**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**JUNE
                30, 2006,**ORo
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934
              FOR
                THE TRANSITION PERIOD FROM _______________ TO
                _________________


Commission
      file number **1-14369**





**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)





**Not
      Applicable**


(Former
      name, former address and former fiscal year, if changed since last
      report)





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 o








Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “an accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one): .




Large
      accelerated filer o   Accelerated
      filer o  Non-accelerated
      filer x








Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).






Yes o No x

















**As
      of August 7, 2006, there were 5,197,954 Common Shares, par value $0.01 per
      share, outstanding**


-1-


**AMERICAN
      COMMUNITY PROPERTIES TRUST**


**FORM
      10-Q**


**JUNE
      30, 2006**


**TABLE
      OF CONTENTS**


Page
                Number**PART
                I**
            **FINANCIAL
                INFORMATION**Item
                1.
            Consolidated
                Financial StatementsConsolidated
                Statements of Income for the
                Six Months Ended June 30, 2006 (Unaudited) and June 30, 2005
                (Unaudited)
            3Consolidated
                Statements of Income for the
                Three Months Ended June 30, 2006 (Unaudited) and June 30, 2005
                (Unaudited)
            4Consolidated
                Balance Sheets as of June 30, 2006
                (Unaudited) and December 31, 2005 (Audited)
            5Consolidated
                Statement of Changes
                in Shareholders' Equity for the Six Months Ended June 30, 2006
                (Unaudited)
            6Consolidated
                Statements of Cash Flows for the Six
                Months Ended June 30, 2006 (Unaudited) and June 30, 2005
                (Unaudited)
            7Notes
                to Consolidated Financial Statements
                (Unaudited)
            8Item
                2.
            Management's
                Discussion and Analysis of Financial Condition
                and Results of Operations for the Six and Three Months Ended June
                30, 2006
                and 2005
            23Item
                3.
            Quantitative
                and Qualitative Disclosures about
                Market Risk
            35Item
                4.
            Controls
                and Procedures
            35**PART
                II**
            **OTHER
                INFORMATION**Item
                1.
            Legal
                Proceedings
            35Item
                1A.
            Risk
                Factors
            36Item
                2
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            39Item
                3.
            Defaults
                Upon Senior Securities
            39Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            39Item
                5.
            Other
                Information
            39Item
                6.
            Exhibits
            39Signatures
            40





-2-
 *Table
          of Contents*





**AMERICAN
                COMMUNITY PROPERTIES TRUST****CONSOLIDATED
                STATEMENTS OF INCOME****FOR
                THE SIX MONTHS ENDED JUNE 30,**(In
                thousands, except per share amounts)(Unaudited)**2006**
            
            2005**Revenues**Rental
                property revenues
            
            **$**
            **26,138**
            
            $
            10,828Community
                development-land sales
            
            
            **6,626**
            
            
            12,721Homebuilding-home
                sales
            
            
            **11,259**
            
            
            -Management
                and other fees, substantially all from related entities
            
            
            **565**
            
            
            1,697Reimbursement
                of expenses related to managed entities
            
            
            **1,104**
            
            
            3,227Total
                revenues
            
            
            **45,692**
            
            
            28,473**Expenses**Rental
                property operating expenses
            
            
            **12,343**
            
            
            4,374Cost
                of land sales
            
            
            **3,666**
            
            
            8,880Cost
                of home sales
            
            
            **8,521**
            
            
            21General,
                administrative, selling and marketing
            
            
            **5,007**
            
            
            5,415Depreciation
                and amortization
            
            
            **4,074**
            
            
            1,950Expenses
                reimbursed from managed entities
            
            
            **1,104**
            
            
            3,227Total
                expenses
            
            
            **34,715**
            
            
            23,867**Operating
                income**
            
            
            **10,977**
            
            
            4,606**Other
                income (expense)**Interest
                and other income
            
            
            **218**
            
            
            646Equity
                in earnings from unconsolidated entities
            
            
            **343**
            
            
            628Interest
                expense
            
            
            **(7,200**
            **)**
            
            (3,379
            )Minority
                interest in consolidated entities
            
            
            **(2,666**
            **)**
            
            (238
            )**Income
                before provision for income taxes**
            
            
            **1,672**
            
            
            2,263**Provision
                for income taxes**
            
            
            **714**
            
            
            747**Net
                income**
            
            **$**
            **958**
            
            $
            1,516**Earnings
                per share****Basic
                and diluted**
            
            **$**
            **0.18**
            
            $
            0.29**Weighted
                average shares outstanding****Basic
                and diluted**
            
            
            **5,198**
            
            
            5,192**Cash
                dividends per share**
            
            **$**
            **0.63**
            
            $
            0.20




**Note:** The
      income statement for the six months ended June 30, 2006 reflects the adoption
      of
      Emerging Issues Task Force Issue 04-05, *“Determining
      Whether a General Partner, or the General Partners as a Group, Controls a
      Limited Partnership or Similar Entity When the Limited Partners Have Certain
      Rights,”* (“EITF
      04-05”) on January 1, 2006 (Refer to Note 2).





*The
      accompanying notes are an integral part of these consolidated
      statements.*





-3-
 *Table
          of Contents*





**AMERICAN
                COMMUNITY PROPERTIES TRUST****CONSOLIDATED
                STATEMENTS OF INCOME****FOR
                THETHREE MONTHS ENDED JUNE
                30,**(In
                thousands, except per share amounts)(Unaudited)**2006**
            
            2005**Revenues**Rental
                property revenues
            
            **$**
            **13,347**
            
            $
            5,487Community
                development-land sales
            
            
            **2,682**
            
            
            8,973Homebuilding-home
                sales
            
            
            **7,234**
            
            
            -Management
                and other fees, substantially all from related entities
            
            
            **275**
            
            
            970Reimbursement
                of expenses related to managed entities
            
            
            **532**
            
            
            1,650Total
                revenues
            
            
            **24,070**
            
            
            17,080**Expenses**Rental
                property operating expenses
            
            
            **6,388**
            
            
            2,281Cost
                of land sales
            
            
            **1,430**
            
            
            6,236Cost
                of home sales
            
            
            **5,487**
            
            
            11General,
                administrative, selling and marketing
            
            
            **2,342**
            
            
            2,711Depreciation
                and amortization
            
            
            **2,101**
            
            
            942Expenses
                reimbursed from managed entities
            
            
            **532**
            
            
            1,650Total
                expenses
            
            
            **18,280**
            
            
            13,831**Operating
                income**
            
            
            **5,790**
            
            
            3,249**Other
                income (expense)**Interest
                and other income
            
            
            **89**
            
            
            521Equity
                in earnings from unconsolidated entities
            
            
            **173**
            
            
            283Interest
                expense
            
            
            **(3,699**
            **)**
            
            (1,623
            )Minority
                interest in consolidated entities
            
            
            **(1,601**
            **)**
            
            (212
            )**Income
                before provision for income taxes**
            
            
            **752**
            
            
            2,218**Provision
                for income taxes**
            
            
            **295**
            
            
            742**Net
                income**
            
            **$**
            **457**
            
            $
            1,476**Earnings
                per share****Basic
                and diluted**
            
            **$**
            **0.09**
            
            $
            0.28**Weighted
                average shares outstanding****Basic
                and diluted**
            
            
            **5,198**
            
            
            5,192**Cash
                dividends per share**
            
            **$**
            **0.10**
            
            $
            0.10




**Note:** The
      income statement for the three months ended June 30, 2006 reflects the adoption
      of Emerging Issues Task Force Issue 04-05, *“Determining
      Whether a General Partner, or the General Partners as a Group, Controls a
      Limited Partnership or Similar Entity When the Limited Partners Have Certain
      Rights,”* (“EITF
      04-05”) on January 1, 2006 (Refer to Note 2).





*The
      accompanying notes are an integral part of these consolidated
      statements.*





-4-
 *Table
          of Contents*





**AMERICAN
                COMMUNITY PROPERTIES TRUST****CONSOLIDATED
                BALANCE
                SHEETS**(In
                thousands, except share and per share amounts)**As
                of**
            
            As
                of**June
                30, 2006**
            
            December
                31, 2005**(Unaudited)**
            
            (Audited)**ASSETS****ASSETS:**Investments
                in real estate:Operating
                real estate, net of accumulated depreciation
            
            **$**
            **143,496**
            
            $
            76,578of
                $139,631 and $46,412 respectivelyLand
                and development costs
            
            
            **60,041**
            
            
            54,232Condominiums
                under construction
            
            
            **13,454**
            
            
            17,621Rental
                projects under construction or development
            
            
            **12,205**
            
            
            4,458Investments
                in real estate, net
            
            
            **229,196**
            
            
            152,889Cash
                and cash equivalents
            
            
            **13,465**
            
            
            21,156Restricted
                cash and escrow deposits
            
            
            **21,326**
            
            
            8,925Investments
                in unconsolidated real estate entities
            
            
            **6,657**
            
            
            9,738Receivable
                from bond proceeds
            
            
            **16,873**
            
            
            8,422Accounts
                receivable
            
            
            **1,853**
            
            
            1,332Deferred
                tax assets
            
            
            **16,167**
            
            
            5,610Property
                and equipment, net of accumulated depreciation
            
            
            **1,138**
            
            
            1,182Deferred
                charges and other assets, net of amortization of$2,127
                and $898 respectively
            
            
            **10,829**
            
            
            7,831**Total
                Assets**
            
            **$**
            **317,504**
            
            $
            217,085**LIABILITIES
                AND SHAREHOLDERS' EQUITY****LIABILITIES:**Non-recourse
                debt
            
            **$**
            **236,327**
            
            $
            119,865Recourse
                debt
            
            
            **42,481**
            
            
            32,981Accounts
                payable and accrued liabilities
            
            
            **20,349**
            
            
            19,243Deferred
                income
            
            
            **4,091**
            
            
            3,961Accrued
                current income tax liability
            
            
            **1,178**
            
            
            6,545**Total
                Liabilities**
            
            
            **304,426**
            
            
            182,595**SHAREHOLDERS'
                EQUITY:**Common
                shares, $.01 par value, 10,000,000 shares authorized,5,197,954
                shares issued and outstanding as ofJune
                30, 2006 and December 31, 2005
            
            
            **52**
            
            
            52Treasury
                stock, 67,709 shares at cost
            
            
            **(376**
            **)**
            
            (376
            )Additional
                paid-in capital
            
            
            **17,066**
            
            
            17,066Retained
                earnings (deficit)
            
            
            **(3,664**
            **)**
            
            17,748**Total
                Shareholders' Equity**
            
            
            **13,078**
            
            
            34,490**Total
                Liabilities and Shareholders' Equity**
            
            $
            **317,504**
            
            $
            217,085








**Note:** The
      balance sheet as of June 30, 2006 reflects the adoption of Emerging Issues
      Task
      Force Issue 04-05, *“Determining
      Whether a General Partner, or the General Partners as a Group, Controls a
      Limited Partnership or Similar Entity When the Limited Partners Have Certain
      Rights,”* (“EITF
      04-05”) on January 1, 2006 (Refer to Note 2).





*The
      accompanying notes are an integral part of these consolidated
      statements.*


-5-
 *Table
          of Contents*





**AMERICAN
                COMMUNITY PROPERTIES TRUST****CONSOLIDATED
                STATEMENTOF
                CHANGES IN
                SHAREHOLDERS' EQUITY**(In
                thousands, except share amounts)Common
                Shares
            
            
            
            Additional
            
            RetainedPar
            
            Treasury
            
            Earnings
            
            EarningsNumber
            
            Value
            
            Stock
            
            Capital
            
            (Deficit)
            
            TotalBalance
                December 31, 2005 (Audited)
            
            
            5,197,954
            
            $
            52
            
            $
            (376
            )
            $
            17,066
            
            $
            17,748
            
            $
            34,490Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            958
            
            
            958Dividends
                paid
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,232
            )
            
            (3,232
            )Cumulative
                effect of change in accounting for EITF 04-05
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (19,138
            )
            
            (19,138
            )**Balance
                June 30, 2006 (Unaudited)**
            
            
            **5,197,954**
            
            **$**
            **52**
            
            **$**
            **(376**
            **)**
            **$**
            **17,066**
            
            **$**
            **(3,664**
            **)**
            **$**
            **13,078***The
                accompanying notes are an integral part of these consolidated
                statements.*





-6-
 *Table
          of Contents*





**AMERICAN
                COMMUNITY PROPERTIES TRUST****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****FORTHE SIXMONTHS ENDED JUNE
                30,**(In
                thousands)(Unaudited)**2006**
            
            2005**Cash
                Flows from Operating Activities**Net
                income
            
            **$**
            **958**
            
            $
            1,516Adjustments
                to reconcile net income to net cash providedby
                operating activities:Depreciation
                and amortization
            
            
            **4,074**
            
            
            1,950Deficit
                distribution to minority interests
            
            
            **2,646**
            
            
            179Benefit
                for deferred income taxes
            
            
            **(716**
            **)**
            
            (3,495
            )Equity
                in earnings-unconsolidated entities
            
            
            **(343**
            **)**
            
            (628
            )Cost
                of sales-community development
            
            
            **3,666**
            
            
            8,880Cost
                of sales-homebuilding
            
            
            **8,521**
            
            
            21Stock
                based compensation expense
            
            
            **102**
            
            
            655Minority
                interest in consolidated entities
            
            
            **2,666**
            
            
            238Amortization
                of deferred loan costs
            
            
            **275**
            
            
            312Changes
                in notes and accounts receivable
            
            
            **175**
            
            
            291Additions
                to community development assets
            
            
            **(9,475**
            **)**
            
            (10,214
            )Homebuilding-construction
                expenditures
            
            
            **(4,354**
            **)**
            
            (5,976
            )Deferred
                income
            
            
            **130**
            
            
            -Changes
                in accounts payable, accrued liabilities
            
            
            **(6,255**
            **)**
            
            4,498Net
                cash provided by (used in) operating activities
            
            
            **2,070**
            
            
            (1,773
            )**Cash
                Flows from Investing Activities**Investment
                in office building and apartment construction
            
            
            **(7,747**
            **)**
            
            (1,957
            )Distribution
                from land real estate joint venture
            
            
            **-**
            
            
            1,160Cash
                from newly consolidated properties
            
            
            **4,723**
            
            
            -Change
                in investments-unconsolidated apartment partnerships
            
            
            **-**
            
            
            1,116Change
                in investments-unconsolidated commercial partnerships
            
            
            **338**
            
            
            356Change
                in restricted cash
            
            
            **560**
            
            
            112Additions
                to rental operating properties, net
            
            
            **(20,193**
            **)**
            
            (2,043
            )Other
                assets
            
            
            **(521**
            **)**
            
            (347
            )Net
                cash used in investing activities
            
            
            **(22,840**
            **)**
            
            (1,603
            )**Cash
                Flows from Financing Activities**Cash
                proceeds from debt financing
            
            
            **37,279**
            
            
            18,245Payment
                of debt
            
            
            **(19,399**
            **)**
            
            (12,416
            )County
                Bonds proceeds, net of undisbursed funds
            
            
            **1,077**
            
            
            1,214Payments
                of distributions to minority interests
            
            
            **(2,646**
            **)**
            
            (179
            )Dividends
                paid to shareholders
            
            
            **(3,232**
            **)**
            
            (1,024
            )Net
                cash provided by financing activities
            
            
            **13,079**
            
            
            5,840**Net
                (Decrease) Increase in Cash and Cash Equivalents**
            
            
            **(7,691**
            **)**
            
            2,464**Cash
                and Cash Equivalents, Beginning of Year**
            
            
            **21,156**
            
            
            16,138**Cash
                and Cash Equivalents, June 30,**
            
            **$**
            **13,465**
            
            $
            18,602*The
                accompanying notes are an integral part of these consolidated
                statements.*





-7-
 *Table
          of Contents*





**AMERICAN
      COMMUNITY PROPERTIES TRUST**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006**


(Unaudited)








**(1)**
            **ORGANIZATION**





American
      Community Properties Trust ("ACPT") is a self-managed holding company that
      is
      primarily engaged in the investment of rental properties, property management
      services, community development, and homebuilding. These operations are
      concentrated in the Washington, D.C. metropolitan area and Puerto Rico and
      are
      carried out through American Rental Properties Trust ("ARPT"), American Rental
      Management Company ("ARMC "), American Land Development U.S., Inc. ("ALD")
      and
      IGP Group Corp. ("IGP Group") and their subsidiaries.


ACPT
      is
      taxed as a U.S. partnership and its taxable income flows through to its
      shareholders.  ACPT is subject to Puerto Rico taxes on IGP Group's taxable
      income, generating foreign tax credits that are passed through to ACPT's
      shareholders.  ACPT's federal taxable income consists of certain passive
      income from IGP Group, a controlled foreign corporation, additional
      distributions from IGP Group including Puerto Rico taxes paid on behalf of
      ACPT,
      and dividends from ACPT's U.S. subsidiaries.  Other than Interstate
      Commercial Properties ("ICP"), which is taxed as a Puerto Rico corporation,
      the
      taxable income from the remaining Puerto Rico operating entities passes through
      to IGP Group or ALD.  Of this taxable income, only the portion of taxable
      income applicable to the profits, losses or gains 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.





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





**Basis
      of Presentation**


The
      accompanying consolidated financial statements include the accounts of ACPT
      and
      its subsidiaries and partnerships, after eliminating all intercompany
      transactions. Unless the context otherwise requires, all of the entities
      included in the consolidated financial statements are hereinafter referred
      to
      collectively as the “Company” or “ACPT.”


The
      Company consolidates entities which are not variable interest entities as
      defined by FASB Interpretation No. 46 (revised December 2003) (“FIN 46 (R)”) in
      which it owns, directly or indirectly, a majority voting interest in the entity.
      In addition, beginning January 1, 2006, 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 Emerging Issues Task Force
      Issue 04-05, " *Determining
      Whether a General Partner, or the General Partners as a Group, Controls a
      Limited Partnership or Similar Entity When the Limited Partners Have Certain
      Rights* ,"
      (“EITF
      04-05”).


As
      of
      December 31, 2005, the consolidated group included ACPT and its four major
      subsidiaries, ARPT, ARMC, ALD and IGP Group. In addition, the consolidated
      group
      includes American Housing Management Company, American Housing Properties L.P.
      (“AHP”), St. Charles Community, LLC, Interstate General Properties Limited
      Partnership S.E., Land Development Associates, S.E., LDA Group LLC, Torres
      del
      Escorial, Inc., Escorial Office Building I, Inc., Interstate Commercial
      Properties, Inc., Bannister Associates Limited Partnership, Coachman's Limited
      Partnership, Crossland Associates Limited Partnership, Fox Chase Apartments
      General Partnership, Headen House Associates Limited Partnership, Lancaster
      Apartments Limited Partnership, New Forest Apartments General Partnership,
      Owings Chase, LLC, Palmer Apartments Associates Limited Partnership, Prescott
      Square, LLC, Sheffield Greens Apartments, LLC, Village Lake L.P., Wakefield
      Terrace Associates Limited Partnership, and Wakefield Third Age Associates
      Limited Partnership.


Beginning
      January 1, 2006, as a result of EITF 04-05, the consolidated group also includes
      the following properties: Alturas del Senorial Associates Limited Partnership,
      Bayamon Garden Associates Limited Partnership, Carolina Associates Limited
      Partnership S.E., Colinas de San Juan Associates Limited Partnership, Essex
      Apartments Associates Limited Partnership, Huntington Associates Limited
      Partnership, Jardines de Caparra Associates Limited Partnership, Monserrate
      Associates Limited Partnership, San Anton Associates S.E., Turabo Limited
      Dividend Partnership and Valle del Sol Associates Limited Partnership.
      Historically, these partnerships had been recorded using the equity method
      of
      accounting.


On
      April
      28, 2006, the Company, through its subsidiary AHP, completed the acquisition
      of
      two apartment properties, Milford Station I LLC and Milford Station II LLC,
      in
      Baltimore, Maryland containing a total of 250 units for approximately
      $14,300,000. We allocated the purchase price of acquired properties to land,
      building and in-place leases based on the relative fair value of each component
      in accordance with SFAS No. 141, “ *Business
      Combinations.”* The
      acquisitions of Milford I and Milford II are included within our results of
      operations from the date of acquisition, April 28, 2006.


The
      Company's investment in the four real estate entities that it does not control,
      does not serve as the general partner, or for which it is not the primary
      beneficiary if such entity is a variable interest entity, are recorded using
      the
      equity method of accounting. Refer to Note 3 for further discussion regarding
      investments in unconsolidated real estate entities.


-8-
 *Table
          of Contents*


**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/A for the
      year ended December 31, 2005. The operating results for the six and three months
      ended June 30, 2006 and 2005 are not necessarily indicative of the results
      that
      may be expected for the full year. Net income 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.





**Implementation
      of EITF 04-05**


As
      of
      January 1, 2006, we consolidated 11 partnerships which were previously
      unconsolidated as a result of the application of EITF 04-05. Those partnerships
      own, or control other entities that own, 14 apartment properties. Our interests
      in the profits and losses of these partnerships range from 1 to 50 percent.
      The
      initial consolidation of those partnerships resulted in increases (decreases),
      net of intercompany eliminations, and included the recording of deferred taxes
      in amounts reported in our consolidated balance sheet as of January 1, 2006,
      as
      follows (in thousands):




Increase
                  (decrease)Operating
                  real estate, net of accumulated depreciation
              
              $
              53,282Cash
                  and cash equivalents
              
              
              4,723Investments
                  in unconsolidated real estate entities
              
              
              (920
              )Deferred
                  tax assets
              
              
              9,841All
                  other assets
              
              
              11,618Total
                  assets
              
              $
              78,544Non-recourse
                  debt
              
              $
              98,556All
                  other liabilities
              
              
              (874
              )Shareholders’
                  equity
              
              
              (19,138
              )Total
                  liabilities and shareholders’ equity
              
              $
              78,544





The
      Company recorded an overall reduction to retained earnings of $19.1 million
      in a
      manner similar to a cumulative effect of a change in accounting principle.
      The
      retained earnings impact is net of a deferred tax asset recorded of $9.8 million
      related to temporary differences arising from the negative deficits absorbed
      by
      the Company as a result of consolidating the partnerships.





-9-
 *Table
          of Contents*


The
      impact to our consolidated statements of income for the six months ended June
      30, 2006 is summarized as follows:





**Balance
                prior**
            
            
            
            **Six
                Months****to
                the**
            
            
            
            **Ended****Implementation**
            
            **Increase**
            
            **June
                30,****of
                EITF 04-05**
            
            **(Decrease)**
            
            **2006**Rental
                property revenues
            
            $
            12,524
            
            $
            13,614
            
            $
            26,138Management
                and other fees
            
            
            1,477
            
            
            (912
            )
            
            565Reimbursement
                of expenses related to managed entities
            
            
            3,181
            
            
            (2,077
            )
            
            1,104Total
                revenues
            
            
            35,067
            
            
            10,625
            
            
            45,692Rental
                property operating expenses
            
            
            5,512
            
            
            6,831
            
            
            12,343Depreciation
                and amortization
            
            
            2,212
            
            
            1,862
            
            
            4,074Expenses
                reimbursed from managed entities
            
            
            3,181
            
            
            (2,077
            )
            
            1,104Total
                expenses
            
            
            28,099
            
            
            6,616
            
            
            34,715Operating
                income
            
            
            6,968
            
            
            4,009
            
            
            10,977Equity
                in earnings from unconsolidated entities
            
            
            510
            
            
            (167
            )
            
            343Interest
                expense
            
            
            (3,737
            )
            
            (3,463
            )
            
            (7,200
            )Minority
                interest in consolidated entities
            
            
            (214
            )
            
            (2,452
            )
            
            (2,666
            )Income
                (loss) before provision (benefit) for income taxes
            
            
            3,745
            
            
            (2,073
            )
            
            1,672Provision
                (benefit) for income taxes
            
            
            1,373
            
            
            (659
            )
            
            714Net
                income
            
            
            2,372
            
            
            (1,414
            )
            
            958Earnings
                per share basic and diluted
            
            $
            0.46
            
            $
            (0.28
            )
            $
            0.18


-10-
 *Table
          of Contents*





The
      impact to our consolidated statements of income for the three months ended
      June
      30, 2006 is summarized as follows:





**Balance
                prior**
            
            
            
            **Three
                Months****to
                the**
            
            
            
            **Ended****Implementation**
            
            **Increase**
            
            **June
                30,****of
                EITF 04-05**
            
            **(Decrease)**
            
            **2006**Rental
                property revenues
            
            $
            6,499
            
            $
            6,848
            
            $
            13,347Management
                and other fees
            
            
            750
            
            
            (475
            )
            
            275Reimbursement
                of expenses related to managed entities
            
            
            1,617
            
            
            (1,085
            )
            
            532Total
                revenues
            
            
            18,782
            
            
            5,288
            
            
            24,070Rental
                property operating expenses
            
            
            2,865
            
            
            3,523
            
            
            6,388Depreciation
                and amortization
            
            
            1,167
            
            
            934
            
            
            2,101Expenses
                reimbursed from managed entities
            
            
            1,617
            
            
            (1,085
            )
            
            532Total
                expenses
            
            
            14,908
            
            
            3,372
            
            
            18,280Operating
                income
            
            
            3,874
            
            
            1,916
            
            
            5,790Equity
                in earnings from unconsolidated entities
            
            
            234
            
            
            (61
            )
            
            173Interest
                expense
            
            
            (1,958
            )
            
            (1,741
            )
            
            (3,699
            )Minority
                interest in consolidated entities
            
            
            (206
            )
            
            (1,395
            )
            
            (1,601
            )Income
                (loss) before provision (benefit) for income taxes
            
            
            2,033
            
            
            (1,281
            )
            
            752Provision
                (benefit) for income taxes
            
            
            709
            
            
            (414
            )
            
            295Net
                income
            
            
            1,324
            
            
            (867
            )
            
            457Earnings
                per share basic and diluted
            
            $
            0.26
            
            $
            (0.17
            )
            $
            0.09





In
      prior
      periods, we used the equity method of accounting to account for our investments
      in the partnerships that we consolidated in 2006 in accordance with EITF 04-05.
      Under the equity method of accounting, we recognized partnership income or
      losses based generally on our percentage interest in the partnership.
      Consolidation of a partnership does not ordinarily result in a change to the
      net
      amount of the partnership income or loss that is recognized using the equity
      method of accounting. However, when consolidated real estate partnerships make
      cash distributions or allocate losses to partners in excess of the minority
      partners’ basis in the property, generally accepted accounting principles
      require that the consolidating partner record a charge equal to the amount
      of
      such excess distribution. Certain of the partnerships that we consolidated
      in
      accordance with EITF 04-05 had deficits in equity that resulted from
      distributions made to the partners in excess of basis and losses during prior
      periods when we accounted for our investment using the equity method of
      accounting. We would have been required to recognize the non-controlling
      partners’ share of those distributions in excess of basis and losses had we
      consolidated these entities in prior periods.


-11-
 *Table
          of Contents*


**Cash
      Dividends**





As
      announced on March 10, 2006, the Company entered into a closing agreement with
      the United States Internal Revenue Service ("IRS") by which the Company will
      maintain its publicly traded partnership ("PTP") status for U.S. federal income
      tax purposes.  The closing agreement with the IRS required the Company to
      report approximately $5.0 million to shareholders as taxable income on March
      29,
      2006.  Under the terms of the Company's governing documents, the Company
      was required to make minimum annual distributions to the shareholders equal
      to
      at least 45% of net taxable income allocated to shareholders.  Accordingly,
      the Board of Trustees declared a dividend of $0.43 per share, or approximately
      $2,230,000 in the aggregate, that was paid on April 12, 2006 to shareholders
      of
      record on March 29, 2006.





On
      March
      30, 2006, the Board of Trustees declared a cash dividend of $0.10 per share,
      paid on April 27, 2006 to shareholders of record on April 13, 2006. On May
      15,
      2006, the Board of Trustees declared a $0.10 cash dividend paid on June 13,
      2006
      to shareholders of record on May 30, 2006.





**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,


·
            Maintenance
                and other repair costs are charged to operations as
                incurred.





The
      table
      below presents the major classes of depreciable assets as of June 30, 2006
      and
      December 31, 2005 (in thousands):





**June
                30,**
            
            December
                31,**2006**
            
            2005**(unaudited)**
            
            (audited)Land
            
            **$**
            **23,649**
            
            $
            10,065Building
            
            
            **240,184**
            
            
            102,140Building
                improvements
            
            
            **12,160**
            
            
            4,525Equipment
            
            
            **7,134**
            
            
            6,260**283,127**
            
            
            122,990Accumulated
                depreciation
            
            
            **139,631**
            
            
            46,412Operating
                properties, net
            
            **$**
            **143,496**
            
            $
            76,578








*Other
      Property and Equipment*


In
      addition, the Company owned other property and equipment of $1,138,000 and
      $1,182,000, net of accumulated depreciation, respectively, as of June 30, 2006
      and December 31, 2005 respectively.





*Depreciation*


Total
      depreciation expense was $4,074,000 and $1,950,000 for the six months ended
      June
      30, 2006 and 2005, respectively, and $2,101,000 and $942,000 for the three
      months ended June 30, 2006 and 2005, respectively.





-12-
 *Table
          of Contents*


**Reclassifications**





Certain
      amounts from prior years have been reclassified to conform to our current year's
      presentation. This includes the reclassification of the Company’s consolidated
      balance sheet as of December 31, 2005 to conform to the revised presentation
      elected as of January 1, 2006. The revised presentation as of June 30, 2006
      is
      more condensed than prior periods and categorizes assets and liabilities by
      type.





**Impact
      of Recently Issued Accounting Standards**





*SFAS
      123(R)*


In
      December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      123(R), " *Share
      Based Payment* ,"
      a
      revision of SFAS No. 123, which is similar in concept to SFAS No. 123, but
      requires all share-based payments to employees, including grants of employee
      stock options, to be recognized in the financial statements based on their
      fair
      values. Pro forma disclosure is no longer an alternative.  In addition,
      this revision requires a public entity to measure the cost of employee services
      received in exchange for an award of liability instruments at their fair
      value.  The use of intrinsic value for liability instruments is no longer
      allowed for public entities.


The
      Company implemented the provisions of SFAS No. 123(R) as of January 1, 2006,
      the
      impact of which was not material on the Company’s financial position or results
      of operations.





*SFAS
      154*


In
      May
      2005, the FASB issued SFAS No. 154, " *Accounting
      Changes and Error Corrections* ,"
      which
      replaces APB Opinion No. 20 and SFAS No. 3, and changes the requirements for
      the
      accounting for and reporting of a change in accounting principle.  This
      statement is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005, although early adoption is
      permitted for accounting changes and corrections of errors made in fiscal years
      beginning after the date SFAS 154 was issued.  The adoption of SFAS 154 did
      not have a material impact on our financial condition or results of
      operations.





*FIN
      48*


In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation of FASB
      Statement No. 109, “Accounting for Income Taxes,” and it seeks to reduce
      the diversity in practice associated with certain aspects of measurement and
      recognition in accounting for income taxes. In addition, FIN 48 requires
      expanded disclosure with respect to the uncertainty in income taxes and is
      effective as of the beginning of our 2007 fiscal year. We are currently
      evaluating the impact, if any, that FIN 48 will have on our financial
      statements.





**(3)**
            **INVESTMENT
                IN UNCONSOLIDATED REAL ESTATE
                ENTITIES**





The
      Company accounts for investments in unconsolidated real estate entities that
      are
      not considered variable interest entities under FIN 46 (R) in accordance with
      SOP 78-9 *"Accounting
      for Investments in Real Estate Ventures"* and
      APB
      Opinion No. 18 *"The
      Equity Method of Accounting for Investments in Common Stock"* .
      For
      entities that are considered variable interest entities under FIN 46(R), the
      Company performs an assessment to determine the primary beneficiary of the
      entity as required by FIN 46(R). The Company accounts for variable interest
      entities 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.


The
      Company considers many factors in determining whether or not an investment
      should be recorded under the equity method, such as economic and ownership
      interests, authority to make decisions, and contractual and substantive
      participating rights of the partners. Income and losses are recognized in
      accordance with the terms of the partnership agreements and any guarantee
      obligations or commitments for financial support. The Company's investments
      in
      unconsolidated real estate entities accounted for under the equity method of
      accounting consisted of general partnership interests in two limited
      partnerships which own apartment properties in the United States; a limited
      partnership interest in a limited partnership that owns a commercial property
      in
      Puerto Rico; and a 50% ownership interest in a joint venture formed as a limited
      liability company.





*Apartment
      Partnerships*


On
      January 1, 2006, the Company adopted EITF 04-05 which now requires us to
      consolidate 11 additional partnerships, which historically, were recorded using
      the equity method of accounting (refer to Note 2). The unconsolidated apartment
      partnerships as of June 30, 2006 include two partnerships owning 110 rental
      units compared to 13 partnerships owning 3,463 rental units in 16 apartment
      complexes as of June 30, 2005. The two remaining unconsolidated complexes are
      owned by Brookside Gardens Limited Partnership and Lakeside Apartments Limited
      Partnership.


We
      have
      determined that two of our unconsolidated apartment partnerships, Brookside
      Gardens and Lakeside Apartments, are variable interest entities under FIN 46-R,
      however, the Company is not required to consolidate the partnerships due to
      the
      fact that it is not the primary beneficiary and does not bear the majority
      of
      the risk of expected losses. The Company holds less than a 20% economic interest
      in Brookside and Lakeside. As a general partner, we have significant influence
      over operations of Brookside and Lakeside that is disproportionate to our
      economic ownership in these two partnerships. In accordance with SOP 78-9 and
      APB No. 18, these investments are accounted for under the equity method. The
      Company is exposed to losses for Brookside of $199,000 and Lakeside of $172,000,
      consisting of our net investment, loans and unpaid fees. All amounts are fully
      reserved. 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.





-13-
 *Table
          of Contents*






*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 27.82% ownership interest in the partnership's
      assets, equal to a 45.26% interest in cash flow generated by the thirty-year
      lease of the building.


On
      April
      30, 2004, the Company purchased a 50% limited partnership interest in El Monte
      Properties, S.E. ("El Monte") from Insular Properties Limited Partnership
      ("Insular") for $1,462,500. Insular is owned by the J. Michael Wilson Family,
      a
      related party. In December 2004, a third party buyer purchased El Monte for
      $20,000,000, $17,000,000 in cash and $3,000,000 in notes. The net cash proceeds
      from the sale of the real estate were distributed to the partners. As a result,
      the Company received $2,500,000 in cash and recognized $986,000 of income in
      2004. The gain on sale was reduced by the amount of the seller's note which
      is
      subject to future subordination. In January 2005, El Monte distributed to the
      Company its share of the $3,000,000 note, $1,500,000. The Company will recognize
      income as it receives cash payments on the note. The note is due in installments
      over a three year period beginning in December 2007. El Monte will distribute
      any remaining cash when it winds up its affairs.





*Land
      Development Joint Venture*


In
      September 2004, the Company entered into a joint venture agreement with Lennar
      Corporation for the development of a 352-unit, active adult community located
      in
      St. Charles, Maryland. At that time, a limited liability company, St. Charles
      Active Adult Community, LLC, was formed to carry out the terms of this agreement
      whereby Lennar and the Company would each hold a 50% ownership interest in
      the
      limited liability company. The joint venture's operating agreement calls for
      the
      development of 352 lots to be sold to Lennar's homebuilding division under
      a
      purchase agreement starting in the end of 2005. The Company will manage the
      project's development for a market rate fee pursuant to a management agreement.
      In September 2004, the Company transferred land to the joint venture in exchange
      for a 50% ownership interest and $4,277,000 in cash. The Company's investment
      in
      the joint venture was recorded at 50% of the historical cost basis of the land
      with the other 50% recorded within our deferred charges and other assets. The
      proceeds received are reflected as deferred revenue. The deferred revenue and
      related deferred costs will be recognized into income as the joint venture
      sells
      lots to Lennar. In March 2005, the joint venture closed a non-recourse
      development loan which was amended in June 2006. Per the amended terms of the
      loan, both the Company and Lennar provided development completion guarantees
      and
      Lennar is required to purchase a minimum of 100 lots per year; therefore the
      joint venture is required to develop 100 lots per year. During the first six
      months of 2006, the joint venture did not sell any lots to Lennar’s homebuilding
      division.





-14-
 *Table
          of Contents*


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, which are all accounted for
      as
“investments in unconsolidated real estate entities” on the balance
      sheet.





LandDevelopmentApartment
            
            Commercial
            
            JointPartnerships
            
            Partnerships
            
            Venture
            
            Total(In
                thousands)**Summary
                Financial Position:****Total
                Assets**June
                30, 2006
            
            $
            5,231
            
            $
            28,334
            
            $
            14,234
            
            $
            47,799December
                31, 2005
            
            
            77,830
            
            
            28,464
            
            
            11,947
            
            
            118,241**Total
                Non-Recourse Debt**June
                30, 2006
            
            
            3,268
            
            
            23,475
            
            
            6,173
            
            
            32,916December
                31, 2005
            
            
            101,848
            
            
            23,120
            
            
            4,019
            
            
            128,987**Total
                Other Liabilities**June
                30, 2006
            
            
            1,245
            
            
            852
            
            
            1,127
            
            
            3,224December
                31, 2005
            
            
            9,782
            
            
            1,516
            
            
            994
            
            
            12,292**Total
                (Deficit) Equity**June
                30, 2006
            
            
            718
            
            
            4,006
            
            
            6,934
            
            
            11,658December
                31, 2005
            
            
            (33,800
            )
            
            3,828
            
            
            6,934
            
            
            (23,038
            )**Company's
                Investment, net (1)**June
                30, 2006
            
            
            -
            
            
            4,829
            
            
            1,828
            
            
            6,657December
                31, 2005
            
            
            (1,597
            )
            
            4,824
            
            
            1,828
            
            
            5,055**Summary
                of Operations****Total
                Revenue**Six
                Months Ended June 30, 2006
            
            
            392
            
            
            1,828
            
            
            -
            
            
            2,220Six
                Months Ended June 30, 2005
            
            
            13,871
            
            
            1,827
            
            
            -
            
            
            15,698Three
                Months Ended June 30, 2006
            
            
            193
            
            
            915
            
            
            -
            
            
            1,108Three
                Months Ended June 30, 2005
            
            
            6,956
            
            
            913
            
            
            -
            
            
            7,869**Net
                Income**Six
                Months Ended June 30, 2006
            
            
            (58
            )
            
            926
            
            
            -
            
            
            868Six
                Months Ended June 30, 2005
            
            
            1,017
            
            
            898
            
            
            (3
            )
            
            1,912Three
                Months Ended June 30, 2006
            
            
            (31
            )
            
            468
            
            
            -
            
            
            437Three
                Months Ended June 30, 2005
            
            
            361
            
            
            466
            
            
            (3
            )
            
            824**Company's
                Recognition of Equity in Earnings**Six
                Months Ended June 30, 2006
            
            
            -
            
            
            343
            
            
            -
            
            
            343Six
                Months Ended June 30, 2005
            
            
            256
            
            
            372
            
            
            -
            
            
            628Three
                Months Ended June 30, 2006
            
            
            -
            
            
            173
            
            
            -
            
            
            173Three
                Months Ended June 30, 2005
            
            
            104
            
            
            179
            
            
            -
            
            
            283





-15-
 *Table
          of Contents*


LandDevelopmentApartment
            
            Commercial
            
            JointPartnerships
            
            Partnerships
            
            Venture
            
            Total(In
                thousands)**Summary
                of Cash Flows:****Cash
                Flows from Operating Activities**Six
                Months Ended June 30, 2006
            
            $
            77
            
            $
            1,032
            
            $
            132
            
            $
            1,241Six
                Months Ended June 30, 2005
            
            
            3,196
            
            
            875
            
            
            42
            
            
            4,113Three
                Months Ended June 30, 2006
            
            
            24
            
            
            173
            
            
            721
            
            
            918Three
                Months Ended June 30, 2005
            
            
            1,020
            
            
            7
            
            
            42
            
            
            1,069**Company's
                Share of Cash Flows from Operating Activities**Six
                Months Ended June 30, 2006
            
            
            1
            
            
            467
            
            
            66
            
            
            534Six
                Months Ended June 30, 2005
            
            
            1,014
            
            
            396
            
            
            21
            
            
            1,431Three
                Months Ended June 30, 2006
            
            
            -
            
            
            78
            
            
            361
            
            
            439Three
                Months Ended June 30, 2005
            
            
            313
            
            
            (3
            )
            
            21
            
            
            331**Operating
                Cash Distributions**Six
                Months Ended June 30, 2006
            
            
            -
            
            
            747
            
            
            -
            
            
            747Six
                Months Ended June 30, 2005
            
            
            2,478
            
            
            753
            
            
            2,320
            
            
            5,551Three
                Months Ended June 30, 2006
            
            
            -
            
            
            388
            
            
            -
            
            
            388Three
                Months Ended June 30, 2005
            
            
            993
            
            
            341
            
            
            2,320
            
            
            3,654**Company's
                Share of Operating Cash Distributions**Six
                Months Ended June 30, 2006
            
            
            -
            
            
            339
            
            
            -
            
            
            339Six
                Months Ended June 30, 2005
            
            
            1,075
            
            
            356
            
            
            1,160
            
            
            2,591Three
                Months Ended June 30, 2006
            
            
            -
            
            
            176
            
            
            -
            
            
            176Three
                Months Ended June 30, 2005
            
            
            398
            
            
            154
            
            
            1,160
            
            
            1,712**Refinancing
                Cash Distributions**Six
                Months Ended June 30, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -Six
                Months Ended June 30, 2005
            
            
            100
            
            
            -
            
            
            -
            
            
            100Three
                Months Ended June 30, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -Three
                Months Ended June 30, 2005
            
            
            100
            
            
            -
            
            
            -
            
            
            100**Company's
                Share of Refinancing Cash Distributions**Six
                Months Ended June 30, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -Six
                Months Ended June 30, 2005
            
            
            1
            
            
            -
            
            
            -
            
            
            1Three
                Months Ended June 30, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -Three
                Months Ended June 30, 2005
            
            
            1
            
            
            -
            
            
            -
            
            
            1




Notes:


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


-16-
 *Table
          of Contents*





**(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 June 30, 2006 and December 31,
      2005 (in thousands):





Maturity
            
            Interest
            
            Outstanding
                as ofDates
            
            Rates
                (a)
            
            **June
                30,**
            
            December
                31,From/To
            
            From/To
            
            **2006**
            
            2005**(unaudited)**
            
            (audited)**Recourse
                Debt**Community
                Development (b), (c), (d)
            
            
            06-30-07/03-01-21
            
            
            4%-P+1%
            
            **$**
            **30,221**
            
            $
            14,161Homebuilding
                (e)
            
            
            10-31-07
            
            
            P
            
            
            **7,514**
            
            
            13,905Investment
                Properties (f)
            
            
            05-15-07/01-23-13
            
            
            P+1.25%/6.98%
            
            
            **4,615**
            
            
            4,752General
                obligations (g)
            
            
            07-29-07/05-01-10
            
            
            Non-interest
                bearing/5.99%
            
            
            131
            
            
            163**Total
                Recourse Debt**
            
            
            
            
            
            
            
            
            **42,481**
            
            
            32,981**Non-Recourse
                Debt**Community
                Development (h)
            
            
            11-23-07
            
            
            Non-interest
                bearing
            
            
            **500**
            
            
            500Investment
                Properties (i), (j), (k)
            
            
            04-30-09/08-01-47
            
            
            4.95%/10%
            
            
            **235,827**
            
            
            119,365**Total
                Non-Recourse Debt**
            
            
            
            
            
            
            
            
            **236,327**
            
            
            119,865Total
                Debt
            
            
            
            
            
            
            
            **$**
            **278,808**
            
            $
            152,846





(a)
            "P"
                = Prime lending interest rate.  (The prime rate at June 30, 2006 was
                8.25%)


(b)
            As
                of June 30, 2006, $22,689,000 of the community development recourse
                debt
                relates to the general obligation bonds issued by the Charles County
                government as described in detail under the heading "Financial
                Commitments" in Note 5.


(c)
            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, MD. The maximum amount of the loan
                at any
                one time is $14,000,000. The facility includes various sub-limits
                on a
                revolving basis for amounts to finance apartment project acquisitions
                and
                land development in St. Charles. The terms require certain financial
                covenants to be calculated annually as of December 31, including
                a
                tangible net worth to senior debt ratio for ALD and a minimum net
                worth
                test for ACPT. As of June 30, 2006, the Company borrowed $6,700,000
                on the
                Revolver.


(d)
            The
                remainder of the outstanding balance of our community development
                recourse
                debt, $800,000, is fully collateralized by approximately 490 acres
                within
                Parque El Commandante.


(e)
            The
                outstanding recourse debt related to the homebuilding operations
                is
                composed of a $26,000,000 revolving construction loan with a maximum
                outstanding balance limited to $18,000,000 for Torres Del Escorial. 
                This loan is secured by a mortgage on the property and will be repaid
                by
                the proceeds from home sales.


(f)
            As
                of June 30, 2006 and December 31, 2005, the outstanding recourse
                debt
                within the investment properties is comprised of a loan borrowed
                to
                finance the acquisition of our properties Village Lake and Coachman's
                in
                January 2003, as well as a 2 year, $3,000,000 recourse note with
                Columbia
                Bank that the Company obtained in June 2005.  The loan with Columbia
                Bank carries a fixed interest rate of 6.98% and requires the Company
                to
                pay monthly principal and interest payments until its maturity on
                May 15,
                2007 and is collateralized by the Company's cash receipts from the
                two
                apartment properties acquired in 2004 and two parcels of land in
                St.
                Charles acquired in the second quarter of
                2005.


(g)
            The
                general recourse debt outstanding as of June 30, 2006 is made up
                of
                various capital leases outstanding within our U.S. and Puerto Rico
                operations as well as vehicle
                notes.


(h)
            In
                the fourth quarter 2005, the Company purchased 22 residential acres
                adjacent to the Sheffield Neighborhood for $1,000,000. The Company
                funded
                half of the purchase price with cash and signed a two-year note for
                $500,000 due in November 2007.  The Company plans to annex the land
                into the St. Charles mater plan
                community. (i)
            The
                non-recourse debt related to the investment properties is collateralized
                by the apartment projects. As of June 30, 2006, approximately $88,330,000
                of this debt is secured by the Federal Housing Administration ("FHA")
                or
                the Maryland Housing Fund. The non-recourse debtbalance
                is also composed of an $8,618,000 mortgage on the office building
                in
                Parque Escorial. The mortgage is a thirty-year loan with a tenyear
                fixed rate equal to 7.33%. At the end of the first ten years the
                interest
                rate will be reset, at the discretion of management, to a fixedrate
                for an additional five, seven or ten years equal to the SWAP rate
                plus
                2.25%. The non-recourse debt related to the investmentproperties
                also includes a construction loan for Sheffield Greens Apartments
                LLC
                (Sheffield Greens). As of June 30, 2006, the balance ofthe
                construction loan was $10,978,000. (j)
            On
                April 5, 2006, the non-recourse mortgage for one of our consolidated
                apartment properties in Puerto Rico, Colinas de San JuanAssociates
                L.P., was refinanced with a ten-year, 6.59% non-recourse mortgage
                loan of
                $9,680,000. The proceeds from the refinancing were used for capitalimprovements
                at the property site and distributions to the general and limited
                partners. (k)
            On April 28, 2006, the Company, through
              its
              subsidiary AHP, completed the acquisition of two apartment properties,
              Milford Station I LLC and Milford Station II LLC, in Baltimore, Maryland
              containing a total of 250 units for approximately $14,300,000.  The
              acquisition was financed through a combination of $11,836,000 of
              non-recourse notes and borrowing $3,755,000 from the Revolver which
              included funding improvement escrows and payment of closing
              costs.












-17-
 *Table
            of
            Contents*





The
      Company’s loans contain various financial, cross collateral, cross default,
      technical and restrictive provisions. As of June 30, 2006, the Company is in
      compliance with the financial covenants and the other provisions of its loan
      agreements.





**(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. Also, 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.  In March 2006, the Charles County
      Commissioners issued the last tranche of Bonds on behalf of the Company in
      conjunction with the roadway construction project.  The Bonds bear interest
      rates from 4% to 8% and call for semi-annual interest payments and annual
      principal payments and mature in fifteen years. The Company is obligated to
      pay
      interest and principal 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 over
      an
      eighteen month period by the Charles County Commissioners 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.


In
      August
      2005, the Company signed a memorandum of understanding ("MOU") with the Charles
      County Commissioners regarding a land donation that will house a planned minor
      league baseball stadium and entertainment complex. Under the terms of the MOU,
      the Company donated 42 acres of land in St. Charles to Charles 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.
      Charles County will be responsible for infrastructure improvements on the site
      of the complex. In return, Charles County agreed to issue $7,000,000 of general
      obligation bonds to finance the infrastructure improvements. In March 2006,
      $4,000,000 of these bonds were issued for this project. The funds for this
      project will be repaid by ACPT over a 15-year period. In addition, the County
      agreed to issue an additional 100 school allocations a year to St. Charles
      commencing with the issuance of bonds. The County will also require ACPT to
      fund
      an escrow account from lot sales that will be used to repay these
      bonds.


As
      of
      June 30, 2006, ACPT is guarantor of $23,578,000 of surety bonds for the
      completion of land development projects with Charles County; substantially
      all
      are for the benefit of the Charles County Commissioners.





*Consulting
      Agreements and Arrangements*


ACPT
      entered into a consulting and retirement compensation agreement with Interstate
      General Company L.P.’s (“IGC”) founder and Chief Executive Officer, James J.
      Wilson, effective October 5, 1998 (the "Consulting Agreement"). IGC was the
      predecessor company to ACPT. Under the terms of the Consulting Agreement, the
      Company will pay Mr. Wilson $200,000 per year through October 2008.





*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 June 30, 2006, ACPT has guaranteed
      $34,036,000 of outstanding debt owed by its subsidiaries. IGP has guaranteed
      $8,314,000 of its subsidiaries' outstanding debt. LDA guaranteed $7,514,000
      of
      outstanding debt owed by its subsidiary. In addition, St. Charles Community
      LLC
      guaranteed $11,347,000 of outstanding debt owed by AHP. 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. In addition to debt service guarantees, both the Company
      and Lennar provided development completion guarantees related to the St. Charles
      Active Adult Community Joint Venture. 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*


There
      have been no material changes to the legal proceedings previously disclosed
      in
      our Annual Report on Form 10-K for the year ended December 31,
      2005.


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 certain 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 the 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.


-18-
 *Table
          of Contents*





**(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 are reflected
      below (in thousands):





**CONSOLIDATED
                STATEMENT OF INCOME:**Six
                Months Ended
            
            Three
                Months EndedJune
                30,
            
            June
                30,**2006**
            
            2005
            
            **2006**
            
            2005**Management
                and Other Fees****(A)**Unconsolidated
                subsidiaries with third party partners
            
            
            
            
            **$**
            **19**
            
            $
            1,135
            
            **$**
            **9**
            
            $
            683Affiliates
                of J. Michael Wilson, CEO and Chairman
            
            
            
            
            
            **248**
            
            
            244
            
            
            **117**
            
            
            122**$**
            **267**
            
            $
            1,379
            
            **$**
            **126**
            
            $
            805**General
                and Administrative Expense**Affiliates
                of J. Michael Wilson, CEO and Chairman
            
            
            (B1
            )
            **$**
            **19**
            
            $
            69
            
            **$**
            **-**
            
            $
            37Reserve
                additions and other write-offs-Unconsolidated
                    real estate entities with third party
                    partners
            
            
            (A
            )
            
            **5**
            
            
            (18
            )
            
            **(1**
            **)**
            
            (8
            )Reimbursement
                  to IBC for ACPT’s share ofJ. Michael Wilson's
                  salary
            
            
            
            
            
            **188**
            
            
            175
            
            
            **94**
            
            
            87Reimbursement
                of administrative costs-Affiliates of J. Michael Wilson, CEO and Chairman
            
            
            
            
            
            **(5**
            **)**
            
            (9
            )
            
            **(2**
            **)**
            
            (5
            )James J. Wilson, IGC chairman and director
            
            
            (B2
            )
            
            **100**
            
            
            100
            
            
            **50**
            
            
            50Thomas J. Shafer, Trustee
            
            
            (B3
            )
            
            **30**
            
            
            21
            
            
            **15**
            
            
            10**$**
            **337**
            
            $
            338
            
            **$**
            **156**
            
            $
            171**Balance**
            
            
            Balance**June
                30,**
            
            
            December
                31,**2006**
            
            
            2005**Assets
                Related to Rental Properties**Receivables-All
                unsecured and due on demandUnconsolidated
                    real estate entities with third party partners, net of
                    reserves
            
            
            
            
            
            
            
            
            
            
            **$**
            **-**
            
            $
            506**Other
                Assets**Receivables-All
                unsecured and due on demandAffiliate
                of J. Michael Wilson, CEO and Chairman
            
            
            
            
            
            
            
            
            
            
            **$**
            **85**
            
            $
            108**$**
            **85**
            
            $
            108





(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 collectibility 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.


In
      prior
      years, we managed a commercial property in Puerto Rico owned by the Wilson
      Family. The Wilson Family property was sold to a third party in April 2005.
      Management fees generated by this property represented less than 1% of the
      Company's total revenue.


Effective
      April 30, 2006, ARMC’s management agreement with Chastleton Associates LP
      terminated due to the fact that the apartment property was sold to a third
      party. The property was previously owned by an affiliate. Management fees
      generated by this property accounted for less than 1% of the Company’s total
      revenue. The Company earned an agreed-upon management fee for administrative
      services through the end of the second quarter 2006.


-19-
 *Table
          of Contents*


(B)  **Other**





Other
      transactions with related parties are as follows:





(1)
            In
                2005, the Company rented executive office space and other property
                from an
                affiliate in the United States pursuant to a lease that expires in
                2010.
                In management’s opinion, all leases with affiliated persons were on terms
                at least as favorable as these generally available from unaffiliated
                persons for comparable property. Effective January 27, 2006, the
                office
                building was sold to a third party who assumed the Company’s lease
                agreements.(2)
            Represents
                fees paid to James J. Wilson pursuant to a consulting and retirement
                agreement. At Mr. Wilson's request, payments are made to
                IGC.(3)
            Represents
                fees paid to Thomas J. Shafer, a trustee, pursuant to a consulting
                agreement.





**Related
      Party Acquisitions**





*El
      Monte*


On
      April
      30, 2004, the Company purchased a 50% limited partnership interest in El Monte
      Properties S.E. ("El Monte") from Insular Properties Limited Partnership
      ("Insular") for $1,462,500. Insular is owned by the J. Michael Wilson Family.
      Per the terms of the agreement, the Company was responsible to fund $400,000
      of
      capital improvements and lease stabilization costs, and had a priority on cash
      distributions up to its advances plus accrued interest at 8%, investment and
      a
      13% cumulative preferred return on its investment. The purchase price was based
      on a third party appraisal of $16,500,000 dated April 22, 2003. The Company's
      limited partnership investment was accounted for under the equity method of
      accounting.


In
      December 2004, a third party buyer purchased El Monte for $20,000,000 -
      $17,000,000 in cash and $3,000,000 in notes. The net cash proceeds from the
      sale
      of the real estate were distributed to the partners. As a result, the Company
      received $2,500,000 in cash and recognized $986,000 of income in 2004. El Monte
      distributed the note, $1,500,000 to the Company in January 2005. The note bears
      interest at a rate of prime plus 2% with a ceiling rate of 9% and matures on
      December 3, 2009. The note is payable in three installments, the first
      installment of $250,000 is due on December 3, 2007, the second installment
      of
      $250,000 is due on December 3, 2008 and the balance is due on December 3, 2009.
      The Company will recognize the $1,500,000 as income as the cash payments on
      the
      note are received. El Monte will distribute any remaining cash when it winds
      up
      its affairs.








**(7)**
            **SEGMENT
                INFORMATION**





ACPT
      has
      two reportable segments: U.S. operations and Puerto Rico operations. The
      Company's chief decision-makers allocate resources and evaluate the Company's
      performance based on these two segments. The U.S. segment is comprised of
      different components grouped by product type or service, to include: investments
      in rental properties, community development and property management services.
      The Puerto Rico segment entails the following components: investment in rental
      properties, community development, homebuilding and property management
      services. The accounting policies of the segments are the same as those
      described in the summary of significant accounting policies.





*Customer
      Dependence*


Residential
      land sales to Lennar within our U.S. segment were $5,024,000 for the six months
      ended June 30, 2006 which represents 22% of the U.S. segment's revenue and
      11%
      of our total year-to-date consolidated revenue. No other customers accounted
      for
      more than 10% of our consolidated revenue for the six and three months ended
      June 30, 2006.


During
      the second quarter of 2005, the Company sold commercial land for $7,448,000
      to
      Jalexis, Inc. within our Puerto Rico segment. That commercial land sale
      represented 64% of the Puerto Rico segment's revenue and 26% of our consolidated
      revenue for the six months ended June 30, 2005, and 91% of the Puerto Rico
      segment’s revenue and 44% of the consolidated revenue for the three months ended
      June 30, 2005. No other customers accounted for more than 10% of our
      consolidated revenue in the six and three months ended June 30,
      2006.


-20-
 *Table
          of Contents*







The
      following presents the segment information for the six months ended June 30,
      2006 and 2005 (in thousands):





United
            
            Puerto
            
            Inter-**Six
                Months (Unaudited)**
            
            States
            
            Rico
            
            Segment
            
            Total**2006:**Rental
                property revenues
            
            $
            15,606
            
            $
            10,532
            
            $
            -
            
            $
            26,138Rental
                property operating expenses
            
            
            7,155
            
            
            5,188
            
            
            -
            
            
            12,343Land
                sales revenue
            
            
            6,626
            
            
            -
            
            
            -
            
            
            6,626Cost
                of land sales
            
            
            3,666
            
            
            -
            
            
            -
            
            
            3,666Home
                sales revenue
            
            
            -
            
            
            11,259
            
            
            -
            
            
            11,259Cost
                of home sales
            
            
            -
            
            
            8,521
            
            
            -
            
            
            8,521Management
                and other fees
            
            
            269
            
            
            296
            
            
            -
            
            
            565General,
                administrative, selling and marketing expense
            
            
            3,396
            
            
            1,611
            
            
            -
            
            
            5,007Depreciation
                and amortization
            
            
            2,275
            
            
            1,799
            
            
            -
            
            
            4,074Operating
                income
            
            
            6,009
            
            
            4,968
            
            
            -
            
            
            10,977Interest
                income
            
            
            59
            
            
            60
            
            
            (18
            )
            
            101Equity
                in earnings from unconsolidated entities
            
            
            -
            
            
            343
            
            
            -
            
            
            343Interest
                expense
            
            
            4,048
            
            
            3,170
            
            
            (18
            )
            
            7,200Minority
                interest in consolidated entities
            
            
            312
            
            
            2,354
            
            
            -
            
            
            2,666Income
                (loss) before provision for income taxes
            
            
            1,710
            
            
            (38
            )
            
            -
            
            
            1,672Income
                tax provision (benefit)
            
            
            729
            
            
            (15
            )
            
            -
            
            
            714Net
                income (loss)
            
            
            981
            
            
            (23
            )
            
            -
            
            
            958Gross
                profit on land sales
            
            
            2,960
            
            
            -
            
            
            -
            
            
            2,960Gross
                profit (loss) on home sales
            
            
            -
            
            
            2,738
            
            
            -
            
            
            2,738Total
                assets
            
            
            208,106
            
            
            109,767
            
            
            (369
            )
            
            317,504Additions
                to long lived assets
            
            
            24,208
            
            
            908
            
            
            -
            
            
            25,116**2005:**Rental
                property revenues
            
            $
            10,828
            
            $
            -
            
            **$**
            **-**
            
            $
            10,828Rental
                property operating expenses
            
            
            4,374
            
            
            -
            
            
            **-**
            
            
            4,374Land
                sales revenue
            
            
            2,324
            
            
            10,397
            
            
            **-**
            
            
            12,721Cost
                of land sales
            
            
            1,547
            
            
            7,492
            
            
            (159
            )
            
            8,880Home
                sales revenue
            
            
            -
            
            
            -
            
            
            **-**
            
            
            -Cost
                of home sales
            
            
            -
            
            
            21
            
            
            **-**
            
            
            21Management
                and other fees
            
            
            505
            
            
            1,194
            
            
            (2
            )
            
            1,697General,
                administrative, selling and marketing expense
            
            
            3,731
            
            
            1,686
            
            
            (2
            )
            
            5,415Depreciation
                and amortization
            
            
            1,888
            
            
            62
            
            
            -
            
            
            1,950Operating
                income
            
            
            2,117
            
            
            2,330
            
            
            159
            
            
            4,606Interest
                income
            
            
            91
            
            
            371
            
            
            (382
            )
            
            80Equity
                in earnings from unconsolidated entities
            
            
            73
            
            
            555
            
            
            **-**
            
            
            628Interest
                expense
            
            
            3,544
            
            
            145
            
            
            (310
            )
            
            3,379Minority
                interest in consolidated entities
            
            
            238
            
            
            -
            
            
            **-**
            
            
            238(Loss)
                Income before (benefit) provision for income taxes
            
            
            (1,499
            )
            
            3,674
            
            
            88
            
            
            2,263Income
                tax (benefit) provision
            
            
            (548
            )
            
            1,295
            
            
            -
            
            
            747Net
                (loss) income
            
            
            (951
            )
            
            2,379
            
            
            88
            
            
            1,516Gross
                profit on land sales
            
            
            777
            
            
            2,905
            
            
            159
            
            
            3,841Gross
                profit on home sales
            
            
            -
            
            
            (21
            )
            
            -
            
            
            (21
            )Total
                assets
            
            
            146,083
            
            
            68,122
            
            
            (10,058
            )
            
            204,147Additions
                to long lived assets
            
            
            5,323
            
            
            1,290
            
            
            -
            
            
            6,613





-21-
 *Table
          of Contents*







The
      following presents the segment information for the three months ended June
      30,
      2006 and 2005 (in thousands):


United
            
            Puerto
            
            Inter-**Three
                Months (Unaudited)**
            
            States
            
            Rico
            
            Segment
            
            Total**2006:**Rental
                property revenues
            
            $
            8,059
            
            $
            5,288
            
            $
            -
            
            $
            13,347Rental
                property operating expenses
            
            
            3,725
            
            
            2,663
            
            
            -
            
            
            6,388Land
                sales revenue
            
            
            2,682
            
            
            -
            
            
            -
            
            
            2,682Cost
                of land sales
            
            
            1,440
            
            
            (10
            )
            
            -
            
            
            1,430Home
                sales revenue
            
            
            -
            
            
            7,234
            
            
            -
            
            
            7,234Cost
                of home sales
            
            
            -
            
            
            5,487
            
            
            -
            
            
            5,487Management
                and other fees
            
            
            128
            
            
            147
            
            
            -
            
            
            275General,
                administrative, selling and marketing expense
            
            
            1,605
            
            
            737
            
            
            -
            
            
            2,342Depreciation
                and amortization
            
            
            1,199
            
            
            902
            
            
            -
            
            
            2,101Operating
                income
            
            
            2,900
            
            
            2,890
            
            
            -
            
            
            5,790Interest
                income
            
            
            34
            
            
            15
            
            
            (18
            )
            
            31Equity
                in earnings from unconsolidated entities
            
            
            -
            
            
            173
            
            
            -
            
            
            173Interest
                expense
            
            
            2,115
            
            
            1,602
            
            
            (18
            )
            
            3,699Minority
                interest in consolidated entities
            
            
            304
            
            
            1,297
            
            
            -
            
            
            1,601Income
                before provision for income taxes
            
            
            515
            
            
            237
            
            
            -
            
            
            752Income
                tax provision
            
            
            228
            
            
            67
            
            
            -
            
            
            295Net
                income
            
            
            287
            
            
            170
            
            
            -
            
            
            457Gross
                profit on land sales
            
            
            1,242
            
            
            10
            
            
            -
            
            
            1,252Gross
                profit (loss) on home sales
            
            
            -
            
            
            1,747
            
            
            -
            
            
            1,747Total
                assets
            
            
            208,106
            
            
            109,767
            
            
            (369
            )
            
            317,504Additions
                to long lived assets
            
            
            20,228
            
            
            842
            
            
            -
            
            
            21,070**2005:**Rental
                property revenues
            
            $
            5,487
            
            $
            -
            
            $
            -
            
            $
            5,487Rental
                property operating expenses
            
            
            2,281
            
            
            -
            
            
            **-**
            
            
            2,281Land
                sales revenue
            
            
            1,525
            
            
            7,448
            
            
            -
            
            
            8,973Cost
                of land sales
            
            
            1,025
            
            
            5,329
            
            
            (118
            )
            
            6,236Home
                sales revenue
            
            
            -
            
            
            -
            
            
            **-**
            
            
            -Cost
                of home sales
            
            
            -
            
            
            11
            
            
            **-**
            
            
            11Management
                and other fees
            
            
            264
            
            
            707
            
            
            (1
            )
            
            970General,
                administrative, selling and marketing expense
            
            
            1,862
            
            
            850
            
            
            (1
            )
            
            2,711Depreciation
                and amortization
            
            
            911
            
            
            31
            
            
            -
            
            
            942Operating
                income
            
            
            1,197
            
            
            1,934
            
            
            118
            
            
            3,249Interest
                income
            
            
            42
            
            
            166
            
            
            (191
            )
            
            17Equity
                in earnings from unconsolidated entities
            
            
            49
            
            
            234
            
            
            **-**
            
            
            283Interest
                expense
            
            
            1,705
            
            
            79
            
            
            (161
            )
            
            1,623Minority
                interest in consolidated entities
            
            
            212
            
            
            -
            
            
            **-**
            
            
            212(Loss)
                Income before (benefit) provision for income taxes
            
            
            (630
            )
            
            2,759
            
            
            89
            
            
            2,218Income
                tax (benefit) provision
            
            
            (216
            )
            
            958
            
            
            -
            
            
            742Net
                (loss) income
            
            
            (414
            )
            
            1,801
            
            
            89
            
            
            1,476Gross
                profit on land sales
            
            
            500
            
            
            2,119
            
            
            118
            
            
            2,737Gross
                profit on home sales
            
            
            -
            
            
            (11
            )
            
            -
            
            
            (11
            )Total
                assets
            
            
            146,083
            
            
            68,122
            
            
            (10,058
            )
            
            204,147Additions
                to long lived assets
            
            
            4,114
            
            
            452
            
            
            -
            
            
            4,566








**(8)**
            **SUBSEQUENT
                EVENTS**





*Cash
      Dividend*


On
      August
      10, 2006, the Board of Trustees declared a $0.10 per share cash dividend on
      its
      common shares, payable on September 8, 2006 to shareholders of record on August
      24, 2006.


-22-
 *Table
          of Contents*





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





**FORWARD-LOOKING
      STATEMENTS**


The
      following discussion should be read in conjunction with the consolidated
      financial statements and notes thereto appearing in this report. Historical
      results set forth in Management's Discussion and Analysis of Financial Condition
      and Results of Operation and the Financial Statements should not be taken as
      indicative of our future operations.


This
      quarterly report on Form 10-Q contains forward-looking statements within the
      meaning of the Private Securities Litigation Reform Act of 1995. These include
      statements about our business outlook, market and economic conditions,
      strategies, future plans, anticipated costs and expenses, capital spending,
      and
      any other statements that are not historical. The accuracy of these statements
      is subject to a number of risks, uncertainties, and other factors that may
      cause
      our actual results, performance or achievements of the Company to differ
      materially from any future results, performance or achievements expressed or
      implied by such forward-looking statements. Those items are discussed under
      "Risk Factors" in Part II, Item 1A to this Form 10-Q.





**RESTATEMENT
      AND INTERNAL CONTROL REMEDIATION MATTERS**


During
      the preparation of the Company's 2004 tax returns in the fourth quarter 2005,
      the Company became aware that certain intercompany interest income was subject
      to U.S. withholding tax when the interest was paid and certain income from
      its
      Puerto Rico operations could be treated as income of ACPT even though it was
      not
      distributed to ACPT. To correct the errors discovered, the Company restated
      its
      financial statements for the periods covered in its Form 10-K for the fiscal
      year ended December 31, 2004 and its Forms 10-Q for the first two quarters
      of
      fiscal 2005.  The Company has evaluated the effectiveness of its internal
      control over accounting for income taxes as of June 30, 2006, and has determined
      that the accounting errors referenced above and the potential for additional
      misstatements indicate a material weakness in internal control over accounting
      for income taxes.  The Company is taking steps to ensure that the material
      weakness is remediated, including the retention of additional international
      tax
      advisors and providing our in-house tax professionals and senior financial
      management with additional training to enhance their awareness of potential
      international tax matters and enable the Company to more effectively manage
      its
      internal and third-party tax professionals.





**CRITICAL
      ACCOUNTING POLICIES**


The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States, which we refer to as 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 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.


Refer
      to
      the Company’s 2005 Annual Report on Form 10-K for a discussion of critical
      accounting policies, which include profit recognition, cost capitalization,
      investment in unconsolidated partnerships, impairment of long-lived assets,
      depreciation of real estate investments, income taxes and contingencies. For
      the
      six months ended June 30, 2006 there were no material changes to our policies,
      except as noted below.





**NEW
      ACCOUNTING PRONOUNCEMENT AND CHANGE IN BASIS OF
      PRESENTATION**


In
      June
      2005, the FASB ratified Emerging Issues Task Force Issue 04-05, "Determining
      Whether a General Partner, or the General Partners as a Group, Controls a
      Limited Partnership or Similar Entity When the Limited Partners Have Certain
      Rights," or EITF 04-05. EITF 04-05 provides an accounting model to be used
      by a
      general partner, or group of general partners, to determine whether the general
      partner(s) controls a limited partnership or similar entity in light of certain
      rights held by the limited partners. In accordance with the provisions of EITF
      04-05, beginning January 1, 2006 we have included the following partnerships
      in
      our consolidated group: Alturas Del Senorial Associates Limited Partnership,
      Bayamon Garden Associates Limited Partnership, Carolina Associates Limited
      Partnership S.E., Colinas de San Juan Associates Limited Partnership, Essex
      Apartments Associates Limited Partnership, Huntington Associates Limited
      Partnership, Jardines de Caparra Associates Limited Partnership, Monserrate
      Associates Limited Partnership, San Anton Associates, Turabo Limited Dividend
      Partnership and Valle del Sol Associates Limited Partnership. Historically,
      our
      interests in these partnerships have been recorded using the equity method
      of
      accounting.


The
      impact of consolidating the financial statements of these partnerships increased
      our operating assets and liabilities by $78.5 million and $97.7 million,
      respectively, as of January 1, 2006. The addition to assets is primarily related
      to real estate at historical cost, net of accumulated depreciation of
      approximately $53.3 million, and the addition to liabilities is primarily
      related to non-recourse debt of approximately $98.6 million held by these
      limited partnerships. The Company recorded an overall reduction to retained
      earnings of $19.1 million in a manner similar to a cumulative effect of a change
      in accounting principle. The retained earnings impact is net of a deferred
      tax
      asset recorded of $9.8 million related to temporary differences arising from
      the
      negative deficits absorbed by the Company in consolidation.


With
      respect to our accounting for minority interest in our consolidated
      partnerships, when consolidated real estate partnerships make cash distributions
      or allocate losses to partners in excess of the minority partners' basis in
      the
      property, we generally record a charge equal to the amount of such excess
      distribution, even though there is no economic effect or cost to our
      shareholders.


-23-
 *Table
          of Contents*





**RESULTS
      OF OPERATIONS**


The
      following discussion is based on the consolidated financial statements of the
      Company. It compares the results of operations of the Company for the six and
      three months ended June 30, 2006 (unaudited) with the results of operations
      of
      the Company for the six and three months ended June 30, 2005 (unaudited). As
      a
      result of implementing EITF 04-05, our year to date net income, on a
      consolidated basis, was reduced by $1,414,000 and our quarterly net income,
      on a
      consolidated basis, was reduced by $867,000. 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.





**Results
      of Operations - U.S. Operations:**


For
      the
      six months ended June 30, 2006 our U.S. segment generated $6,009,000 of
      operating income compared to $2,117,000 of operating income generated by the
      segment for the same period in 2005. For the three months ended June 30, 2006,
      our U.S. segment generated $2,900,000 of operating income compared to $1,197,000
      of operating income for the three months ended June 30, 2005. Additional
      information and analysis of the U.S. operations can be found below.





**Rental
      Property Revenues and Operating Expenses - U.S.
      Operations:**


In
      the
      prior period, 13 U.S. based apartment properties in which we hold an ownership
      interest qualified for the consolidation method of accounting. Beginning January
      1, 2006, two additional properties, Huntington Associates Limited Partnership
      (“Huntington”) and Essex Apartments Associates Limited Partnership (“Essex”),
      qualified for consolidation under the new provisions of EITF 04-05. The rules
      of
      consolidation require that we include within our financial statements the
      consolidated apartment properties' total revenue and operating expenses. The
      portion of net income attributable to the interests of the outside owners of
      these properties and any losses and distributions in excess of the minority
      owners' basis in those properties are reflected as minority interest expense.


On
      May
      23, 2005, the Company acquired the assets of Nottingham Apartments LLC, in
      Baltimore, Maryland containing 85 units for approximately $3,000,000. On April
      28, 2006, the Company completed the acquisition of two apartment properties,
      Milford Station I LLC and Milford Station II LLC, in Baltimore, Maryland
      containing a total of 250 units for approximately $14,300,000. All of the
      acquired properties are being operated as market rate properties.


As
      of
      June 30, 2006, eleven of the consolidated properties are market rent properties,
      allowing us to determine the appropriate rental rates. Even though we can
      determine the rents, a portion of our units must be leased to tenants with
      low
      to moderate income. HUD subsidizes four of the properties and the two remaining
      properties are a mix of subsidized units and market rent units. HUD dictates
      the
      rents of the subsidized units.





The
      following table presents the results of rental property revenues and operating
      expenses for the six and three months periods ended June 30, 2006 and 2005
      ($ in
      thousands):





($
                in thousands)
            
            **June
                30, 2006**
              **as****presented**
            
            **Less**
              **Effect
                of**
              **EITF
                04-05**
            
            **June
                30, 2006**
              **Comparative**
            
            **June
                30, 2005**
            
            **Comparative**
              **difference****Rental
                property revenues**Six
                months ended
            
            $
            15,606
            
            $
            3,219
            
            $
            12,387
            
            $
            10,828
            
            $
            1,559Three
                months ended
            
            $
            8,059
            
            $
            1,628
            
            $
            6,431
            
            $
            5,487
            
            $
            944**Rental
                operating expenses**Six
                months ended
            
            $
            7,155
            
            $
            1,925
            
            $
            5,230
            
            $
            4,374
            
            $
            856Three
                months ended
            
            $
            3,725
            
            $
            1,006
            
            $
            2,719
            
            $
            2,281
            
            $
            438





*Six
      months ended*


Rental
      property revenues, on a comparable basis, increased $1,559,000 to $12,387,000
      for the six months ended June 30, 2006 compared to $10,828,000 for the same
      period in 2005. The 14% increase in our rental property revenue during the
      first
      half of 2006 was primarily due to our apartment acquisitions in May 2005 and
      April 2006 which added $590,000. The increase was also attributable to an
      overall rent increase of 6% resulting in an additional $389,000 of rental
      property income, a reduction in vacancies of $233,000, a benefit of $261,000
      resulting from the completion of the amortization of acquired intangible leases
      for Owings Chase and Prescott Square in 2005, and an increase in our other
      revenues, such as corporate unit fees, cable income and recovery of bad debts
      totaling $86,000.


The
      addition of Huntington and Essex to the consolidation as a result of EITF 04-05
      increased rental property revenues by $3,219,000 for the six months ended June
      30, 2006. Although not included in the consolidated results for six months
      ended
      June 30, 2005, rental property revenues for Huntington and Essex were
      $3,217,000, which is consistent with the rental property revenue for the six
      months ended June 30, 2006.


-24-
 *Table
          of Contents*


Rental
      property operating expenses, on a comparable basis, increased $856,000 in the
      first half of 2006 to $5,230,000 compared to $4,374,000 for the first half
      of
      2005. The 20% increase in our rental property operating expenses during the
      first six months of 2006 is the result of our apartment acquisitions in May
      2005
      and April 2006 which increased our operating expenses by $323,000, additional
      operating and maintenance costs due to project wide cleaning and increased
      security which added $242,000, an increase in administrative expenses of
      $179,000, increases in utilities expenses of $84,000, and increases in insurance
      and taxes of $25,000.


The
      addition of Huntington and Essex to the consolidation as a result of EITF 04-05
      increased rental property operating expenses by $1,925,000 for the six months
      ended June 30, 2006. Although not included in the consolidated results for
      six
      months ended June 30, 2005, operating expenses for Huntington and Essex were
      $1,469,000. The $456,000 increase was related to increased repairs and
      maintenance expenses primarily related to rehabilitation of units, project
      wide
      cleaning, grounds, maintenance supplies and painting, as well as maintenance
      salaries and security.





*Three
      months ended*


Rental
      property revenues, on a comparable basis, increased $944,000 to $6,431,000
      for
      the three months ended June 30, 2006 compared to $5,487,000 for the same period
      in 2005. The 17% increase in our rental property revenue during the second
      quarter of 2006 was primarily due to our apartment acquisitions in May 2005
      and
      April 2006 which added $442,000. The increase was also attributable to an
      overall rent increase resulting in an additional $234,000 in rental property
      revenue, a reduction in vacancies of $138,000 and a benefit of $89,000 resulting
      from the completion of the amortization of acquired intangible leases for Owings
      Chase and Prescott Square in 2005.


The
      addition of Huntington and Essex to the consolidation as a result of EITF 04-05
      increased rental property revenues by $1,628,000 for the three months ended
      June
      30, 2006. Although not included in the consolidated results for the three months
      ended June 30, 2005, rental property revenues for Huntington and Essex were
      $1,616,000, which is consistent with the rental property revenues for the three
      months ended June 30, 2006.


Rental
      property operating expenses, on a comparable basis, increased $438,000 in the
      second quarter of 2006 to $2,719,000 compared to $2,281,000 for the first
      quarter of 2005. The 19% increase in our rental property operating expenses
      in
      the second quarter of 2006 is the result of our apartment acquisitions in May
      2005 and April 2006 which increased expenses by $219,000, additional operating
      and maintenance costs due to project wide cleaning and increased security which
      added $131,000 of rental property operating expenses and an increase in
      administrative expenses of $72,000.


The
      addition of Huntington and Essex to the consolidation as a result of EITF 04-05
      increased rental property operating expenses by $1,006,000 for the three months
      ended June 30, 2006. Although not included in the consolidated results for
      the
      three months ended June 30, 2005, operating expenses for Huntington and Essex
      were $841,000. The $165,000 increase was related to increased repairs and
      maintenance expenses primarily related to rehabilitation of units, project
      wide
      cleaning, grounds, maintenance supplies and painting, as well as maintenance
      salaries and security.





**Community
      Development - U.S. Operations:**


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. In March
      2004,
      the Company executed an agreement with Lennar Corporation to sell 1,950
      residential lots (1,359 single-family lots and 591 town home lots) in Fairway
      Village in St. Charles, Maryland. The agreement requires the homebuilder to
      provide $20,000,000 in letters of credit to secure the purchase of the lots
      and
      purchase 200 residential lots per year, provided that they are developed and
      available for delivery. Based on 200 lot sales per year, it is estimated that
      lot settlements will take place through 2015. Sales are closed on a lot by
      lot
      basis at the time when the builder purchases the lot. The ultimate selling
      price
      per lot sold to Lennar may exceed the amount recognized at closing since the
      final lot price is equal to 30% of the base price of the home sold on the lot.
      Additional revenue exceeding the established take down price per lot will be
      recognized upon Lennar's settlement with the respective homebuyers. Residential
      lots can vary in size and location resulting in pricing differences. Gross
      margins of residential lots are fairly consistent within any given village
      in
      St. Charles. Commercial land is typically sold by contract that allows for
      a
      study period and delayed settlement until the purchaser obtains the necessary
      permits for development. The sales prices and gross margins for commercial
      parcels vary significantly depending on the location, size, extent of
      development and ultimate use. Commercial land sales are cyclical and usually
      have a noticeable positive effect on our earnings in the period they reach
      settlement.





-25-
 *Table
          of Contents*


Community
      development land sales revenue increased $4,302,000 to $6,626,000 for the six
      months ended June 30, 2006 compared to $2,324,000 for the six months ended
      June
      30, 2005. Community development land sales revenue increased $1,157,000 to
      $2,682,000 for the three months ended June 30, 2006 compared to $1,525,000
      for
      the three months ended June 30, 2005.





*Residential
      Land Sales*


For
      the
      six months ended June 30, 2006, we delivered 26 residential lots to Lennar,
      recognizing as revenue an average price of $127,560 per lot, which includes
      the
      initial recognition of $125,000 per lot plus water and sewer fees, road fees
      and
      other off-site fees. For the six months ended June 30, 2005, we delivered 10
      residential lots to Lennar at an average selling price of $103,000 per lot
      which
      includes the initial recognition of $100,000 per lot plus water and sewer fees,
      road fees and other off-site fees. As of June 30, 2006, we had 28 developed
      residential lots ready for delivery.


For
      the
      three months ended June 30, 2006, we delivered 6 residential lots to Lennar
      at
      an average selling price of $127,560 per lot compared to 10 residential lots
      delivered to Lennar during the second quarter of 2005 at an average selling
      price of $103,000 per lot.


Prices
      for our residential lots reflect the healthy housing market and increased home
      prices in Charles County in 2005 which have remained steady in 2006. The current
      selling price of new town-homes in this area is in excess of $300,000 while
      single-family homes in Fairway Village are selling in excess of
      $450,000.


During
      the first six months of 2006 and 2005 we also recognized $1,707,000 and
      $1,248,000, respectively, of additional revenue for lots that were previously
      sold to Lennar in 2005 and 2004. During the second quarter of 2006 and 2005,
      we
      recognized $1,115,000 and $499,000, respectively, of additional revenue for
      lots
      previously sold to Lennar. This additional revenue is based on the final
      settlement price of the homes as provided by our agreement with
      Lennar.





*Commercial
      Land Sales*


For
      the
      six months ended June 30, 2006, we sold 10.46 commercial acres in St. Charles
      for $1,602,000 and during the three months ended June 30, 2006, we sold 7.81
      commercial acres in St. Charles for $802,000. For the six and three months
      ended
      June 30, 2005, we sold 0.3 commercial acres $50,000. As of June 30, 2006, our
      backlog contained 10.2 commercial acres under contract for a total of
      $3,875,000.





*St.
      Charles Active Adult Community, LLC - Land Joint Venture*


In
      September 2004, the Company transferred a parcel of land in the Glen Eagles
      Neighborhood in Fairway Village with a cost basis of $5,625,000 to a newly
      formed joint venture with Lennar in exchange for cash of $4,277,000, and a
      50%
      membership interest in the venture. Pursuant to an operating agreement, the
      joint venture will develop the property and sell it to Lennar’s homebuilding
      division. The Company serves as the managing agent for the project and receives
      a 3% management fee. The Company recorded deferred revenues equal to the cash
      it
      received at closing and off-site fees the joint venture is obligated to pay
      the
      Company until the lots are sold by the joint venture and deferred costs related
      to 50% of the cost basis of the land. We expect to recognize the profit on
      the
      portion of land transferred as lots are sold by Lennar through the amortization
      of previously deferred revenues and costs. Pursuant to the terms of the lot
      option agreement, lots began selling in the fourth quarter of 2005 and are
      expected to continue through the first quarter of 2009. The remaining 50% of
      the
      land's cost basis was recorded as our investment in the joint venture and is
      reflected within our investments in unconsolidated real estate entities. The
      joint venture did not sell any lots to Lennar’s homebuilding division during the
      six and three months ended June 30, 2006 or 2005.





*Gross
      Margin on Land Sales*


The
      gross
      margin on land sales for the six months ended June 30, 2006 was 45% compared
      to
      33% for the same period of 2005. The gross margin on land sales for the three
      months ended June 30, 2006 and 2005 were 46% and 33%, respectively. Our gross
      margins on land sales during the six and three months of 2006 and 2005 have
      been
      affected by increases in the price of steel, oil and fuel and the strong demand
      and limited supply for contractors for the development of lots in Fairway
      Village. These cost increases were more than offset by increased sales prices
      of
      homes in Fairway Village. In 2005, our period costs, and the lack of an offset
      by land sales revenue, affected our gross margin on land sales.





*Customer
      Dependence*


Residential
      land sales to Lennar within our U.S. segment amounted to $5,024,000 for the
      six
      months ended June 30, 2006 which represents 22% of the U.S. segment's revenue
      and 11% of our total consolidated revenue. Loss of all or a substantial portion
      of our land sales, as well as the joint venture's land sales, to Lennar would
      have a significant adverse effect on our financial results until such lost
      sales
      could be replaced.





-26-
 *Table
          of Contents*




**Management
      and Other Fees - U.S. Operations:**


We
      earn
      monthly management fees from all of the apartment properties that we own as
      well
      as our management of apartment properties owned by third parties and affiliates
      of J. Michael Wilson. We receive an additional fee from the properties that
      we
      manage for their use of the property management computer system that we
      purchased at the end of 2001 and a fee for vehicles purchased by the Company
      for
      use on behalf of the properties. The cost of the computer system and vehicles
      are reflected within depreciation expense. This section includes only the fees
      earned from the non-controlled properties; the fees earned from the controlled
      properties are eliminated in consolidation.




**Management
                and other fees**
              ($
                in thousands)
            
            **June
                30, 2006**
              **as
                p****resented**
            
            **Less**
              **Effect
                of**
              **EITF
                04-05**
            
            **June
                30, 2006**
              **Comparative**
            
            **June
                30, 2005**
            
            **Comparative**
              **difference**Six
                months ended
            
            $
            269
            
            $
            (202
            )
            $
            471
            
            $
            505
            
            $
            (34
            )Three
                months ended
            
            $
            128
            
            $
            (97
            )
            $
            225
            
            $
            264
            
            $
            (39
            )





Due
      to
      the required elimination of management fees in consolidation, the total
      management fees decreased for the six and three months ended June 30, 2006,
      as
      compared to six and three months ended June 30, 2005 as a result of the impact
      of EITF 04-05. On a comparative basis, management and other fees were relatively
      consistent with the prior periods.





**General,
      Administrative, Selling and Marketing Expense - U.S.
      Operations:**


The
      costs
      associated with the oversight of our U.S. operations, accounting, human
      resources, office management and technology, as well as corporate and other
      executive office costs are included in this section. ARMC employs the
      centralized office management approach for its property management services
      for
      our 15 properties located in St. Charles, Maryland, five properties located
      in
      the Baltimore, Maryland area and one property in Virginia and, to a lesser
      extent, the other properties that we manage. The apartment properties reimburse
      ARMC for certain costs incurred at the central office that are attributable
      to
      the operations of those properties. In accordance with EITF Topic 01-14,
      " *Income
      Statement Characterization of Reimbursements Received for Out of Pocket Expenses
      Incurred* ,"
      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.


General,
      administrative, selling and marketing costs incurred within our U.S. operations
      decreased $335,000 to $3,396,000 for the six months ended June 30, 2006,
      compared to $3,731,000 for the same period of 2005. The 9% decrease in general,
      administrative, selling and marketing costs is primarily attributable to a
      decrease in the costs associated with our outstanding share incentive rights,
      as
      a result of a reduction of shares outstanding due to prior period exercises
      coupled with a significant increase in the share price during the first six
      months of 2005. There was also a decrease in Trustees’ fees due to shares issued
      to the independent trustees in the prior year with no comparable issuances
      in
      the current year. The decrease was partially offset by an increase in
      accounting, auditing fees and legal fees.


General,
      administrative, selling and marketing costs incurred within our U.S. operations
      decreased $257,000 to $1,605,000 for the three months ended June 30, 2006,
      compared to $1,862,000 for the three months ended June 30, 2005. The 14%
      decrease in general, administrative, selling and marketing costs is due to
      a
      decrease in the costs associated with our outstanding share incentive rights
      and
      a decrease in Trustees’ fees. The decrease was partially offset by an increase
      in accounting, auditing fees and legal fees.





**Depreciation
      Expense - U.S. Operations:**





**Depreciation
                expense**
              ($
                in thousands)
            
            **June
                30, 2006**
              **as
                p****resented**
            
            **Less**
              **Effect
                of**
              **EITF
                04-05**
            
            **June
                30, 2006**
              **Comparative**
            
            **June
                30, 2005**
            
            **Comparative**
              **difference**Six
                months ended
            
            $
            2,275
            
            $
            252
            
            $
            2,023
            
            $
            1,888
            
            $
            135Three
                months ended
            
            $
            1,199
            
            $
            126
            
            $
            1,073
            
            $
            911
            
            $
            162





Depreciation
      expense, on a comparable basis, increased $135,000 to $2,023,000 for the first
      six months of 2006 compared to $1,888,000 for the same period in 2005 and
      increased $162,000 to $1,073,000 for the three months ended June 30, 2006
      compared to $911,000 for the three months ended June 30, 2005. The increase
      is
      primarily attributable to the acquisitions in May 2005 and April 2006. The
      increase is also attributable to additional capital improvements made to the
      properties.





**Equity
      in Earnings from Unconsolidated Entities - U.S.
      Operations:**


With
      the
      implementation of the EITF 04-05, effective January 1, 2006, the Company has
      consolidated the operational results of certain apartment partnerships which
      resulted in the overall decrease in our equity in earnings. We account for
      our
      investments in two apartment partnerships, Brookside and Lakeside, using equity
      accounting, but due to our limited ownership in these partnerships, our
      recognition of the partnerships’ earnings is immaterial.





-27-
 *Table
          of Contents*


**Interest
      Expense - U.S. Operations:**


The
      interest related to the U.S. recourse debt, exclusive of debt related to the
      apartment properties, is allocated to the qualifying land inventory based on
      its
      book balance. Any excess interest, interest on capital leases and amortization
      of certain loan fees are reflected as interest expense. This section reflects
      all interest expense incurred.





**Interest
                expense**
              ($
                in thousands)
            
            **June
                30, 2006**
              **as
                p****resented**
            
            **Less**
              **Effect
                of**
              **EITF
                04-05**
            
            **June
                30, 2006**
              **Comparative**
            
            **June
                30, 2005**
            
            **Comparative**
              **difference**Six
                months ended
            
            $
            4,048
            
            $
            633
            
            $
            3,415
            
            $
            3,544
            
            $
            (129
            )Three
                months ended
            
            $
            2,115
            
            $
            316
            
            $
            1,799
            
            $
            1,705
            
            $
            94





Interest
      expense, on a comparable basis, decreased 4% for the first six months ended
      June
      30, 2006 to $3,415,000 compared to $3,544,000 for the first six months of 2005.
      The year to date decrease is due to loan fees and the write-off of unamortized
      deferred financing fees of $210,000 in connection with the refinancing of one
      of
      our apartment property’s mortgage in March 2005. U.S. Operations interest
      expense for the six months ended June 30, 2005 also includes $310,000 of
      intersegment interest expense between our Puerto Rico operations with no
      corresponding amounts for June 30, 2006. Interest expense between operating
      segments eliminates in consolidation. These decreases were offset by the
      additional interest expense on the mortgages of the properties acquired in
      May
      2005 and April 2006.


Interest
      expense, on a comparable basis, increased $94,000 for the three months ended
      June 30, 2006 to $1,799,000 compared to $1,705,000 for the three months ended
      June 30, 2005. The increase is the result of the additional mortgage interest
      on
      the apartment properties acquired in May 2005 and April 2006.


For
      the
      six and three months ended June 30, 2006, $732,000 and $443,000 of interest
      was
      capitalized in the U.S. operations compared to $253,000 and $107,000 of interest
      capitalized during the same periods in 2005.





**Minority
      Interest in Consolidated Entities - U.S. Operations:**


Minority
      interest in consolidated entities includes the minority partner's share of
      the
      consolidated partnerships earnings and distributions to minority partners in
      excess of their basis in the consolidated partnership, even though these
      distributions have no economic effect or cost to the Company. Losses charged
      to
      the minority interest are limited to the minority partner's basis in the
      partnership. Because the minority interest holders in most of our partnerships
      have received distributions in excess of their basis, we anticipate volatility
      in minority interest expense.  Although this allows us to recognize 100
      percent of the income of the partnerships up to distributions and losses in
      excess of basis previously required to be recognized as our expense, we will
      be
      required to recognize as expense 100 percent of future distributions to minority
      partners and any subsequent losses.





Minority
      interest for the six and three months ended June 30, 2006 was $312,000 and
      $304,000 respectively compared to $238,000 and $212,000 for the six and three
      months ended June 30, 2005. The year to date and quarter to date increases
      in
      minority interest expense are due to distributions made to the limited partners
      of Huntington for which we are now required to consolidate as a result of the
      implementation of EITF 04-05.





**Provision
      for Income Taxes - U.S. Operations:**


The
      effective
      tax rates for the six and three months ended June 30, 2006, were 43% and 44%
      respectively. The effective tax rates for the six and three months ended June
      30, 2005 were (37)% and (34)%, respectively. The statutory rate is 39%. The
      effective tax rate for 2006 differs from the statutory rate due to certain
      permanent differences and state taxes. The effective rate for 2005 differs
      from
      the statutory rate primarily due to the effect of permanent items and the
      taxation of foreign source interest income with a corresponding foreign tax
      credit.





**Results
      of Operations - Puerto Rico Operations:**


For
      the
      six months ended June 30, 2006, our Puerto Rico segment generated $4,968,000
      of
      operating income compared to $2,330,000 of operating income for the same period
      in 2005. For the three months ended June 30, 2006, our Puerto Rico segment
      generated $2,890,000 of operating income compared to $1,934,000 of operating
      income for the same period in 2005. Additional information and analysis of
      the
      Puerto Rico operations can be found below.





**Rental
      Property Revenues and Operating Expenses - Puerto Rico
      Operations:**


Effective
      January 1, 2006, the Company consolidated a number of apartment partnerships
      in
      accordance with EITF 04-05. Under the new consolidation guidance, nine Puerto
      Rico based apartment partnerships, operating twelve apartment properties,
      (“Puerto Rico Apartments”) in which we hold an ownership interest now qualify
      for the consolidation method of accounting. As a result, we included within
      our
      financial statements the consolidated apartment properties’ total revenues and
      operating expenses. The portion of net income attributable to the interests
      of
      the outside owners of these properties and any income or losses and
      distributions in excess of the minority owners’ basis in those properties are
      reflected as minority interest. As of June 30, 2006, our twelve consolidated
      properties are HUD subsided projects with rental rates governed by HUD.


-28-
 *Table
          of Contents*





The
      following table presents the results of rental property revenues and operating
      expenses for the six and three-month periods ended June 30, 2006 and
      2005:





($
                in thousands)
            
            **June
                30, 2006**
              **as
                presented**
            
            **Less**
              **Effect
                of**
              **EITF
                04-05**
            
            **June
                30, 2006**
              **Comparative**
            
            **June
                30,****2005**
            
            **Comparative**
              **Difference****Rental
                property revenues**Six
                months ended
            
            $
            10,532
            
            $
            10,395
            
            $
            137
            
            $
            -
            
            $
            137Three
                months ended
            
            $
            5,288
            
            $
            5,220
            
            $
            68
            
            $
            -
            
            $
            68**Rental
                operating expenses**Six
                months ended
            
            $
            5,188
            
            $
            4,906
            
            $
            282
            
            $
            -
            
            $
            282Three
                months ended
            
            $
            2,663
            
            $
            2,517
            
            $
            146
            
            $
            -
            
            $
            146





The
      consolidation of the Puerto Rico Apartments as a result of EITF 04-05, increased
      rental property revenues by $10,395,000 and $5,220,000 for the six and three
      months ended June 30, 2006, respectively. Although not included in the
      consolidated results for the same periods in 2005, rental property revenues
      from
      the Puerto Rico Apartments were $10,278,000 and $5,157,000. The increases for
      the six and three month periods ended June 30, 2006 were related to an overall
      increase in rents partially offset by an increase in the vacancy in the Carolina
      Associates LP, SE Properties.


The
      consolidation of the Puerto Rico Apartments as a result of EITF 04-05 increased
      rental property operating expenses by $4,906,000 and $2,517,000 for the six
      and
      three months ended June 30, 2006, respectively. Although not included in the
      consolidated results for the same periods in 2005, rental property revenues
      from
      the Puerto Rico Apartments were $4,796,000 and $2,511,000. The increases for
      the
      periods ended June 30, 2006, were primarily due to increases in utilities,
      repairs and rehabilitation of units in such periods.


In
      September 2005, the Company commenced the operations of the first commercial
      rental property in the community of Parque Escorial, know as Escorial Building
      One, in which it is holds a 100% ownership interest. Escorial Building One
      is a
      three-story building with approximately 56,000 square feet of offices space
      for
      lease. The Company moved the Puerto Rico Corporate Office to the new facilities
      in the third quarter of 2005, and leases approximately 20% of the
      building.


During
      six and three months ended June 30 2006, the commercial rental property
      generated $137,000 and $68,000 of rental property income, respectively.
      Operating expenses for the commercial rental property during these periods
      were
      $282,000 and $146,000, respectively. As of June 30, 2006, 36% of the office
      space was leased. There were no commercial rental property operations during
      the
      same periods in 2005.





**Community
      Development - Puerto Rico Operations:**


Total
      land sales revenue in any one period is affected by the mix of residential
      and
      commercial sales. Residential and commercial land sales are cyclical in nature
      and usually have a noticeable positive effect impact on our earnings in the
      period in which settlement is made.


There
      were no community development land sales during the six and three months ended
      June 30, 2006. Community development land sales during the same periods in
      2005
      were $10,397,000 and $7,448,000, respectively. In April 2005, the Company sold
      7.2 commercial acres for $7,448,000 and in February 2005, the Company sold
      2.5
      commercial acres for $2,949,000 in the master- planned community of Parque
      Escorial. The gross margins on land sales for the six and three months ended
      June 30, 2005 were 29% and 30%, respectively, with no comparable gross margins
      for the same periods in 2006.


There
      were no commercial contracts for commercial sales in backlog at June 30,
      2006.





**Homebuilding
      - Puerto Rico Operations:**


The
      Company organizes corporations as needed to operate each individual homebuilding
      project. In April 2004, the Company commenced the construction of a new 160-unit
      mid-rise condominium complex known as Torres del Escorial (“Torres”). The
      condominium units were offered to buyers in the market in January 2005 and
      delivery of the units commenced in the fourth quarter of 2005. The condominium
      units are sold individually from an on site sales office to pre-qualified
      homebuyers.


During
      the six and three months of 2006, 45 and 29 units, respectively, within the
      Torres project were closed at an average selling price of approximately $250,000
      per unit for both periods, generating aggregate revenues of $11,259,000 and
      $7,234,000, respectively, with no comparable home sales revenue generated for
      the same periods in 2005. The year to date and quarter to date gross margins
      on
      home sales were 24%. As of June 30, 2006, 29 units of Torres were under contract
      at an average selling price of $257,000 per unit. Each sales contract is backed
      by a $6,000 deposit. For the six months ended June 30, 2006, the Company had
      33
      new contracts and 27 canceled contracts.  The slowdown in new contracts is
      partially attributable to a limited number of condominimums currently
      available for contract in the balance of Building Three.  At the Company's
      discretion, more units will become available for contract in the
      fourth and final building.  The Company generally waits to open up a
      new building until substantially all of the units in previous buildings are
      under contract.  -29-
 *Table
            of
            Contents*





**Management
      and Other fees - Puerto Rico Operations:**


We
      earn
      monthly fees from our management of four non-owned apartment properties and
      four
      property-owner associations operating in Parque Escorial. This section includes
      only the fees earned from the non-owned managed entities. The fees earned from
      the controlled properties are eliminated in consolidation.





**Management
                Fees**
              ($
                in thousands)
            
            **June
                30, 2006**
              **as
                presented**
            
            **Less**
              **Effect
                of**
              **EITF
                04-05**
            
            **June
                30, 2006**
              **Comparative**
            
            **June
                30, 2005**
            
            **Comparative**
              **Difference**Six
                months ended
            
            $
            296
            
            $
            (710
            )
            $
            1,006
            
            $
            1,194
            
            $
            (188
            )Three
                months ended
            
            $
            147
            
            $
            (378
            )
            $
            525
            
            $
            707
            
            $
            (182
            )





Due
      to
      the required elimination of management fees in consolidation, total management
      fees decreased for the six and three months ended June 30, 2006, as compared
      to
      the six and three months ended June 30, 2005 as a result of the impact of EITF
      04-05. On a comparative basis, the decrease in management fees primarily
      resulted from the fact that in 2005, we managed one commercial property owned
      by
      the Wilson Family which was sold to a third party in April 2005. Fees earned
      in
      2005 included a broker’s fee from the sale of the property of $139,000 and a
      refinancing fee of $96,000 was earned from Bayamon Garden.





**General,
      Administrative, Selling and Marketing Expenses - Puerto Rico
      Operations:**


The
      costs
      associated with the oversight of our operations, accounting, human resources,
      office management and technology are included within this section. The apartment
      properties reimburse IGP for certain costs incurred at IGP’s office that are
      attributable to the operations of those properties. In accordance with EITF
      01-14 the costs and reimbursement of these costs are not included within this
      section but rather, they are reflected as separate line items on the
      consolidated income statement. Due to the fact that we moved our corporate
      office to our new office building, Escorial Office Building One, rent expense
      and parking expenses are eliminated in consolidation.


General,
      administrative, selling and marketing expenses decreased 4% or $75,000 to
      $1,611,000 during the six months ended June 30, 2006, as compared to $1,686,000
      for the same period of 2005 and decreased $113,000 or 13% to $737,000 during
      the
      three months ended June 30, 2006, as compared to $850,000 for the three months
      ended June 30, 2005.


The
      4%
      year to date decrease is attributable to a reduction in office and parking
      rents, a decrease in the outstanding share incentive rights expenses recorded
      as
      a result of a reduction in our share price that we experienced during the first
      six months of 2006, as well as decreases in bad debts, consulting tax services
      and miscellaneous general expenses. These decreases were offset in part by
      an
      increase in selling and marketing expenses incurred in the Torres project,
      with
      no comparable expense during the same period in 2005 and increases in municipal
      and property taxes as well as salaries and benefits.


The
      13%
      decrease in our quarter to date general and administrative expenses is the
      result of a reduction in the charge to our share appreciation rights, a decrease
      in salaries and benefits, a reduction in office and parking rents and bad debt
      expense. The three months decreases were offset by increases in municipal and
      property taxes, other general administrative expenses and selling and marketing
      expenses.





**Depreciation
      Expense - Puerto Rico Operations:**





**Depreciation
                Expense**
              ($
                in thousands)
            
            **June
                30, 2006**
              **as
                presented**
            
            **Less**
              **Effect
                of**
              **EITF
                04-05**
            
            **June
                30, 2006**
              **Comparative**
            
            **J****une
                30, 2005**
            
            **Comparative**
              **Difference**Six
                months ended
            
            $
            1,799
            
            $
            1,610
            
            $
            189
            
            $
            62
            
            $
            127Three
                months ended
            
            $
            902
            
            $
            808
            
            $
            94
            
            $
            31
            
            $
            63





Depreciation
      expense, on a comparable basis, increased $127,000 to $189,000 for the first
      six
      months of 2006 compared to $62,000 for the same period in 2005 and increased
      $63,000 to $94,000 for the three months ended June 30, 2006 compared to $31,000
      for the three months ended June 30, 2005. The increase is attributable to the
      Escorial Building One, our commercial office building. Our year to date and
      quarter to date depreciation expense for this building was $113,000 and $58,000
      respectively.





-30-
 *Table
          of Contents*




**Equity
      in Earnings from Partnerships from Unconsolidated Entities- Puerto Rico
      Operations:**


With
      the
      implementation of the EITF 04-05, effective January 1, 2006, the Company
      consolidated the operating results of its apartment partnerships. We
      account for our limited partner investment in the commercial rental property
      owned by ELI and El Monte under the equity method of accounting. The earnings
      from our investment in commercial rental property are reflected within this
      section. The recognition of earnings depends on our investment basis in the
      property, and where the partnership is in the earnings stream.




**Equity
                in earnings**
              ($
                in thousands)
            
            **June
                30, 2006**
              **as
                presented**
            
            **Less**
              **Effect
                of**
              **EITF
                04-05**
            
            **June
                30, 2006**
              **Comparative**
            
            **June
                30, 2005**
            
            **Comparative**
              **Difference**Six
                months ended
            
            $
            343
            
            $
            (103
            )
            $
            446
            
            $
            555
            
            $
            (109
            )Three
                months ended
            
            $
            173
            
            $
            (29
            )
            $
            202
            
            $
            234
            
            $
            (32
            )





Equity
      in
      earnings from partnerships, on a comparable basis, decreased 20% to $446,000
      during the first six months of 2006, as compared to $555,000 during the same
      period of 2005 and decreased 14% to $202,000 during the second quarter of 2006
      compared to $234,000 in 2005. The six-month decrease is the result of reduced
      net income for the Puerto Rico Apartments for both periods in 2006 as compared
      to the same periods in 2005. The decreased net income was primarily related
      to
      operating, financial and depreciation expenses increasing at a greater rate
      than
      revenues.





**Interest
      Expense - Puerto Rico Operations:**


Interest
      on the homebuilding construction loan is capitalized. Interest related to the
      non-recourse debt of our investment properties, interest on capital leases,
      other than bank charges, and the amortization of certain loan fees are reflected
      on our financial statements as interest expense. This section reflects all
      interest expense incurred.





**Interest
                Expense**
              ($
                in thousands)
            
            **June
                30, 2006**
              **as
                presented**
            
            **Less**
              **Effect
                of**
              **EITF
                04-05**
            
            **June
                30, 2006**
              **Comparative**
            
            **J****une
                30, 2005**
            
            **Comparative**
              **Difference**Six
                months ended
            
            $
            3,170
            
            $
            2,830
            
            $
            340
            
            $
            145
            
            $
            195Three
                months ended
            
            $
            1,602
            
            $
            1,425
            
            $
            177
            
            $
            79
            
            $
            98





Interest
      expense, on a comparable basis, increased $195,000 for the six months of 2006
      to
      $340,000, as compared to $145,000 for the six months ended June 30, 2005 and
      increased $98,000 during the second quarter of 2006 to $177,000 as compared
      to
      $79,000 of interest expense for the same period of 2005. The year to date and
      quarter ended increases are primarily attributable to interest expense incurred
      on the office building mortgage and an intercompany loan which eliminates in
      consolidation with no comparable interest recognized in both periods in 2005.


For
      the
      six months ended June 30, 2006, $340,000 of the interest incurred was expensed
      and $496,000 was capitalized. During the same period in 2005, $145,000 was
      expensed and $700,000 was capitalized. During the three months ended June 30,
      2006, $177,000 of interest incurred was expensed and $224,000 was capitalized.
      During the same period in 2005, $79,000 was expensed and $357,000 was
      capitalized. The decreases in capitalized interest during the periods is
      primarily due to a development loan that was paid in full in April 2005, as
      well
      as the conversion of the Escorial Office One construction loan to a permanent
      loan in October 2005.





**Minority
      Interest in Consolidated Entities - Puerto Rico
      Operations:**


As
      a
      result in implementing EITF 04-05, our Puerto Rico segment now records minority
      interest expense related to the minority partners’ share of the consolidated
      apartment partnerships earnings and distributions to minority partners in excess
      of their basis in the consolidated partnership, even though these distributions
      have no economic effect or cost to the Company. Losses charged to the minority
      interest are limited to the minority partners’ basis in the partnership. Because
      the minority interest holders in most of our partnerships have received
      distributions in excess of their basis, we anticipate volatility in minority
      interest expense. Although this allows us to recognize 100 percent of the income
      of the partnerships up to distributions and losses in excess of basis previously
      required to be recognized as our expense, we will be required to expense 100
      percent of future distributions to minority partners and any subsequent
      losses.


Minority
      interest for the six and three months ended June 30, 2006, were $2,354,000
      and
      $1,297,000, respectively. The minority interest expense in both periods was
      primarily the result of distributions to the minority owners in excess of their
      basis from our consolidated apartment partnerships. During the first quarter
      of
      2006, surplus cash distributions of $1,057,000 were made from the consolidated
      apartment partnerships to the minority owners in excess of their basis. In
      April
      2006, the mortgage of one of our consolidated apartment properties was
      refinanced and as a result, the Company made a distribution of $1,100,000 to
      the
      minority partners. Also during the second quarter, $200,000 of regular
      distributions from the surplus cash from other consolidated apartment properties
      were made.





**Provision
      for Income Taxes - Puerto Rico Operations:**


The
      effective tax rates for the six and three months ended June 30, 2006 were 39%
      and 28%, respectively. The effective tax rates for the six and three months
      ended June 30, 2005 were 35% for both periods. The statutory rate is 29%.
      The effective tax rate for the six months ended June 30, 2006 was generated
      by a
      loss and corresponding tax benefit of $15,000, resulting in a variance from
      the
      statutory rate primarily due to the impact of non-taxable items, such
      as the tax-exempt income received from our commercial partnership ELI, SE,
      offset in part by deferred taxes on items for which no current benefit
      may be recognized.  The higher effective rate for 2005 relates to the
      accrual of additional taxes regarding the potential taxation of certain PR
      income at U.S. Corporate rates, however, this tax issue was subsequently
      resolved and during the fourth quarter of 2005, such tax accumulation
      was reversed.


-31-
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          of Contents*





**LIQUIDITY
      AND CAPITAL RESOURCES**





*Summary
      of Cash Flows*


As
      of
      June 30, 2006, the Company had cash and cash equivalents of $13,465,000 and
      $21,326,000 in restricted cash. The following table sets forth the changes
      in
      the Company's cash flows ($ in thousands):





Six
                  Months Ended June 30,**2006**
              
              2005Operating
                  Activities
              
              **$**
              **2,070**
              
              $
              (1,773
              )Investing
                  Activities
              
              
              **(22,840**
              **)**
              
              (1,603
              )Financing
                  Activities
              
              
              **13,079**
              
              
              5,840Net
                  (Decrease) Increase in Cash
              
              **$**
              **(7,691**
              **)**
              $
              2,464





For
      the
      six months ended June 30, 2006 operating activities provided $2,070,000 of
      cash
      flows compared to $1,773,000 of cash flows used in its operating activities
      for
      the six months ended June 30, 2005. Our operating activities include cash paid
      for additions to our community development as well as homebuilding improvements.
      For the six months ended June 30, 2006, cash paid for additions to our community
      development assets was $9,475,000 compared to $10,214,000 for the six months
      ended June 30, 2005. For the six months ended June 30, 2006, we used $4,354,000
      of cash from operating activities for our homebuilding expenditures compared
      to
      $5,976,000 for the six months ended June 30, 2005. From period to period, cash
      flow from operating activities depends primarily upon changes in our net income,
      as discussed more fully above under "Results of Operations," as well as changes
      in our receivables and payables.





During
      the six months ended June 30, 2006, the Company had $22,840,000 of net cash
      used
      in its investing activities compared to $1,603,000 of net cash used during
      the
      first six months of 2005. 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. On April 28, 2006, the Company completed
      the
      acquisition of two apartment properties in Baltimore, Maryland containing a
      total of 250 units for approximately $14,300,000. Also, during the first half
      of
      2006, we invested $7,747,000 in the construction of an apartment project in
      St.
      Charles compared to construction expenditures of $1,957,000, related to the
      construction of our office building in Parque Escorial used during the first
      half of 2005. Finally, as a result of adding 11 additional properties to our
      consolidation as of January 1, 2006, under the new provisions of EITF-04-05,
      we
      added $4,723,000 to the opening consolidated cash balance. For further
      discussion of the impact at the implementation of EITF 04-05, see Note 2 to
      our
      consolidated financial statements.





For
      the
      six months ended June 30, 2006, $13,079,000 of cash was provided by our
      financing activities compared to $5,840,000 of cash provided by financing
      activities for the same period in 2005. Cash used in or provided by financing
      activities generally relates to dividend distributions to our shareholders,
      distributions made to our minority interest partners and advances and repayment
      of debt. The increase in distributions to minority interest partners from
      $179,000 for the six months ended June 30, 2005 to $2,646,000 for the six months
      ended June 30, 2006 is primarily the result of including the 11 additional
      apartment properties as discussed above. The increase in dividends paid to
      shareholders from $1,024,000 for the first half of 2005 to $3,232,000 for the
      first half of 2006 is the result of a special dividend paid related to the
      resolution of certain tax matters. Related to changes in our debt items,
      generally, new debt incurred during a period depends upon the net effect of
      our
      acquisition, development and refinancing activity. The detailed activity within
      our recourse and non-recourse debt instruments is discussed below within the *Contractual
      Financial Obligations* section.





-32-
 *Table
          of Contents*


*Contractual
      Financial Obligations*


The
      following chart reflects our contractual financial obligations as of June 30,
      2006:





Payments
                Due By PeriodLess
                Than
            
            
            
            
            
            AfterTotal
            
            1
                Year
            
            1-3
                Years
            
            4-5
                Years
            
            5
                Years(In
                thousands)Total
                  recourse debt - communitydevelopment
                  and homebuilding
            
            $
            37,735
            
            $
            4,849
            
            $
            15,255
            
            $
            2,954
            
            $
            14,677Total
                recourse debt - investment properties
            
            
            4,615
            
            
            2,868
            
            
            213
            
            
            81
            
            
            1,453Total
                non-recourse debt - community development
            
            
            500
            
            
            -
            
            
            500
            
            
            -
            
            
            -Total
                non-recourse debt - investment properties
            
            
            235,827
            
            
            3,898
            
            
            20,874
            
            
            11,076
            
            
            199,979Capital
                lease obligations
            
            
            78
            
            
            7
            
            
            62
            
            
            9
            
            
            -Operating
                lease obligations
            
            
            1,507
            
            
            380
            
            
            1,010
            
            
            117
            
            
            -Purchase
                obligations
            
            
            53,392
            
            
            22,763
            
            
            30,454
            
            
            50
            
            
            125**Total
                contractual cash obligations**
            
            **$**
            **333,654**
            
            **$**
            **34,765**
            
            **$**
            **68,368**
            
            **$**
            **14,287**
            
            **$**
            **216,234**





Recourse
      Debt - U.S. Operations


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 as part of a residential lot sales contract
      for 1,950 lots in Fairway Village.  The Bonds were issues 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
      of 5.6%, and call for semi-annual interest payments and annual principal
      payments and mature in fifteen years. Under the terms of bond repayment
      agreements with the County, the Company is obligated to pay interest and
      principal 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 over an eighteen month
      period 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.


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, MD.  The maximum amount of the loan at any one time is
      $14,000,000. The facility includes various sub-limits on a revolving basis
      for
      amounts to finance apartment project acquisitions and land development in St.
      Charles. The terms require certain financial covenants to be calculated annually
      as of December 31, including a tangible net worth to senior debt ratio for
      ALD
      and a minimum net worth test for ACPT. Although not required to be measured,
      as
      of June 30, 2006, the Company was in compliance with these financial covenants.
      As of June 30, 2006, the Company borrowed $6,700,000 on the
      Revolver.


In
      August
      2005, the Company signed a memorandum of understanding ("MOU") with the Charles
      County Commissioners regarding a land donation that will house a planned minor
      league baseball stadium and 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 $7,000,000 of general obligation bonds to
      finance the infrastructure improvements. In March 2006, $4,000,000 of bonds
      were
      issued for this project. The funds for this project will be repaid by ACPT
      over
      a 15-year period. In addition, the County agreed to issue an additional 100
      school allocations a year to St. Charles commencing with the issuance of bonds.
      The County will also require ACPT to fund an escrow account from lot sales
      that
      will be used to repay these bonds.


In
      June
      2005, the Company signed a two year, $3,000,000 recourse note with Columbia
      Bank.  The loan carries a fixed interest rate of 6.98%, requires the
      Company to pay monthly principal and interest payments until its maturity on
      May
      15, 2007 and is collateralized by the Company's cash receipts from the two
      apartment properties acquired in October 2004 and two parcels of land in St.
      Charles acquired in the second quarter of 2005.





-33-
 *Table
          of Contents*






Recourse
      Debt - Puerto Rico Operations


Substantially
      all of the Company's homebuilding assets and 490 acres of community development
      land assets in Parque El Commandante within the Puerto Rico segment are
      encumbered by recourse debt.  The land assets in Parque Escorial are
      unencumbered as of June 30, 2006. The Company obtained a construction loan
      in
      March 2004 for its current homebuilding project, Torres del Escorial. The
      construction loan carries a $26,000,000 revolving line of credit with aggregate
      advances not to exceed $18,000,000 outstanding at any one time. The loan is
      secured by a mortgage on the property and will be repaid by the proceeds of
      the
      home sales. As of June 30, 2006, the construction loan balance to
      advance is approximately $1,666,000 and the outstanding balance due to
      the bank is $7,514,000.





Non-Recourse
      Debt - U.S. Operations


As
      more
      fully described in Note 4 to our Consolidated Financial Statements included
      in
      this Form 10-Q, the non-recourse apartment properties' debt is collateralized
      by
      apartment projects.  As of June 30, 2006, approximately 37% of this debt is
      secured by the Federal Housing Administration ("FHA") or the Maryland Housing
      Fund.


Non-recourse
      debt within our U.S. operations also includes a construction loan for a new
      apartment project in St. Charles. On August 11, 2005, Sheffield Greens
      Apartments, LLC ("Sheffield Greens"), a wholly owned subsidiary of the Company,
      obtained a non-recourse construction loan of $27,008,000 to fund the
      construction costs for a new apartment property in St. Charles' Fairway Village.
      The construction loan will mature in September 2007 and at such time will
      convert into a 40-year non-recourse permanent mortgage. The loan has a fixed
      interest rate of 5.47%, and requires interest-only payments during the
      construction phase followed by principal and interest payments until maturity.
      The loan is subject to a HUD regulatory agreement. The loan documents provide
      for covenants and events of default that are customary for mortgage loans
      insured by the Federal Housing Authority.


On
      April
      28, 2006, the Company completed the acquisition of two apartment properties
      in
      Baltimore, Maryland containing a total of 250 units for approximately
      $14,300,000. The acquisition was financed through a combination $11,836,000
      of
      non-recourse notes and borrowing $3,755,000 from the Revolver, which included
      funding improvement escrows and payment of closing costs.


In
      the
      fourth quarter of 2005, the Company purchased 22 residential acres adjacent
      to
      the Sheffield Neighborhood in St. Charles for $1,000,000. The Company paid
      $500,000 in cash and signed a two-year, non-interest bearing, non-recourse
      note,
      for $500,000 due in November 2007.





Non-Recourse
      Debt - Puerto Rico Operations


As
      more
      fully described in Note 4 to our Consolidated Financial Statements included
      in
      this Form 10-Q, the non-recourse apartment properties' debt is collateralized
      by
      the apartment projects.  As of June 30, 2006, approximately $1,000,000 of
      this debt is secured by the Federal Housing Administration ("FHA").


Non-recourse
      debt within our Puerto Rico operations also includes a permanent mortgage of
      $8,618,000 for the office building. The permanent loan facility consists of
      a
      thirty-year loan with a ten year fixed rate equal to 7.33%. At the end of the
      first ten years the interest rate will be reset, at the discretion of
      management, to a fixed rate for an additional five, seven or ten years equal
      to
      the SWAP rate plus 2.25%.


On
      April
      5, 2006, the non-recourse mortgage for one of our consolidated apartment
      properties in Puerto Rico, Colinas de San Juan Associates Limited Partnership,
      was refinanced with a ten-year, 6.59% non-recourse mortgage loan of $9,680,000.
      The proceeds from the refinancing were used for capital improvements at the
      property site and distributions to the general and limited
      partners.





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 project in St. Charles, costs associated
      with
      our homebuilding project in Puerto Rico, land development contracts for the
      County’s road projects and the development of our land in the U.S. and Puerto
      Rico. Our U.S. and Puerto Rico land development contracts, homebuilding
      contracts 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 2006, the Company plans to continue its development
      activity within the master planned communities in St. Charles and Puerto Rico
      and may commit to future contractual obligations at that time.





*Liquidity
      Requirements*


Our
      short-term liquidity requirements consist primarily of obligations under capital
      and operating leases, normal recurring operating expenses, regular debt service
      requirements (including debt service relating to additional or replacement
      debt
      as well as matured debt), non-recurring expenditures and dividends to common
      shareholders. The Company has historically met its liquidity requirements from
      cash flow generated from residential and commercial land sales, home sales,
      property management fees, and rental property revenue. However, a significant
      reduction in the demand for real estate or a decline in the prices of real
      estate could adversely impact our cash flows. Anticipated cash flow from
      operations, existing loans, refinanced or extended loans, and new financing
      are
      expected to meet our financial commitments for the year. However, there are
      no
      assurances that these funds will be generated.


We
      are
      actively seeking additions to our rental property portfolio. We are currently
      pursuing various opportunities to purchase additional apartment properties
      in
      the Baltimore, Maryland and Washington, D.C. areas. Future acquisitions may
      be
      financed through a combination of Company equity, third party equity and market
      rate mortgages. During the remaining six months of 2006, we may seek additional
      development loans and permanent mortgages for continued development and
      expansion of St. Charles and Parque Escorial and other potential rental property
      opportunities.


The
      Company will evaluate and determine on a continuing basis, depending upon market
      conditions and the outcome of events described under the section titled
      "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.





-34-
 *Table
          of Contents*


**ITEM
                3.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT
                MARKET RISK**





The
      Company is exposed to certain financial market risks, the most predominant
      being
      fluctuations in interest rates. Interest rate fluctuations are monitored by
      the
      Company's management as an integral part of the Company's overall risk
      management program, which recognizes the unpredictability of financial markets
      and seeks to reduce the potentially adverse effect on the Company's results
      of
      operations.


As
      of
      June 30, 2006, there have been no material changes in the Company's financial
      market risk since December 31, 2005 as discussed in the Company's Annual Report
      on Form
      10-K.





**ITEM
                4.**
            **CONTROLS
                AND
                PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**


In
      connection with the preparation of this Form 10-Q, as of June 30, 2006, an
      evaluation was performed under the supervision and with the participation of
      the
      Company's management, including the CEO and 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 these
      disclosure controls and procedures, because of the material weakness in internal
      control discussed below, were not effective in ensuring that the information
      required to be disclosed in our reports filed with the SEC is recorded,
      processed, summarized and reported on a timely basis.


During
      the preparation of the Company's 2004 tax returns in the fourth quarter 2005,
      the Company became aware that certain intercompany interest income was subject
      to U.S. withholding tax when the interest was paid and certain income from
      its
      Puerto Rico operations could be treated as income of ACPT even though it was
      not
      distributed to ACPT. The Company determined that neither the obligation to
      pay
      the withholding tax or exposure related to the tax status had been previously
      accrued. Accordingly, the Company announced on November 15, 2005, that the
      Company would restate financial statements for the periods covered in its Form
      10-K for the fiscal year ended December 31, 2004 and the Forms 10-Q for the
      first two quarters of fiscal 2005 to correct previously reported amounts related
      to these income tax matters.


The
      Company has determined the accounting errors referenced above indicate a
      material weakness in internal controls with respect to accounting for income
      taxes.  A material weakness in internal control is a significant
      deficiency, or combination of significant deficiencies, that results in more
      than a remote likelihood that a material misstatement of the financial
      statements would not be prevented or detected on a timely basis by the
      Company.  The Company is taking steps to ensure that the material weakness
      is remediated, including the retention of additional international tax advisors
      and providing our in-house tax professionals and senior financial management
      with additional training to enhance their awareness of potential international
      tax matters and enable the Company to more effectively
      manage its internal and third-party tax professionals .





**Management's
      Annual Report on Internal Control Over Financial Reporting and Attestation
      Report of the Independent Registered Public Accounting
      Firm**


Not
      applicable





**Changes
      in Internal Control Over Financial Reporting**


Except
      as
      discussed above, there have been no other changes during the Company's quarter
      ended June 30, 2006, in the Company's internal controls over financial reporting
      that have materially affected, or are reasonably likely to materially affect,
      the Company's internal controls over financing reporting.





**PART
                II**
            **OTHER
                INFORMATION**





**ITEM
                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.





-35-
 *Table
          of Contents*


**ITEM
                1A.**
            **RISKFACTORS**





You
      should carefully consider the risks described below. These risks are not the
      only ones that we may face. Additional risks and uncertainties that we are
      unaware of, or that we currently deem immaterial, also may become important
      factors that affect us. If any of the following risks occurs, our business,
      financial condition or results of operations could be materially and adversely
      affected.


**National,
      regional and local economic and business conditions that will, among other
      things, affect:**


*Demand
      for residential lots, commercial parcels and multifamily
      housing*


The
      real
      estate industry is sensitive to changes in economic conditions such as the
      level
      of employment, consumer confidence, availability of financing and interest
      rate
      levels as well as other market conditions such as oversupply or reduction in
      demand for commercial, industrial or multifamily properties. In addition,
      regulatory changes could possibly alter, among other things, the tax
      deductibility of interest paid on home loans. Adverse changes in any of these
      conditions generally, or in the market regions where we operate, could decrease
      demand for our residential lots, commercial parcels and homes, which could
      adversely affect our revenues and earnings.





*The
      ability of the general economy to recover timely from an economic
      downturn*


**·**  Although
      the real estate business historically has been cyclical, it has not undergone
      a
      significant economic down cycle in a number of years. Recently, the combination
      of high home prices and interest rate increases have slowed the current real
      estate market. This has led some people to assert that real estate prices may
      be
      inflated and may decline if demand continues to weaken. A decline in the prices
      for real estate could adversely affect our home and land sales revenues and
      margins.





*Availability
      and creditworthiness of tenants*


**·**  We
      are
      exposed to customer risk. Our performance depends on our ability to collect
      rent
      from our customers. General economic conditions and an increase in unemployment
      rates could cause the financial condition of a large number of our tenants
      to
      deteriorate. While no tenant in our wholly owned portfolio accounted for a
      significant amount of the annualized rental revenue of these respective
      properties at June 30, 2006, our financial position may be adversely affected
      by
      financial difficulties experienced by our tenants, including bankruptcies,
      insolvencies or general downturns in business.





*The
      availability of financing for both our customers and us*


**·**  Our
      business and earnings are also substantially dependent on the ability of our
      customers to finance the purchase of our land or homes. Limitations on the
      availability of financing or increases in the cost of such financing could
      adversely affect our operations. Our business and earnings is also substantially
      dependent on our ability to obtain financing for our development activities
      as
      well as refinancing our properties' mortgages. Increases in interest rates,
      concerns about the market or the economy, or consolidation or dissolution of
      financial institutions could increase our cost of borrowing, reduce our ability
      to obtain the funds required for our future operations, and limit our ability
      to
      refinance existing debt when it matures. Changes in competition, availability
      of
      financing, customer trends and market conditions may impact our ability to
      obtain loans to finance the development of our future communities.





**Adverse
      changes in the real estate markets, including, among other
      things:**


*Competition
      with other companies*


**·**  We
      operate in a very competitive environment, which is characterized by competition
      from a number of other land developers. Actions or changes in plans by
      competitors may negatively affect us.





*Risks
      of real estate acquisition and development (including our ability to obtain
      governmental approvals for development projects and to complete our current
      development projects on time and within budget)*


**·**  Our
      plans
      for the future development of our residential communities can be affected by
      a
      number of factors including time delays in obtaining necessary government
      permits and approvals and legal challenges to our planned
      communities.


**·**  The
      agreements we execute to acquire properties generally are subject to customary
      conditions to closing, including completion of due diligence investigations
      which may be unacceptable; acquired properties may fail to perform as we
      expected in analyzing our investments; our estimates of the costs or
      repositioning or redeveloping acquired properties may be inaccurate; the
      development opportunity may be abandoned after expending significant resources.
      In connection with our development occupancy rates and rents at the newly
      completed property may not meet the expected levels and could be insufficient
      to
      make the property profitable.


·  The
      development of our residential communities may be affected by circumstances
      beyond our control, including weather conditions, work stoppages, labor
      disputes, unforeseen engineering, environmental or geological problems and
      unanticipated shortages of or increases in the cost of materials and labor.
      Any
      of these circumstances could give rise to delays in the completion of, or
      increase the cost of, developing one or more of our residential
      communities.


·  The
      bulk
      of our operations are concentrated in Maryland and Puerto Rico, making us
      particularly vulnerable to changes in local economic conditions. In addition,
      if
      weather conditions, or a natural disaster such as a hurricane or tornado, were
      to impact those regions, our results of operations could be adversely impacted.
      Although insurance could mitigate some amount of losses from a catastrophe
      in
      those regions, it might not fully compensate us for our opportunity costs or
      our
      projected results of future operations in those regions, the market acceptance
      of which might be different after a catastrophe.





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**We
      depend on our relationship with Lennar for a significant portion of our U.S.
      segment’s residential land sales revenues.**


Residential
      land sales to Lennar within our U.S. segment amounted to $5,024,000 and
      $1,880,000 for the six and three months ended June 30, 2006 which represents
      22%
      and 17% of the U.S. segment's revenue and 11% and 8% of our total consolidated
      revenue. Loss of all or a substantial portion of our land sales, as well as
      the
      joint venture's land sales, to Lennar would have a significant adverse effect
      on
      our financial results. We cannot assure you that any lost sales could be
      replaced on comparable terms, or at all.





**Ability
      to renew HUD subsidy contracts and availability of federal funds on a timely
      basis to service these contracts**


As
      of
      June 30, 2006, we owned an equity interest in and managed for third parties
      and
      affiliates properties that benefit from governmental programs intended to
      provide housing to people with low or moderate incomes. These programs, which
      are usually administered by HUD or state housing finance agencies, typically
      provide mortgage insurance, favorable financing terms or rental assistance
      payments to the property owners. As a condition of the receipt of assistance
      under these programs, the properties must comply with various requirements,
      which typically limit rents to pre-approved amounts. If permitted rents on
      a
      property are insufficient to cover costs, our cash flow from these properties
      will be negatively impacted, and our management fees may be reduced or
      eliminated.





**Ability
      to obtain insurance at a reasonable cost**


We
      may
      experience economic harm if any damage to our properties is not covered by
      insurance. We carry insurance coverage on our properties of the type and in
      amounts that we believe is in line with coverage customarily obtained by owners
      of similar properties. We believe all of our properties are adequately insured.
      However, we cannot guarantee that the limits of our current policies will be
      sufficient in the event of a catastrophe to our properties. We may suffer losses
      that are not covered under our comprehensive liability, fire, extended coverage
      and rental loss insurance policies. If an uninsured loss or a loss in excess
      of
      insured limits should occur, we could lose capital invested in a property,
      as
      well as any future revenue from the property. We would nevertheless remain
      obligated on any mortgage indebtedness or other obligations related to the
      property.





**Environmental
      and safety requirements**


Our
      properties may contain or develop harmful mold, which could lead to liability
      for adverse health effects and costs of remediating the problem. When excessive
      moisture accumulates in buildings or on building materials, mold growth may
      occur, particularly if the moisture problem remains undiscovered or is not
      addressed over a period of time. Some molds may produce airborne toxins or
      irritants. Concern about indoor exposure to mold has been increasing as exposure
      to mold may cause a variety of adverse health effects and symptoms, including
      allergic or other reactions. As a result, the presence of significant mold
      at
      any of our properties could require us to undertake a costly remediation program
      to contain or remove the mold from the affected property. In addition, the
      presence of significant mold could expose us to liability from our tenants,
      employees of our tenants and others if property damage or health concerns arise.
      In addition, we are required to operate our properties in compliance with fire
      and safety regulations, building codes and other land use regulations, as they
      may be adopted by governmental agencies and bodies and become applicable to
      our
      properties. We may be required to make substantial capital expenditures to
      comply with those requirements and these expenditures could have a material
      adverse effect on our operating results and financial condition, as well as
      our
      ability to make distributions to shareholders.





**Ability
      to retain senior management and key employees**


We
      could
      be hurt by the loss of key management personnel. Our future success depends,
      to
      a significant degree, on the efforts of our senior management. Our operations
      could be adversely affected if key members of senior management cease to be
      active in our company.





**If
      the company were to be taxed as a corporation rather than a partnership, this
      would have adverse tax consequences for the company and its shareholders with
      respect to the income earned from our Puerto Rico
      operations.**


The
      Internal Revenue Code provides that publicly traded partnerships like ACPT
      will,
      as a general rule, be taxed as corporations for U.S. federal income tax
      purposes, subject to certain exceptions. We have relied in the past, and expect
      to continue to rely on an exception to this general rule for publicly traded
      partnerships that earn 90% or more of their gross income for every taxable
      year
      from specified types of “qualifying income,” including dividends. If we fail to
      meet this “qualifying income” exception or otherwise determine to be treated as
      a corporation for federal income tax purposes, the income we earn from our
      Puerto Rico operations would be subject to increased taxes.


We
      do not
      believe that there would be an increase in the U.S. income taxes that would
      be
      imposed on our U.S. operations if we were not to qualify as a partnership for
      U.S. income tax purposes. However, our classification as a partnership does
      permit us to reduce the overall taxes that we pay on the operations of our
      Puerto Rico subsidiary (because, in our current structure, we are taxed in
      Puerto Rico, but not in the United States, on those operations as a result
      of
      our partnership structure). If we were not to qualify as a partnership for
      U.S.
      tax purposes, the net result would be an **** incremental
      increase in our total tax expense on income for operations in Puerto Rico,
      although it is not practicable to quantify that potential impact.





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**The
      tax liabilities of our shareholders may exceed the amount of the cash
      distributions we make to them.**


A
      shareholder generally will be subject to U.S. federal income tax on his or
      her
      allocable share of our taxable income, whether or not we distribute that income
      to you. We intend to make elections and take other actions so that, to the
      extent possible, our taxable income will be allocated to individual shareholders
      in accordance with the cash received by them. In addition, we are generally
      required by our Declaration of Trust to make minimum aggregate distributions,
      in
      cash or property, each year to our shareholders equal to 45% of our net taxable
      income, reduced by the amount of Puerto Rico taxes we pay.


If
      our income
      consists largely of cash distributions from our subsidiaries, as expected,
      it is
      likely that we will have sufficient cash to distribute to shareholders. There
      can be no assurance, however, that our allocations will be respected in their
      entirety or that we will be able to make distributions in any given year that
      provide each individual shareholder with sufficient cash to meet his or her
      federal and state income tax liabilities with respect to his or her share of
      our
      income.





**A
      portion of the proceeds from the sale of our shares may be taxed as ordinary
      income.**


A
      shareholder will generally recognize gain or loss on the sales of our shares
      equal to the difference between the amount realized and the shareholder’s tax
      basis in the shares sold. Except as noted below, the gain or loss recognized
      by
      a shareholder, other than a “dealer” in our shares, on the sale or exchange of
      shares held for more than one year will generally be taxable as capital gain
      or
      loss. Capital gain recognized by an individual on the sale of shares held more
      than 12 months will generally be taxed at a maximum rate of 15%.


A
      portion
      of this gain or loss, however, may be taxable as ordinary income under Section
      751 of the Code to the extent attributable to so-called “unrealized
      receivables,” which term, for this purpose, includes stock in our Puerto Rico
      subsidiary to the extent that gain from our sale of that stock would be taxable
      to our shareholders as a dividend under Section 1248 of the Code. The amount
      of
      ordinary income attributable to “unrealized receivables” related to stock in our
      Puerto Rico subsidiary will be determined based on the amount of earnings and
      profits accumulated by our Puerto Rico subsidiary. We will provide to each
      selling shareholder, at the time we send the K-1 materials, a table showing
      the
      earnings and profits accumulated by our Puerto Rico subsidiary by year and
      the
      average number of our shares outstanding during the year, so that the
      shareholder may make a determination of the amount of earnings and profits
      allocable to him or her and the amount of ordinary income to be recognized
      on
      the sale. Although there is no definitive authority on the question, we believe
      that it is reasonable to base the allocation on the earnings and profits
      accumulated during the period that the shareholder held the shares that are
      sold
      and the percentage of our average number of shares outstanding that those shares
      represented.


The
      amount of unrealized receivables may exceed the net taxable capital gain that
      a
      shareholder would otherwise realize on the sale of our shares, and may be
      recognized even if the shareholder would realize a net taxable capital loss
      on
      the sale. Thus, a shareholder may recognize both ordinary income and capital
      loss upon a sale of our shares. Accordingly, a shareholder considering the
      sale
      of our shares is urged to consult a tax advisor concerning the portion of the
      proceeds that may be treated as ordinary income. In addition, the shareholder
      is
      required to report to us any sale of his or her shares, unless the broker
      effecting the transaction files a Form 1009-B with respect to the sale
      transaction.





**Investors
      should be aware that tax rules relating to the tax basis and holding period
      of
      interests in a partnership differ from those rules affecting corporate stock
      generally, and these special rules may impact your purchases and sales of our
      shares in separate transactions.**


The
      IRS
      has ruled that an investor who acquires interests in an entity taxed as a
      partnership, like ACPT, in separate transactions must combine those interests
      and maintain a single adjusted tax basis for those interests. Upon a sale or
      other disposition of less than all of the shares held by a shareholder, a
      portion of the shareholder’s tax basis in all of his or her shares must be
      allocated to the shares sold using an “equitable apportionment” method, which
      generally means that the tax basis allocated to the shares sold bears the same
      relation to the shareholder’s tax basis in all of the shares held as the value
      of the shares sold bears to the value of all of the Shares held by the
      shareholder immediately prior to the sale. Furthermore, Treasury Regulations
      under Section 1223 of the Code generally provide that if a shareholder has
      acquired shares at different times, the holding period of the transferred shares
      shall be divided between long-term and short-term capital gain or loss in the
      same proportions as the long-term and short-term capital gain or loss that
      the
      shareholder would realize if the all of the shareholder’s shares were
      transferred in a fully taxable transaction immediately before the actual
      transfer. The Regulations provide, however, a special rule that allows a selling
      shareholder who can identify shares transferred with an ascertainable holding
      period to elect to use the actual holding period of the shares transferred.


Thus,
      according to the ruling discussed above, a shareholder will be unable to select
      high or low basis shares to sell as would be the case with shares of entities
      treated as corporations for federal income tax purposes, but, according to
      the
      regulations, may designate specific shares for purposes of determining the
      holding period of the shares transferred. A shareholder electing to use the
      actual holding period of shares transferred must consistently use that
      identification method for all subsequent sales or exchanges of shares. A
      shareholder considering the purchase of additional shares or a sale of shares
      purchased in separate transactions is urged to consult his tax advisor as to
      the
      possible consequences of the ruling and the application of these Treasury
      Regulations.





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**ITEM
                2.**
            **UNREGISTERED
                SALESOF EQUITY SECURITIES AND USE OF
                PROCEEDS**





None.





**ITEM
                3.**
            **DEFAULTS
                UPONSENIOR
                SECURITIES**





None.





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





ACPT
      held
      its 2006 Annual Meeting of Shareholders on June 7, 2006. At the Meeting,
      shareholders elected two individuals to serve as trustees for a three year
      term
      to expire at the Annual Meeting in 2009.





The
      results of the voting were as follows:





**Trustee** **Votes
      for** **** **Votes
      Withheld**





Antonio
      Ginorio   4,375,101  3,195


Edwin
      L.
      Kelly  4,371,456  6,840





The
      terms
      of Thomas J. Shafer, J. Michael Wilson, Thomas S. Condit, and T. Michael Scott
      continued after the meeting and each continue to serve as a
      trustee.








**ITEM
                5.**
            **OTHER
                INFORMATION**





None.





**ITEM
                6.**
            **EXHIBITS**





(A)
            Exhibits10.1
            Employment
                and Consulting Agreement for Carlos R. Rodriguez31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Chairman and Chief Executive
                Officer31.2
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Financial
                Officer32.1
            Section
                1350 Certification of Chairman and Chief Executive
                Officer32.2
            Section
                1350 Certification of Chief Financial
                Officer





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          of Contents*







**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:
                August 10, 2006
            By:
            /s/
                J. Michael WilsonJ.
                Michael Wilson
              Chairman
                and Chief Executive OfficerDated:
                August 10, 2006
            By:
            /s/
                Cynthia L. HedrickCynthia
                L. Hedrick
              Chief
                Financial OfficerDated:
                August 10, 2006
            By:
            /s/
                Matthew M. MartinMatthew
                M. Martin
              Chief
                Accounting Officer







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