated to the operating segments quarterly based on a percentage of
management’s estimated usage of time.  The amount of general and
administrative expenses allocated to the Corporate Segment decreased by
$143,000, or 5%, to $2,607,000 for the nine months ended September 30, 2009 as
compared to the same period of 2008.  The decrease was driven by
efforts to cut general and administrative expenses as well as certain
fluctuations in the amount of costs allocated to the operating
segments.  The allocation percentages fluctuate based on the resources
and oversight required to operate that segment.





Total
general, administrative, selling and marketing costs decreased $591,000, or 6%,
to $8,457,000 for the nine months ended September 30, 2009 and increased
$661,000, or 20%, to $3,554,000 for the three months ended September 30, 2009 as
compared to $8,948,000 and $2,893,000 for the same periods in 2008,
respectively.  In the U.S., these costs increased by approximately
$92,000 and $631,000 for the nine and three months, and in Puerto Rico, these
costs decreased $683,000 and increased $130,000 for the nine and three months
ended in September 30, 2009, respectively.





In the
U.S., the Company noted significant increases in accruals for share based
compensation issued to the Chief Executive Officer and non-employee Trustees as
well as increases in the Board of Trustee and consulting costs related to the
Merger.  These increases were offset in part by the reorganization and
costs saving initiatives implemented in the fourth quarter of
2008.  From the first nine months of 2008 to the first nine months of
2009, there was also a slight shift in the allocation of corporate expenses with
the Land Development segment’s allocation decreasing by 12% and the Operating
Real Estate and Corporate segments increasing by 9% and 3%,
respectively.  This shift is primarily related to the method by which
the Company allocates overhead.





The 36%
decrease in the Puerto Rican overhead is primarily attributable to a decrease in
salaries and benefits as a result of the reorganization in the fourth quarter of
2008, offset slightly by an increase in legal fees.





INCOME
TAXES





Provision
for (Benefit from) Income Taxes


Due to the potential
variability in the anticipated effective tax rate on non-discrete activity
and/or discrete taxable events, the company has computed its intraperiod income
tax provision for the discrete taxable events and non-discrete activity using a
discrete period computation.


United
States





The
United States effective tax rates for the nine months ended September 30, 2009
and 2008 were 36% and 30%, respectively.  The United States effective tax
rates for the three months ended September 30, 2009 and 2008 were 22% and 37%,
respectively.  The statutory tax rate is 40%.  The difference in the
statutory tax rate and the effective tax rate for the pre-tax loss during the
nine and three months ended September 30, 2009 was primarily due





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 to
accrued taxes and penalties on uncertain tax positions, certain non-deductible
compensation expenses and the change in the deferred tax asset valuation
allowance.  The difference in the statutory tax rate and the effective tax
rate for the pre-tax loss during the nine and three months ended September 30,
2008 was primarily due to a relatively small net loss, the related benefit
for which was partially offset by accrued taxes and penalties on uncertain tax
positions.





Puerto
Rico





The
effective tax rates on the Puerto Rico source income for the nine months ended
September 30, 2009 and 2008 were 28% and (71%), respectively. The effective
tax rates on the Puerto Rico source income for the three months ended September
30, 2009 and 2008 were 29% and 21%, respectively.  The statutory tax
rate is 29%.   The difference in the statutory tax rate and the
effective tax rate for the pre-tax income during the nine and three months ended
September 30, 2009, was primarily due to tax exempt income and the change in the
deferred tax asset valuation allowance offset in part by deferred items for
which no current benefit may be recognized.  The difference in the
statutory tax rate and the effective tax rate for the pre-tax loss during the
nine and three months ended September 30, 2008, was primarily due to tax exempt
income offset in part by the double taxation on the earnings of our wholly-owned
corporate subsidiary, ICP, and deferred items for which no current benefit may
be recognized.





LIQUIDITY
AND CAPITAL RESOURCES





Summary
of Cash Flows





As of
September 30, 2009, the Company had cash and cash equivalents of $21,507,000 and
restricted cash of $10,127,000.  Included in the Company’s cash and
cash equivalents is $3,908,000 of cash located within multifamily apartment
entities, over which the Company does not have direct
control.   ACPT receives surplus cash distributions as well as
management fees from these entities.  As of September 30, 2009, the
Company had corporate available funds of $17,599,000.  The following
table sets forth the changes in the Company’s cash flows ($ in
thousands):





Nine
      months Ended
              September
      30,2009
            
            
            2008Operating
      Activities
            
            $
            2,420
            
            
            $
            (6,968
            )Investing
      Activities
            
            
            (12,054
            )
            
            
            (5,658
            )Financing
      Activities
            
            
            7,106
            
            
            
            7,017Net
      Decrease in Cash
            
            $
            (2,528
            )
            
            $
            (5,609
            )





Operating
Activities





For the
nine months ended September 30, 2009, operating activities provided $2,420,000
of cash flows compared to $6,968,000 of cash flows used in operating activities
for the nine months ended September 30, 2008.  The $9,388,000 increase
in cash flows provided by operating activities primarily resulted from a
reduction of $9,075,000 in the amount invested in land development.  From
period to period, cash flow from operating activities is also impacted by
changes in our net income, as discussed more fully under "Results of
Operations," as well as other changes in our receivables and
payables.





Investing
Activities





For the
nine months ended September 30, 2009, net cash used in investing activities was
$12,054,000 compared to $5,658,000 for the same period of 2008.  Cash
provided by or used in investing activities generally relates to increases in
our investment portfolio through acquisition, development or construction of
rental properties and land held for future use, net of returns on our
investments.  The $6,396,000 increase in the cash used in investing
activities between periods was primarily the result of an increase in
investments in rental projects of $10,205,000 related to the construction of
Gleneagles Apartments, the Company’s $1,500,000 investment in Surrey,





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 and
additions of other assets and prepayments related to the Gleneagles construction
project of $3,105,000 offset by the net cash provided by the sale of IGP of
$9,930,000, net of cash deconsolidated.





Financing
Activities





For the
nine months ended September 30, 2009, net cash provided by financing activities
was $7,106,000 as compared to $7,017,000 for the nine months ended September 30,
2008.  This increase in cash provided by financing activities was
primarily the result of the net differences in the timing of, and increases in,
mortgage amounts for properties refinanced, differences in county bond proceeds,
dividends to shareholders and debt curtailment from sales between the nine
months ended September 30, 2009 and 2008.  The increase in cash
proceeds from debt financing relates to the construction of Gleneagles as well
as the refinancing of the Monserrate Associates apartment property mortgage
while the increase in debt payments relates to the payments against the line of
credit.





Liquidity
Requirements





Our
short-term and long-term liquidity requirements consist primarily of obligations
under capital and operating leases, normal recurring operating expenses, regular
debt service requirements, investments in community development and certain
non-recurring expenditures.  The Company has historically met its
short-term and long-term liquidity requirements from cash flow generated from
residential and commercial land sales, home sales, property management fees,
rental property revenue, and financings.  However, with the current
economic environment, there are no assurances that future sales will occur or
that the Company will have adequate access to credit.





Pursuant
to agreements with the Charles County Commissioners, the Company is committed to
completing $13,525,000 of infrastructure projects, all of which are eligible to
be funded by County bond proceeds, either through existing bond receivables or
future issuances.  The Company expects to incur $2,525,000 in expenses
related to this development over the next 12 months.  Further, due the
Company’s completion of several significant Charles County Roads Projects,
$882,000 of retention and open payables were required to be funded as of
September 30, 2009, of which $411,000 is eligible for bond funding.  
These project costs and the difference between the cost of County projects and
any bond proceeds available to fund such costs will be funded out of the
Company’s available cash flows.





On July
22, 2008, the Company signed a $5,960,000 construction contract for site
development related to the infrastructure of Hilltop Phase I which will involve
the construction of 220 condominium units in Parque Escorial.  This
work is currently in process and as of September 30, 2009, our Puerto Rico
planning and development activities had a remaining commitment of $2,487,000,
all of which is expected to be incurred over the next nine
months.  Our $10,000,000 credit facility, which was set to mature on
August 31, 2009 and has been extended until December 31, 2010, will be used to
fund these expenditures.  As part of the extension, the Company agreed
to reduce the overall facility limit to $7,500,000 with the available credit to
be used to fund remaining Hilltop development, certain retainage due and up to
$500,000 to be used to fund future interest payments due under the
facility.  In addition, the facility now bears interest at Prime plus
1.5% but not less than 5.5%.  The outstanding balance of this facility
on September 30, 2009, was $6,247,000.





In
addition to the activity noted above, we may seek additional development loans
and permanent mortgages for continued development and expansion of other parts
of St. Charles and Parque Escorial, potential opportunities in Florida and other
potential rental property opportunities.





There has
been a current reduction in the demand for residential real estate in the Parque
Escorial markets.  Management has also noted a current reduction in
the demand for commercial properties.  Sustained reductions in demand
for our commercial property would adversely impact our cash flows.





As a
result of our existing commitments and the downturn in the residential real
estate market, management expects to continue to use the Company’s resources
conservatively for the remainder of 2009.  Anticipated cash flow from
operations, existing loans, refinanced or extended loans, asset sales, and new
financing are expected to meet our financial commitments for the next 12
months.  However, there are no assurances that these funds will be
generated.





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The
Company will evaluate and determine on a continuing basis, depending upon market
conditions and the outcome of events described under the section titled "Special
Note Regarding Forward-Looking Statements," the most efficient use of the
Company's capital, including acquisitions and dispositions, purchasing,
refinancing, exchanging or retiring certain of the Company's outstanding debt
obligations, distributions to shareholders and its existing contractual
obligations.





Recourse Debt - U.S. Land
Development Operations





Pursuant
to an agreement reached between ACPT and the County in 2002, the Company agreed
to accelerate the construction of two major roadway links to the road
system.  As part of the agreement, the County agreed to issue general
obligation public improvement bonds (“the Bonds”) to finance $20,000,000 of this
construction guaranteed by letters of credit provided by Lennar as part of a
residential lot sales contract for 1,950 lots in Fairway Village.  The
Bonds were issued in three installments with the final $6,000,000 installment
issued in March 2006.  The Bonds bear interest rates ranging from 4% to 8%,
for a blended lifetime rate for total Bonds issued to date of 5.1%, and call for
semi-annual interest payments and annual principal payments and mature in 15
years.  Under the terms of bond repayment agreements between the
Company and the County, the Company is obligated to pay interest and principal
on the full amount of the Bonds.  Therefore, the Company recorded the
full amount of the debt and a receivable from the County representing the
undisbursed Bond proceeds to be advanced to the Company as major infrastructure
development within the project occurs.  As of December 31, 2008, all
of the bond proceeds had been used to fund the specified
development.  As part of the agreement, the Company will pay the
County a monthly payment equal to one-sixth of the semi-annual interest payments
and one-twelfth of the annual principal payment due on the Bonds.  The
County also requires ACPT to fund an escrow account from lot sales that will be
used to repay this obligation.





In August
2005, the Company signed a Memorandum of Understanding (“MOU”) with the Charles
County Commissioners regarding a land donation that is now the site of a minor
league baseball stadium and will house a planned entertainment
complex.  Under the terms of the MOU, the Company donated 42 acres of
land in St. Charles to the County on December 31, 2005.  The Company
also agreed to expedite off-site utilities, storm-water management and road
construction improvements that will serve the entertainment complex and future
portions of St. Charles so that the improvements will be completed concurrently
with the entertainment complex.  The County will be responsible for
infrastructure improvements on the site of the complex.  In return,
the County agreed to issue additional general obligation bonds to finance the
infrastructure improvements.  In March 2006, $4,000,000 of bonds were
issued for this project, with an additional $3,000,000 issued in both March 2007
and March 2008 and $2,000,000 in March 2009.  These bonds bear
interest rates ranging from 4.9% to 8%, for a blended rate of 5.3%, call for
semi-annual interest payments and annual principal payments, and mature in 15
years.  The terms of the bond repayment agreement are similar to those
noted above.  As of September 30, 2009, $2,525,000 of these bond
proceeds were recorded as a receivable and available to fund the related
infrastructure.  In addition, the County agreed to issue an additional
100 school allocations a year to St. Charles commencing with the issuance of
bonds.





In
December 2006, the Company reached an agreement with the County whereby the
Company receives interest payments on any undistributed bond proceeds held in
escrow by the County.  The agreement covers the period from July 1,
2005 through the last draw made by the Company.  For the nine months
ended September 30, 2009 and 2008, the Company recognized $18,000 and $67,000,
respectively, of interest income on these escrowed funds.





On April
14, 2006, the Company closed a three-year, $14,000,000 revolving line of credit
loan (the “Revolver”) secured by a first lien deed of trust on property located
in St. Charles, Maryland.  During the first quarter of 2009, the Company
renegotiated the terms of the agreement.  The Revolver bears interest
at the Prime rate plus 1.25% (4.50% at September 30, 2009) and was set to mature
on April 14, 2009 but has been extended to March 31, 2010.  As of
September 30, 2009, $1,946,000 was outstanding on this facility.  As a
result of accelerated curtailments due to increased pace of lot sales, the
Revolver is now scheduled to be repaid by December 31, 2009; however, we are
currently working to have the repayment date for a portion of the Revolver
extended to the March 31, 2010 extension date.  Under the terms of the
Revolver, the Company is required to comply with certain financial covenants,
including a minimum net worth covenant.





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On April
2, 2008, the Company secured a two-year, $3,600,000 construction loan for the
construction of a commercial restaurant/office building within the O’Donnell
Lake Restaurant Park.  The facility is secured by the land along with
any improvements constructed and bears interest at the Prime Rate (3.25% at
September 30, 2009).  At the end of the two-year construction period,
the Company may convert the loan to a five-year permanent loan, amortized over a
30-year period at a fixed interest rate to be determined.  As of
September 30, 2009, $3,342,000 was outstanding under this facility, leaving
$258,000 available to fund completion of the building.  However, the
lender has requested that the outstanding balance of the loan be reduced to 80%
of the “as-is” value of the building, requesting a reduction of $782,000 before
November 20, 2009.





Recourse Debt - Puerto
Rican Land Development Operations





Substantially
all of the Company's 490 acres of community development land assets in Parque El
Comandante within the Puerto Rico segment are encumbered by a $10,000,000
recourse revolving line of credit facility.  The homebuilding and land
assets in Parque Escorial are not encumbered by this facility and remain
unencumbered as of September 30, 2009.   This facility matured on
August 31, 2009 but the maturity date was extended to December 31,
2010.  As part of the extension, the Company agreed to reduce the
overall facility limit to $7,500,000 with the available credit to be used to
fund remaining Hilltop development, certain retainage due and up to $500,000 to
be used to fund future interest payments due under the facility.  In
addition, the facility now bears interest at Prime plus 1.5% but not less than
5.5%.  The outstanding balance of this facility on September 30, 2009,
was $6,247,000.  While the Company will continue to seek refinancing
of the line into a construction loan for the development of residential
condominiums, the current state of the credit market may prevent this plan from
occurring.  IGP provided a guarantee on this credit facility; however,
the lender’s recourse under this guarantee is limited to the collateral, except
in the case of fraud, intentional misrepresentation, or misappropriation of
income associated with the collateral. In the event of default, the lender’s
sole recourse is to foreclose on the property.





Non-Recourse Debt - U.S.
Operating Real Estate Operations





As more
fully described in Note 4 to our Consolidated Financial Statements included in
this Quarterly Report on Form 10-Q, the non-recourse apartment properties' debt
is collateralized by apartment projects.  As of September 30, 2009,
approximately 38% of this debt was secured by the Federal Housing Administration
("FHA").  Material changes during 2008 to the non-recourse debt
consist of newly acquired debt and the refinancing of existing
debt.  There were no significant changes to our non-recourse debt
obligations for our U.S. Operating Real Estate Operations during the nine and
three months ended September 30, 2009.





Non-Recourse Debt - Puerto
Rican Operating Real Estate Operations





As more
fully described in Note 4 to our Consolidated Financial Statements included in
this Form 10-Q, the non-recourse debt is collateralized by the respective
multifamily apartment project or commercial building.





On May
12, 2008, IGP agreed to provide a fixed charge and debt service guarantee
related to the Escorial Office Building I, Inc. (“EOB”) mortgage.  The
fixed charge and debt service guarantee requires IGP to contribute capital in
cash in such amounts required to cause EOB to comply with the related financial
covenants.  The guarantee will remain in full force until EOB has
complied with the financial covenants for four consecutive
quarters.  As a part of the IGP sale, the guarantee discussed above
was assumed by IGP Holdings and was not transferred to IGP.  The
Company does not expect the funding of this guarantee to have a material impact
on its liquidity and cash flows.





On August
31, 2009, the Company completed the sale of its wholly-owned subsidiary, IGP to
PBE and its associates, which was a significant portion of the Company’s Puerto
Rican Operating Real Estate segment.  Prior to the sale, IGP was
restructured to include only the Company’s general and limited partnership
interests in nine partnerships which own twelve properties with 2,653 subsidized
apartments in Puerto Rico, as well as the Section 8 affordable housing
management contracts.  Non-recourse debt with a principal balance of
$81,051,000 at August 31, 2009 was assumed by PBE in this
transaction.





There
were no other significant changes to our non-recourse debt obligations for our
Puerto Rican Operating Real Estate Operations during the three months ended
September 30, 2009.





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Purchase Obligations and
Other Contractual Obligations





In
addition to our contractual obligations described above, we have other purchase
obligations consisting primarily of contractual commitments for normal operating
expenses at our apartment properties, recurring corporate expenditures including
employment, consulting and compensation agreements and audit fees, non-recurring
corporate expenditures such as improvements at our investment properties, the
construction of the new apartment projects in St. Charles, costs associated with
our land development contracts for the County’s road projects and the
development of our land in U.S. and Puerto Rico.  Our U.S. and Puerto
Rico land development and construction contracts are subject to increases in
cost of materials and labor and other project overruns.  Our overall
capital requirements will depend upon acquisition opportunities, the level of
improvements on existing properties and the cost of future phases of residential
and commercial land development.  In the nine months ended September
30, 2009, the Company continued its development activity within the master
planned communities in St. Charles and Puerto Rico.





As of
September 30, 2009, as required by the provisions of FASB ASC 740 (FIN 48), the
Company has $14,993,000 recorded as FIN 48 accrued income tax liabilities and
$5,148,000 as accrued interest on unpaid income tax liabilities related to
uncertain tax positions.  We are unable to reasonably estimate the
ultimate amount or timing of settlement of these liabilities.





In
October 2008, the Company entered into an agreement with Surrey to contribute
$2,000,000 in exchange for a 50% ownership interest in Surrey.  During
the three months ended September 30, 2009, the Company contributed their final
payment in accordance with the agreement.








ITEM
      4(T).
            CONTROLS AND
PROCEDURES





Evaluation
of Disclosure Controls and Procedures





In
connection with the preparation of this Form 10-Q, as of September 30, 2009, an
evaluation was performed under the supervision and with the participation of the
Company's management, including the Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), of the effectiveness of the design and operation of
our disclosure controls and procedures as defined in Rule 13a-15(e) under the
Exchange Act.  In performing this evaluation, management reviewed the
selection, application and monitoring of our historical accounting
policies.  Based on that evaluation, the CEO and CFO concluded that, as of
September 30, 2009, these disclosure controls and procedures were effective and
designed to ensure that the information required to be disclosed in our reports
filed with the Securities Exchange Commission is recorded, processed, summarized
and reported on a timely basis.





Changes
in Internal Control Over Financial Reporting





The
Company’s management, with the participation of the Company’s CEO and CFO,
evaluated any change in the Company’s internal control over financial reporting
that occurred during the quarter covered by this report and determined that
there was no change in the Company’s internal control over financial reporting
during the quarter covered by this report that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.


PART
      II
            OTHER INFORMATIONITEM
      1.
            LEGAL
PROCEEDINGS





See the
information under the heading "Legal Matters" in Note 5 to the consolidated
financial statements in this Form 10-Q for information regarding legal
proceedings, which information is incorporated by reference in this Item
1.





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ITEM
      1A.
            RISK FACTORS





There has
been no material change in the Company’s risk factors from those outlined in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.





ITEM
      2.
            UNREGISTERED SALES OF EQUITY SECURITIES AND USE
      OF PROCEEDS





None.





ITEM
      3.
            DEFAULTS UPON SENIOR
  SECURITIES





None.




ITEM
      4.
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS





None.





ITEM
      5.
            OTHER
INFORMATION





None.





ITEM
      6.
            EXHIBITS





(A)
            Exhibits2.1*
            Agreement
      and Plan of Merger, dated as of September 25, 2009, among FCP Fund I, LLP,
      FCP/ACPT Acquisition Company, Inc. and American Community Properties
      Trust.31.1
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
      Officer31.2
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
      Officer32.1
            Section
      1350 Certification of Chief Executive Officer32.2
            Section
      1350 Certification of Chief Financial Officer*Incorporated
      by reference from the Company’s Current Report of Form 8-K, filed on
      September 28, 2009.





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SIGNATURES








Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.





AMERICAN
      COMMUNITY PROPERTIES TRUST(Registrant)Dated:  November
      16, 2009
            By:
            /s/
      Stephen GriesselStephen
      Griessel
              Chief
      Executive OfficerDated:  November
      16, 2009
            By:
            /s/
      Matthew M. MartinMatthew
      M. Martin
              Chief
      Financial Officer





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