UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549


FORM
10-Q








(Mark
One)





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              FOR
      THE QUARTERLY PERIOD ENDEDMARCH 31, 2008,
      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, a non-accelerated filer or a smaller reporting company. 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 oSmaller reporting
company 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 May 7, 2008, there were 5,229,954 Common Shares, par value $0.01 per share,
issued and outstanding


-1-


AMERICAN
COMMUNITY PROPERTIES TRUST


FORM
10-Q


MARCH
31, 2008


TABLE OF CONTENTS




Page
      NumberPART
      I
            FINANCIAL
      INFORMATIONItem
      1.
            Consolidated Financial StatementsConsolidated Statements of Income for the Three Months
      Ended March 31, 2008 (Unaudited) and March 31, 2007
      (Unaudited)
            3Consolidated Balance Sheets as of March 31, 2008
      (Unaudited) and December 31, 2007 (Audited)
            4Consolidated Statement of Changes in
      Shareholders' Equity for the Three Months Ended March 31, 2008
      (Unaudited)
            5Consolidated Statements of Cash Flows for the Three
      Months Ended March 31, 2008 (Unaudited) and March 31, 2007
      (Unaudited)
            6Notes to Consolidated Financial Statements
      (Unaudited)
            7Item
      2.
            Management's Discussion and Analysis of Financial Condition
      and Results of Operations for the Three Months Ended March 31, 2008 and
      2007
            18Item
      4.
            Controls and Procedures
            27PART
      II
            OTHER
      INFORMATIONItem
      1.
            Legal Proceedings
            27Item
      1A.
            Risk Factors
            28Item
      2
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            28Item
      3.
            Defaults Upon Senior Securities
            28Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            28Item
      5.
            Other Information
            28Item
      6.
            Exhibits
            28Signatures
            29




-2-
 Table of Contents





AMERICAN COMMUNITY PROPERTIES TRUSTCONSOLIDATED
      STATEMENTS OF INCOMEFOR
      THE THREE MONTHS ENDED MARCH 31,(In
      thousands, except per share amounts)(Unaudited)2008
            
            
            2007RevenuesRental
      property revenues
            
            $
            15,399
            
            
            $
            14,410Community
      development-land sales
            
            
            1,046
            
            
            
            3,755Homebuilding-home
      sales
            
            
            2,244
            
            
            
            3,088Management
      and other fees, substantially all from related entities
            
            
            188
            
            
            
            263Reimbursement
      of expenses related to managed entities
            
            
            381
            
            
            
            471Total
      revenues
            
            
            19,258
            
            
            
            21,987ExpensesRental
      property operating expenses
            
            
            7,338
            
            
            
            7,356Cost
      of land sales
            
            
            903
            
            
            
            2,916Cost
      of home sales
            
            
            1,717
            
            
            
            2,286General,
      administrative, selling and marketing
            
            
            2,870
            
            
            
            2,463Depreciation
      and amortization
            
            
            2,597
            
            
            
            2,184Expenses
      reimbursed from managed entities
            
            
            381
            
            
            
            471Total
      expenses
            
            
            15,806
            
            
            
            17,676Operating
      income
            
            
            3,452
            
            
            
            4,311Other
      income (expense)Interest
      and other income
            
            
            174
            
            
            
            552Equity
      in earnings from unconsolidated entities
            
            
            168
            
            
            
            1,673Interest
      expense
            
            
            (4,232
            )
            
            
            (4,617
            )Minority
      interest in consolidated entities
            
            
            (1,159
            )
            
            
            (1,372
            )(Loss)
      income before provision for income taxes
            
            
            (1,597
            )
            
            
            547(Benefit)
      provision for income taxes
            
            
            (404
            )
            
            
            523Net
      (loss) income
            
            $
            (1,193
            )
            
            $
            24(Loss)
      earnings per shareBasic
      and Diluted
            
            $
            (0.23
            )
            
            $
            0.00Weighted
      average shares outstandingBasic
      and Diluted
            
            
            5,211
            
            
            
            5,208Cash
      dividends per share
            
            $
            -
            
            
            $
            0.10The
      accompanying notes are an integral part of these consolidated
      statements.





-3-
 Table of Contents





AMERICAN COMMUNITY PROPERTIES TRUSTCONSOLIDATED
      BALANCE SHEETS(In
      thousands, except share and per share amounts)As
      of March 31, 2008
              (Unaudited)
            
            
            As
      of December 31, 2007
              (Audited)ASSETSASSETS:Investments
      in real estate:Operating
      real estate, net of accumulated depreciation
            
            $
            162,591
            
            
            $
            164,352of
      $152,785 and $150,292, respectivelyLand
      and development costs
            
            
            90,499
            
            
            
            84,911Condominiums
      under construction
            
            
            2,808
            
            
            
            4,460Rental
      projects under construction or development
            
            
            1,194
            
            
            
            853Investments
      in real estate, net
            
            
            257,092
            
            
            
            254,576Cash
      and cash equivalents
            
            
            22,209
            
            
            
            24,912Restricted
      cash and escrow deposits
            
            
            20,198
            
            
            
            20,223Investments
      in unconsolidated real estate entities
            
            
            6,521
            
            
            
            6,528Receivable
      from bond proceeds
            
            
            4,762
            
            
            
            5,404Net
      accounts receivable
            
            
            1,886
            
            
            
            2,676Deferred
      tax assets
            
            
            34,583
            
            
            
            34,075Property
      and equipment, net of accumulated depreciation
            
            
            1,089
            
            
            
            1,045Deferred
      charges and other assets, net of amortization of$2,937
      and $2,764 respectively
            
            
            10,098
            
            
            
            11,285Total
      Assets
            
            $
            358,438
            
            
            $
            360,724LIABILITIES AND SHAREHOLDERS'
      EQUITYLIABILITIES:Non-recourse
      debt
            
            $
            279,031
            
            
            $
            279,981Recourse
      debt
            
            
            28,356
            
            
            
            25,589Accounts
      payable and accrued liabilities
            
            
            21,894
            
            
            
            24,874Deferred
      income
            
            
            3,154
            
            
            
            3,214Accrued
      current income tax liability
            
            
            14,718
            
            
            
            14,620Total
      Liabilities
            
            
            347,153
            
            
            
            348,278SHAREHOLDERS'
      EQUITY:Common
      shares, $.01 par value, 10,000,000 sharesauthorized, 5,229,954
      shares issued and outstandingas
      of March 31, 2008 and December 31, 2007
            
            
            52
            
            
            
            52Treasury
      stock, 67,709 shares at cost
            
            
            (376
            )
            
            
            (376
            )Additional
      paid-in capital
            
            
            17,409
            
            
            
            17,377Retained
      deficit
            
            
            (5,800
            )
            
            
            (4,607
            )Total
      Shareholders' Equity
            
            
            11,285
            
            
            
            12,446Total
      Liabilities and Shareholders' Equity
            
            $
            358,438
            
            
            $
            360,724The
      accompanying notes are an integral part of these consolidated
      statements.




-4-
 Table of Contents





AMERICAN COMMUNITY PROPERTIES
      TRUSTCONSOLIDATED
      STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY(In
      thousands, except share amounts)Common
      Shares
            
            
            
            
            
            AdditionalPar
            
            
            Treasury
            
            
            Paid-in
            
            
            RetainedNumber
            
            
            Value
            
            
            Stock
            
            
            Capital
            
            
            Deficit
            
            
            TotalBalance
      December 31, 2007 (Audited)
            
            
            5,229,954
            
            
            $
            52
            
            
            $
            (376
            )
            
            $
            17,377
            
            
            $
            (4,607
            )
            
            $
            12,446Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,193
            )
            
            
            (1,193
            )Amortization
      of Trustee Restricted Shares
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            32
            
            
            
            -
            
            
            
            32Balance
      March 31, 2008 (Unaudited)
            
            
            5,229,954
            
            
            $
            52
            
            
            $
            (376
            )
            
            $
            17,409
            
            
            $
            (5,800
            )
            
            $
            11,285The
      accompanying notes are an integral part of this
      consolidated statement.








-5-
 Table of Contents





AMERICAN COMMUNITY PROPERTIES TRUSTCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE THREE MONTHS ENDED MARCH 31,(In
      thousands)(Unaudited)2008
            
            
            2007Cash
      Flows from Operating ActivitiesNet
      (loss) income
            
            $
            (1,193
            )
            
            $
            24Adjustments
      to reconcile net (loss) income to net cash (used in)provided
      by operating activities:Depreciation
      and amortization
            
            
            2,597
            
            
            
            2,184Distribution
      to minority interests in excess of basis
            
            
            1,121
            
            
            
            1,648Benefit
      for deferred income taxes
            
            
            (508
            )
            
            
            (293
            )Equity
      in earnings-unconsolidated entities
            
            
            (168
            )
            
            
            (1,673
            )Distribution
      of earnings from unconsolidated entities
            
            
            168
            
            
            
            173Cost
      of land sales
            
            
            903
            
            
            
            2,916Cost
      of home sales
            
            
            1,717
            
            
            
            2,286Stock
      based compensation expense
            
            
            36
            
            
            
            (1
            )Amortization
      of deferred loan costs
            
            
            219
            
            
            
            292Changes
      in notes and accounts receivable
            
            
            790
            
            
            
            2,010Additions
      to community development assets
            
            
            (6,491
            )
            
            
            (5,661
            )Homebuilding-construction
      expenditures
            
            
            (65
            )
            
            
            (726
            )Deferred
      income-joint venture
            
            
            (60
            )
            
            
            15Changes
      in accounts payable, accrued liabilities
            
            
            (2,886
            )
            
            
            (2,280
            )Net
      cash (used in) provided by operating activities
            
            
            (3,820
            )
            
            
            914Cash
      Flows from Investing ActivitiesInvestment
      in office building and apartment construction
            
            
            (341
            )
            
            
            (56
            )Change
      in investments - unconsolidated entities
            
            
            7
            
            
            
            1,513Change
      in restricted cash
            
            
            25
            
            
            
            (1,390
            )Additions
      to rental operating properties, net
            
            
            (759
            )
            
            
            (2,997
            )Other
      assets
            
            
            847
            
            
            
            1,042Net
      cash used in investing activities
            
            
            (221
            )
            
            
            (1,888
            )Cash
      Flows from Financing ActivitiesCash
      proceeds from debt financing
            
            
            118
            
            
            
            23,116Payment
      of debt
            
            
            (956
            )
            
            
            (17,032
            )County
      Bonds proceeds, net of undisbursed funds
            
            
            3,297
            
            
            
            2,676Payments
      of distributions to minority interests
            
            
            (1,121
            )
            
            
            (1,648
            )Dividends
      paid to shareholders
            
            
            -
            
            
            
            (516
            )Net
      cash provided by financing activities
            
            
            1,338
            
            
            
            6,596Net
      (Decrease) Increase in Cash and Cash Equivalents
            
            
            (2,703
            )
            
            
            5,622Cash
      and Cash Equivalents, Beginning of Period
            
            
            24,912
            
            
            
            27,459Cash
      and Cash Equivalents, End of Period
            
            $
            22,209
            
            
            $
            33,081The
      accompanying notes are an integral part of these consolidated
      statements.







-6-
 Table of Contents


AMERICAN COMMUNITY PROPERTIES TRUST


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2008


(Unaudited)








(1)
            ORGANIZATION





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 have been passed through to ACPT’s shareholders.  A
federal tax regulation has been proposed that could eliminate the pass through
of these foreign tax credits to ACPT’s shareholders.  Comments on the
proposed regulation are currently being evaluated with the final regulation
expected to be effective for tax years beginning after the final regulation is
ultimately published in the Federal Register. ACPT’s federal taxable income
consists of certain passive income from IGP Group, a controlled foreign
corporation, distributions from IGP Group 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 American
Community Properties Trust and its majority owned subsidiaries and partnerships,
after eliminating all intercompany transactions.  All of the entities
included in the consolidated financial statements are hereinafter referred to
collectively as the "Company" or "ACPT."


The
Company consolidates entities that are not variable interest entities as defined
by Financial Accounting Standard Board (“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, 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”).  The
assets of consolidated real estate partnerships not 100% owned by the Company
are generally not available to pay creditors of the Company.


The
consolidated group includes ACPT and its four major subsidiaries, American
Rental Properties Trust, American Rental Management Company, American Land
Development U.S., Inc., and IGP Group Corp.  In addition, the
consolidated group includes the following other entities:


Alturas
      del Senorial Associates Limited Partnership
            
            LDA
      Group, LLCAmerican
      Housing Management Company
            
            Milford
      Station I, LLCAmerican
      Housing Properties L.P.
            
            Milford
      Station II, LLCBannister
      Associates Limited Partnership
            
            Monserrate
      Associates Limited PartnershipBayamon
      Garden Associates Limited Partnership
            
            New
      Forest Apartments, LLCCarolina
      Associates Limited Partnership S.E.
            
            Nottingham
      South, LLCCoachman's
      Apartments, LLC
            
            Owings
      Chase, LLCColinas
      de San Juan Associates Limited Partnership
            
            Palmer
      Apartments Associates Limited PartnershipCrossland
      Associates Limited Partnership
            
            Prescott
      Square, LLCEscorial
      Office Building I, Inc.
            
            St.
      Charles Community, LLCEssex
      Apartments Associates Limited Partnership
            
            San
      Anton Associates S.E.Fox
      Chase Apartments, LLC
            
            Sheffield
      Greens Apartments, LLCHeaden
      House Associates Limited Partnership
            
            Torres
      del Escorial, Inc.Huntington
      Associates Limited Partnership
            
            Turabo
      Limited Dividend PartnershipInterstate
      Commercial Properties, Inc.
            
            Valle
      del Sol Associates Limited PartnershipInterstate
      General Properties Limited Partnership, S.E.
            
            Village
      Lake Apartments, LLCJardines
      de Caparra Associates Limited Partnership
            
            Wakefield
      Terrace Associates Limited PartnershipLancaster
      Apartments Limited Partnership
            
            Wakefield
      Third Age Associates Limited PartnershipLand
      Development Associates S.E.


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




-7-
 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 for the year
ended December 31, 2007.  The operating results for the three months
ended March 31, 2008, and 2007, are not necessarily indicative of the results
that may be expected for the full year. Net income (loss) per share is
calculated based on weighted average shares outstanding.





Use
of Estimates


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





Sales,
Profit Recognition and Cost Capitalization


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


The costs
of developing the land are allocated to our land assets and charged to cost of
sales as the related inventories are sold using the relative sales value method
which rely on estimated costs and sales values.   In accordance
with SFAS 67 "Accounting for Costs and Initial Rental Operations of Real Estate
Projects", the costs of acquiring and developing land are allocated to these
assets and charged to cost of sales as the related inventories are sold. Within
our homebuilding operations, the costs of acquiring the land and construction of
the condominiums are allocated to these assets and charged to cost of sales as
the condominiums are sold.  The cost of sales is determined by the
percentage of completion method.  The Company considers interest
expense on all debt available for capitalization to the extent of average
qualifying assets for the period.  Interest specific to the
construction of qualifying assets, represented primarily by our recourse debt,
is first considered for capitalization.  To the extent qualifying
assets exceed debt specifically identified, a weighted average rate including
all other debt is applied.  Any excess interest is reflected as
interest expense.





Impairment
of Long-Lived Assets


ACPT carries its rental properties,
homebuilding inventory, land and development costs at the lower of cost or fair
value in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." For
real estate assets such as our rental properties which the Company plans to hold
and use, which includes property to be developed in the future, property
currently under development and real estate projects that are completed or
substantially complete, we evaluate whether the carrying amount of each of these
assets will be recovered from their undiscounted future cash flows arising from
their use and eventual disposition. If the carrying value were to be greater
than the undiscounted future cash flows, we would recognize an impairment loss
to the extent the carrying amount is not recoverable. Our estimates of the
undiscounted operating cash flows expected to be generated by each asset are
performed on an individual project basis and based on a number of assumptions
that are subject to economic and market uncertainties, including, among others,
demand for apartment units, competition, changes in market rental rates, and
costs to operate and complete each project. There have been no impairment
charges for the three months ended March 31, 2008 and 2007.


The
Company evaluates, on an individual project basis, whether the carrying value of
its substantially completed real estate projects, such as our homebuilding
inventory that are to be sold, will be recovered based on the fair value less
cost to sell. If the carrying value were to be greater than the fair value less
costs to sell, we would recognize an impairment loss to the extent the carrying
amount is not recoverable. Our estimates of the fair value less costs to sell
are based on a number of assumptions that are subject to economic and market
uncertainties, including, among others, comparable sales, demand for commercial
and residential lots and competition. The Company performed similar reviews for
land held for future development and sale considering such factors as the cash
flows associated with future development expenditures. Should this evaluation
indicate an impairment has occurred, the Company will record an impairment
charge equal to the excess of the historical cost over fair value less costs to
sell.  There have been no impairment charges for the three months
ended March 31, 2008 and 2007.





-8-
 Table of Contents


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.





Operating
Real Estate


The table
below presents the major classes of depreciable assets as of March 31, 2008 and
December 31, 2007 (in thousands):


March
      31,
            
            
            December
      31,2008
            
            
            2007(Unaudited)
            
            
            (Audited)Building
            
            $
            265,368
            
            
            $
            265,115Building
      improvements
            
            
            10,435
            
            
            
            10,414Equipment
            
            
            14,061
            
            
            
            13,603289,864
            
            
            
            289,132Less:Accumulated
      depreciation
            
            
            152,785
            
            
            
            150,292137,079
            
            
            
            138,840Land
            
            
            25,512
            
            
            
            25,512Operating
      properties, net
            
            $
            162,591
            
            
            $
            164,352








Other
Property and Equipment


In
addition, the Company owned other property and equipment of $1,089,000 and
$1,045,000, net of accumulated depreciation of $2,371,000 and $2,294,000
respectively, as of March 31, 2008 and December 31, 2007
respectively.





Depreciation


Total
depreciation expense was $2,597,000 and $2,184,000 for the three months ended
March 31, 2008 and 2007, respectively.





Impact
of Recently Issued Accounting Standards





SFAS
157 and 159


In
September 2006, the FASB issued SFAS 157, “Fair Value Measurements” and in
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities.”  SFAS 157 defines fair values as
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants in the market in
which the reporting entity transacts. SFAS 157 applies whenever other standards
require assets or liabilities to be measured at fair value and does not expand
the use of fair value in any new circumstances. SFAS 157 establishes a hierarchy
that prioritizes the information used in developing fair value estimates. The
hierarchy gives the highest priority to quoted prices in active markets and the
lowest priority to unobservable data, such as the reporting entity’s own data.
SFAS 157 requires fair value measurements to be disclosed by level within the
fair value hierarchy.  On February 12, 2008, the FASB issued FASB
Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157,”
which amends FAS No. 157 by delaying its effective date by one year for
non-financial assets and non-financial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis. Therefore, beginning on January 1, 2008, this standard applies
prospectively to new fair value measurements of financial instruments and
recurring fair value measurements of non-financial assets and non-financial
liabilities. On January 1, 2009, the standard will also apply to all other
fair value measurements.


SFAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value.  The fair value election is designed to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions.  SFAS 159 was effective for the Company beginning January
1, 2008.  The implementation of SFAS 157 and 159 did not have a
material impact on our financial statements.





-9-
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SFAS
141R


On
December 4, 2007, the FASB issued Statement No. 141R, “Business Combinations”
(“SFAS 141R”).  This statement changes the accounting for acquisitions
specifically eliminating the step acquisition model, changing the recognition of
contingent consideration from being recognized when it is probable to being
recognized at the time of acquisition, disallowing the capitalization of
transaction costs and delays when restructurings related to acquisitions can be
recognized. The standard is effective for fiscal years ending after December 15,
2008 and will only impact the accounting for acquisitions we make after its
adoption.




SFAS
160


On
December 4, 2007, the FASB issued Statement No. 160, “Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS
160”).  SFAS 160 replaces the concept of minority interest with
noncontrolling interests in subsidiaries.  Noncontrolling interests
will now be reported as a component of equity in the consolidated statement of
financial position.  Earnings attributable to noncontrolling interests
will continue to be reported as a part of consolidated earnings; however, SFAS
160 requires that income attributable to both controlling and noncontrolling
interests be presented separately on the face of the consolidated income
statement.  In addition, SFAS 160 provides that when losses
attributable to noncontrolling interests exceed the noncontrolling interest’s
basis, losses continue to be attributed to the noncontrolling interest as
opposed to being absorbed by the consolidating entity.  SFAS 160
requires retroactive adoption of the presentation and disclosure requirements
for existing minority interests. All other requirements of SFAS 160 shall be
applied prospectively.  SFAS 160 is effective for the first annual
reporting period beginning on or after December 15, 2008.  The Company
is currently evaluating the impact of the adoption of SFAS 160 on its
consolidated financial statements.  However, the provisions of SFAS
160 are directly applicable to the Company’s currently reported minority
interest in consolidated entities and, accordingly, will change the presentation
of the Company’s financial statements when implemented.





EITF
Issue No. 06-08


In
November 2006, the Emerging Issues Task force of the FASB (“EITF”) reached a
consensus on EITF Issue No. 06-08, “Applicability of a Buyer’s Continuing
Investment under FASB Statement No. 66, Accounting for Sales of Real Estate, for
Sales of Condominiums” (“EITF 06-08”).  EITF 06-08 requires
condominium sales to meet the continuing investment criterion in FAS No. 66 in
order for profit to be recognized under the percentage-of-completion
method.  EITF 06-08 was effective for the Company beginning January 1,
2008.  The implementation of EITF 06-08 did not have a material impact
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 currently consists 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


The
unconsolidated apartment partnerships as of March 31, 2008 and 2007 included
Brookside Gardens Limited Partnership (“Brookside”) and Lakeside Apartments
Limited Partnership (“Lakeside”) which collectively represent 110 rental
units.  We have determined that these two entities 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 a nominal (1% or less) economic interest in Brookside
and Lakeside but, as a general partner, we have significant influence over
operations of these entities that is disproportionate to our economic
ownership.  In accordance with SOP 78-9 and APB No. 18, these
investments are accounted for under the equity method.  The Company is
exposed to losses consisting of our net investment, loans and unpaid fees for
Brookside of $226,000 and $231,000 and for Lakeside of $164,000 and $172,000 as
of March 31, 2008 and December 31, 2007, respectively.  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.





-10-
 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 a 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 the notes
to the partners whereby the Company received a $1,500,000 note.  The
Company determined that the cost recovery method of accounting was appropriate
for this transaction and accordingly, deferred revenue recognition on this note
until cash payment was received.  In January 2007, the Company
received $1,707,000, equal to the full principal amount due plus all accrued
interest outstanding and, accordingly, recognized $1,500,000 of equity in
earnings from unconsolidated entities and $207,000 of interest
income.  The Company has no required funding obligations and
management expects to wind up El Monte’s affairs during 2008.





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.  The Company manages 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,
December 2006 and again in October 2007.  Included within these
amendments, the maximum borrowings outstanding on the facility were reduced to
$5.0 million.  For the October 2007 amendment, the development loan
was modified to provide a one-year delay in development of the project, as to
date, lot development has outpaced sales.  Per the terms of the loan,
both the Company and Lennar provided development completion guarantees.  In
the first quarter of 2008, the joint venture did not sell any
lots.  In the first quarter of 2007, the joint venture sold 14 lots to
Lennar and recognized $292,000 in deferred revenue, off-site fees and management
fees and $93,000 of deferred costs.


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 sheets.


-11-
 Table of Contents




LandDevelopmentApartment
                
                
                Commercial
                
                
                JointProperties
                
                
                Property
                
                
                Venture
                
                
                Total(in
      thousands)Summary
      Financial Position:Total
      AssetsMarch
      31, 2008
                
                $
                4,912
                
                
                $
                27,789
                
                
                $
                12,479
                
                
                $
                45,180December
      31, 2007
                
                
                4,980
                
                
                
                27,379
                
                
                
                12,397
                
                
                
                44,756Total
      Non-Recourse DebtMarch
      31, 2008
                
                
                3,163
                
                
                
                22,960
                
                
                
                4,811
                
                
                
                30,934December
      31, 2007
                
                
                3,189
                
                
                
                22,960
                
                
                
                4,722
                
                
                
                30,871Total
      Other LiabilitiesMarch
      31, 2008
                
                
                966
                
                
                
                488
                
                
                
                735
                
                
                
                2,189December
      31, 2007
                
                
                976
                
                
                
                147
                
                
                
                741
                
                
                
                1,864Total
      EquityMarch
      31, 2008
                
                
                783
                
                
                
                4,341
                
                
                
                6,933
                
                
                
                12,057December
      31, 2007
                
                
                815
                
                
                
                4,272
                
                
                
                6,934
                
                
                
                12,021Company's
      Investment, net (1)March
      31, 2008
                
                
                -
                
                
                
                4,693
                
                
                
                1,828
                
                
                
                6,521December
      31, 2007
                
                
                (1
                )
                
                
                4,701
                
                
                
                1,828
                
                
                
                6,528Summary
      of Operations:Total
      RevenueThree
      Months Ended March 31, 2008
                
                $
                208
                
                
                $
                896
                
                
                $
                -
                
                
                $
                1,104Three
      Months Ended March 31, 2007
                
                
                170
                
                
                
                909
                
                
                
                1,874
                
                
                
                2,953Net
      IncomeThree
      Months Ended March 31, 2008
                
                
                (35
                )
                
                
                456
                
                
                
                -
                
                
                
                421Three
      Months Ended March 31, 2007
                
                
                (39
                )
                
                
                468
                
                
                
                -
                
                
                
                429Company's
      recognition of equity in earningsThree
      Months Ended March 31, 2008
                
                
                -
                
                
                
                168
                
                
                
                -
                
                
                
                168Three
      Months Ended March 31, 2007 (2)
                
                
                -
                
                
                
                173
                
                
                
                -
                
                
                
                173Summary
      of Cash Flows:Cash
      flows from operating activitiesThree
      Months Ended March 31, 2008
                
                $
                5
                
                
                $
                919
                
                
                $
                (6
                )
                
                $
                918Three
      Months Ended March 31, 2007
                
                
                34
                
                
                
                862
                
                
                
                1,358
                
                
                
                2,254Company's
      share of cash flows from operating activitiesThree
      Months Ended March 31, 2008
                
                
                -
                
                
                
                416
                
                
                
                (3
                )
                
                
                413Three
      Months Ended March 31, 2007
                
                
                -
                
                
                
                390
                
                
                
                679
                
                
                
                1,069Operating
      cash distributionsThree
      Months Ended March 31, 2008
                
                
                -
                
                
                
                387
                
                
                
                -
                
                
                
                387Three
      Months Ended March 31, 2007
                
                
                -
                
                
                
                411
                
                
                
                -
                
                
                
                411Company's
      share of operating cash distributionsThree
      Months Ended March 31, 2008
                
                
                -
                
                
                
                176
                
                
                
                -
                
                
                
                176Three
      Months Ended March 31, 2007
                
                
                -
                
                
                
                186
                
                
                
                -
                
                
                
                186


Notes:


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


unconsolidated
real estate entities.


(2)  Excludes
collection of the El Monte note receivable, resulting in recognition of $1.5
million as Equity in Earnings, see Note 6.


-12-
 Table of Contents





(4)
            DEBT





The Company's outstanding debt is
collateralized primarily by land, land improvements, receivables, investment
properties, investments in partnerships, and rental properties.  The
following table summarizes the indebtedness of the Company at March 31, 2008 and
December 31, 2007 (in thousands):





Maturity
            
            
            Interest
            
            
            Outstanding
      as ofDates
            
            
            Rates
            
            
            March
      31,
            
            
            December
      31,From/To
            
            
            From/To
            
            
            2008
            
            
            2007(Unaudited)
            
            
            (Audited)Recourse
      DebtCommunity
      Development (a), ( b), (c)
            
            08-31-08/03-01-23
            
            
            4%/8%
            
            
            $
            28,145
            
            
            $
            25,490General
      obligations (d)
            
            06-01-09/01-01-12
            
            
            Non-interestbearing/8.10%
            
            
            
            211
            
            
            
            99Total
      Recourse Debt
            
            
            
            
            
            
            
            
            
            
            28,356
            
            
            
            25,589Non-Recourse
      DebtInvestment
      Properties (e)
            
            04-30-09/08-01-47
            
            
            4.95%/10%
            
            
            
            279,031
            
            
            
            279,981Total
      debt
            
            
            
            
            
            
            
            
            
            $
            307,387
            
            
            $
            305,570





a)
            As
      of March 31, 2008, $26,420,000 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.


b)
            On
      April 14, 2006, the Company closed a three year $14,000,000 revolving
      acquisition and development 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 March 31, 2008 no amounts were outstanding
      on the Revolver.


c)
            On
      September 1, 2006, LDA secured a revolving line of credit facility of
      $15,000,000 to be utilized as follows: (i) to repay its outstanding loan
      of $800,000; and (ii) to fund development costs of a project in which the
      Company plans to develop a planned community in Canovanas, Puerto Rico, to
      fund acquisitions and/or investments mainly in estate ventures, to fund
      transaction costs and expenses, to fund future payments of interest under
      the line of credit and to fund the working capital needs of the
      Company.  The line of credit bears interest at a fluctuating
      rate equivalent to the LIBOR Rate plus 200 basis points (6.70% at March
      31, 2008) and matures on August 31, 2008.  The outstanding
      balance of this facility on March 31, 2008, was
  $1,725,000.


d)
            The
      general recourse debt outstanding as of March 31, 2008, is made up of
      various capital leases outstanding within our U.S. and Puerto Rico
      operations, as well as installment loans for vehicles and other
      miscellaneous equipment.


e)
            The
      non-recourse debt related to the investment properties is collateralized
      by the multifamily rental properties and the office building in Parque
      Escorial.  As of March 31, 2008, approximately $74,441,000 of
      this debt is secured by the Federal Housing Administration ("FHA") or the
      Maryland Housing Fund.





The Company’s loans contain various
financial, cross collateral, cross default, technical and restrictive
provisions.  As of
March 31, 2008, the Company was in technical default of the minimum debt service
coverage ratios and minimum fixed charge coverage for the Escorial Office
Building I, Inc. (“EOB”) non-recourse mortgage of $8,469,000.  The
Company received a default waiver from the lender related to the first quarter
2008.  To prevent any further default, IGP provided a fixed charge and
debt service guaranty, whereby IGP will contribute capital in cash in such
amounts required to cause EOB to comply with the financial
covenants.  The guarantee will remain in full force until EOB has
complied with the financial covenants for four consecutive
quarters. The Company was in compliance with all other
financial covenants and the other provisions of its loan
agreements.





-13-
 Table of Contents


(5)
            COMMITMENTS
      AND CONTINGENT LIABILITIES





Financial
Commitments


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


In August
2005, the Company signed a memorandum of understanding ("MOU") with the Charles
County Commissioners regarding a land donation that is now the site of a minor
league baseball stadium and entertainment complex which opened in May of
2008.  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 general obligation bonds to finance the infrastructure
improvements.  In March 2006, $4,000,000 of bonds were issued for this
project, with an additional $3,000,000 issued in both March 2007 and March
2008.  The funds provided by the County 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.


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


As of March 31, 2008,
ACPT is guarantor of $24,352,000 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
Agreement and Arrangement


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 September 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 March 31, 2008, ACPT has
guaranteed $26,420,000 of outstanding debt owed by its
subsidiaries.  IGP has guaranteed $1,725,000 of its subsidiaries'
outstanding debt.  The guarantees will remain in effect until the debt
service is fully repaid by the respective borrowing subsidiary.  The
terms of the debt service guarantees outstanding range from one to nine
years.  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,
2007.


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.





(6)
            RELATED
      PARTY TRANSACTIONS





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


-14-
 Table of Contents





CONSOLIDATED
      STATEMENT OF INCOME:
            
            
            
            Three
      Months EndedMarch
      31,2008
            
            
            2007Management and Other FeesUnconsolidated
      subsidiaries with third party partners
            
            (A)
            
            $
            10
            
            
            $
            10Affiliates
      of J. Michael Wilson, CEO and Chairman
            
            
            
            
            -
            
            
            
            43$
            10
            
            
            $
            53Rental Property Revenues
            
            (B)
            
            $
            15
            
            
            $
            14Interest and Other IncomeUnconsolidated
      real estate entities with third party partners
            
            
            
            $
            2
            
            
            $
            2General and Administrative
      ExpenseReserve
      additions (reductions) and other write-offs-Unconsolidated
      real estate entities with third party partners
            
            (A)
            
            $
            (22
            )
            
            $
            2Reimbursement
      to IBC for ACPT's share of J. Michael Wilson's salary
            
            
            
            
            104
            
            
            
            98Reimbursement
      of administrative costs-Affiliates
      of J. Michael Wilson, CEO and Chairman
            
            
            
            
            (5
            )
            
            
            (6
            )Consulting
      FeesJames
      J. Wilson, IGC Chairman and Director
            
            (C1)
            
            
            50
            
            
            
            50Thomas
      J. Shafer, Trustee
            
            (C2)
            
            
            15
            
            
            
            15$
            142
            
            
            $
            159BALANCE
      SHEET:
            
            
            
            Balance
            
            
            BalanceMarch
      31,
            
            
            December
      31,2008
            
            
            2007Other AssetsReceivables
      - All unsecured and due on demandUnconsolidated
      Subsidiaries
            
            
            
            $
            9
            
            
            $
            -Affiliate
      of J. Michael Wilson, CEO and Chairman
            
            
            
            
            9
            
            
            
            5Total
            
            
            
            $
            18
            
            
            $
            5Other LiabilitiesPayable
      due to Affiliate of J. Michael Wilson, CEO and Chairman
            
            
            
            $
            74
            
            
            $
            -





(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.


At the
end of February 2007, G.L. Limited Partnership, which was owned by affiliates of
J. Michael Wilson, was sold to a third party.  Accordingly, we are no
longer the management agent for this property effective March 1,
2007.  Management fees generated by this property accounted for less
than 1% of the Company’s total revenue.





-15-
 Table of Contents


(B)                      Rental
Property Revenue


On
September 1, 2006, the Company, through one of its Puerto Rican subsidiaries,
Escorial Office Building I, Inc. (“Landlord”), executed a lease with Caribe
Waste Technologies, Inc. (“CWT”), a company owned by the J. Michael Wilson
Family.  The lease provides for 1,842 square feet of office space to
be leased by CWT for five years at $19.00 per rentable square
foot.  The


company
provided CWT with an allowance of $9,000 in tenant improvements which are being
amortized over the life of the lease.  In addition, CWT shall have the
right to terminate this lease at any time after one year, provided it gives
Landlord written notice six (6) months prior to termination.  On
February 25, 2008, CWT provided six months written notice of lease termination,
effective August 24, 2008.   The lease agreement is
unconditionally guaranteed by Interstate Business Corporation (“IBC”), a company
owned by the J. Michael Wilson Family.





(C)           Other


Other transactions with related parties
are as follows:





1)
            Represents
      fees paid to James J. Wilson pursuant to a consulting and retirement
      agreement.  At Mr. Wilson's request, payments are made to
      IGC.


2)
            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 two notes of
$1,500,000 each that bear an interest rate of prime plus 2%, with a ceiling of
9%, and mature on December 3, 2009.  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 a $1,500,000 note to the Company
in January 2005.  On January 24, 2007, the Company received $1,707,000
as payment in full of the principal balance and all accrued interest related to
the El Monte note receivable.  Accordingly, in 2007 the Company
recorded $1,500,000 as equity in earnings and $207,000 as interest
income.





(7)
            INCOME
      TAXES





The total
amount of unrecognized tax benefits as of March 31, 2008, was
$14,718,000.  Included in the balance at March 31, 2008, were $36,000
of tax positions that, if recognized, would affect the effective tax
rate.  A reconciliation of the beginning and ending amount of
unrecognized tax benefit (in thousands) is as follows:





Unrecognized
      tax benefit at beginning of period (December 31, 2007)
            
            $
            14,869Change
      attributable to tax positions taken during a prior period
            
            
            (151
            )Change
      attributable to tax positions taken during the current
    period
            
            
            -Decrease
      attributable to settlements with taxing authorities
            
            
            -Decrease
      attributable to lapse of statute of limitations
            
            
            -Unrecognized
      tax benefit at end of period (March 31, 2008)
            
            $
            14,718





In
accordance with our accounting policy, we present accrued interest related to
uncertain tax positions as a component of interest expense and accrued penalties
as a component of income tax expense on the Consolidated Statement of
Income.  Our Consolidated Statements of Income for the quarters ended
March 31, 2008 and 2007, included interest expense of $335,000 and $296,000,
respectively and penalties of $24,000 and $58,000, respectively.  Our
Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007, included
accrued interest of $3,149,000 and $2,814,000, respectively and accrued
penalties of $1,109,000 and $1,085,000, respectively.


The
Company currently does not have any tax returns under audit by the United States
Internal Revenue Service or the Puerto Rico Treasury
Department.  However, the tax returns filed in the Unites States for
the years ended December 31, 2004 through 2007 remain subject to
examination.  For Puerto Rico, the tax returns for the years ended
December 31, 2003 through 2007 remain subject to examination.  Within
the next twelve months, the Company does not anticipate any payments related to
settlement of any tax examinations.  There is a reasonable possibility
within the next twelve months the amount of unrecognized tax benefits will
decrease by $564,000 when the related statutes of limitations expire and certain
payments are recognized as taxable income.





-16-
 Table of Contents


(8)
            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 $807,000 for the three months
ended March 31, 2008, which represents 7% of the U.S. segment's revenue and 4%
of our total year-to-date consolidated revenue.  No customers
accounted for more than 10% of our consolidated revenue for the three months
ended March 31, 2008.


Residential
land sales to Lennar within our U.S. segment were $1,219,000 for the three
months ended March 31, 2007 which represents 10% of the U.S. segment's revenue
and 6% of our total year-to-date consolidated revenue.  No customers
accounted for more than 10% of our consolidated revenue for the three months
ended March 31, 2007.





The following
presents the segment information for the three months ended March 31, 2008 and
2007 (in thousands):


United
            
            
            Puerto
            
            
            Inter-States
            
            
            Rico
            
            
            Segment
            
            
            TotalThree
      Months Ended March 31, 2008 (Unaudited):
            
            ($)
            
            
            ($)
            
            
            ($)
            
            
            ($)Rental
      property revenues
            
            
            9,799
            
            
            
            5,600
            
            
            
            -
            
            
            
            15,399Rental
      property operating expenses
            
            
            4,574
            
            
            
            2,770
            
            
            
            (6
            )
            
            
            7,338Land
      sales revenue
            
            
            1,046
            
            
            
            -
            
            
            
            -
            
            
            
            1,046Cost
      of land sales
            
            
            903
            
            
            
            -
            
            
            
            -
            
            
            
            903Home
      sales revenue
            
            
            -
            
            
            
            2,244
            
            
            
            -
            
            
            
            2,244Cost
      of home sales
            
            
            -
            
            
            
            1,717
            
            
            
            -
            
            
            
            1,717Management
      and other fees
            
            
            38
            
            
            
            157
            
            
            
            (7
            )
            
            
            188General,
      administrative, selling and marketing expense
            
            
            2,203
            
            
            
            668
            
            
            
            (1
            )
            
            
            2,870Depreciation
      and amortization
            
            
            1,662
            
            
            
            935
            
            
            
            -
            
            
            
            2,597Operating
      income
            
            
            1,541
            
            
            
            1,911
            
            
            
            -
            
            
            
            3,452Interest
      income
            
            
            123
            
            
            
            64
            
            
            
            (14
            )
            
            
            173Equity
      in earnings from unconsolidated entities
            
            
            -
            
            
            
            168
            
            
            
            -
            
            
            
            168Interest
      expense
            
            
            2,763
            
            
            
            1,483
            
            
            
            (14
            )
            
            
            4,232Minority
      interest in consolidated entities
            
            
            4
            
            
            
            1,155
            
            
            
            -
            
            
            
            1,159Loss
      before benefit for income taxes
            
            
            (1,103
            )
            
            
            (494
            )
            
            
            -
            
            
            
            (1,597
            )Income
      tax benefit
            
            
            (239
            )
            
            
            (165
            )
            
            
            -
            
            
            
            (404
            )Net
      loss
            
            
            (864
            )
            
            
            (329
            )
            
            
            -
            
            
            
            (1,193
            )Gross
      profit on land sale
            
            
            143
            
            
            
            -
            
            
            
            -
            
            
            
            143Gross
      profit on home sales
            
            
            -
            
            
            
            527
            
            
            
            -
            
            
            
            527Total
      assets
            
            
            260,086
            
            
            
            98,734
            
            
            
            (382
            )
            
            
            358,438Additions
      to long lived assets
            
            
            848
            
            
            
            252
            
            
            
            -
            
            
            
            1,100




-17-
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United
            
            
            Puerto
            
            
            Inter-States
            
            
            Rico
            
            
            Segment
            
            
            TotalThree
      Months Ended March 31, 2007 (Unaudited):
            
            ($)
            
            
            ($)
            
            
            ($)
            
            
            ($)Rental
      property revenues
            
            
            8,905
            
            
            
            5,505
            
            
            
            -
            
            
            
            14,410Rental
      property operating expenses
            
            
            4,625
            
            
            
            2,731
            
            
            
            -
            
            
            
            7,356Land
      sales revenue
            
            
            3,755
            
            
            
            -
            
            
            
            -
            
            
            
            3,755Cost
      of land sales
            
            
            2,916
            
            
            
            -
            
            
            
            -
            
            
            
            2,916Home
      sales revenue
            
            
            -
            
            
            
            3,088
            
            
            
            -
            
            
            
            3,088Cost
      of home sales
            
            
            -
            
            
            
            2,286
            
            
            
            -
            
            
            
            2,286Management
      and other fees
            
            
            110
            
            
            
            153
            
            
            
            -
            
            
            
            263General,
      administrative, selling and marketing expense
            
            
            1,747
            
            
            
            716
            
            
            
            -
            
            
            
            2,463Depreciation
      and amortization
            
            
            1,271
            
            
            
            913
            
            
            
            -
            
            
            
            2,184Operating
      income
            
            
            2,211
            
            
            
            2,100
            
            
            
            -
            
            
            
            4,311Interest
      income
            
            
            297
            
            
            
            215
            
            
            
            (30
            )
            
            
            482Equity
      in earnings from unconsolidated entities
            
            
            -
            
            
            
            1,673
            
            
            
            -
            
            
            
            1,673Interest
      expense
            
            
            3,066
            
            
            
            1,581
            
            
            
            (30
            )
            
            
            4,617Minority
      interest in consolidated entities
            
            
            -
            
            
            
            1,372
            
            
            
            -
            
            
            
            1,372(Loss)
      income before provision for income taxes
            
            
            (557
            )
            
            
            1,104
            
            
            
            -
            
            
            
            547Income
      tax provision
            
            
            (75
            )
            
            
            598
            
            
            
            -
            
            
            
            523Net
      (loss) income
            
            
            (482
            )
            
            
            506
            
            
            
            -
            
            
            
            24Gross
      profit on land sale
            
            
            839
            
            
            
            -
            
            
            
            -
            
            
            
            839Gross
      profit on home sales
            
            
            -
            
            
            
            802
            
            
            
            -
            
            
            
            802Total
      assets
            
            
            257,772
            
            
            
            106,424
            
            
            
            (1,595
            )
            
            
            362,601Additions
      to long lived assets
            
            
            2,826
            
            
            
            227
            
            
            
            -
            
            
            
            3,053








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 I, Item 1A to the Form 10-K for the year ended December 31,
2007.





-18-
 Table of Contents


EXECUTIVE
SUMMARY OF RESULTS


Consolidated
operating revenues are derived primarily from rental revenue, community
development land sales and home sales.  For the three months ended
March 31, 2008, our consolidated rental revenues increased $989,000 or 7% as
compared to the same period of 2007.  The increase was primarily
attributable to construction of new units in our United States segment as well
as overall rent increases at comparable properties in both the United States and
Puerto Rico segments.


Community
development land sales for the three months ended March 31, 2008 decreased
$2,709,000 or 72% as compared to the same period of 2007.  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.  The overall
decrease was primarily the result of a decrease in commercial settlements for
the first quarter 2008 as compared to the first quarter of 2007.  For
the three months ended March 31, 2008, we sold 0.99 commercial acres in St.
Charles for $184,000 compared to 5.78 commercial acres for $2,536,000 for the
three months ended March 31, 2007.


Home
sales for the three months ended March 31, 2008 decreased $844,000 or 27% as
compared to the same period of 2007.  Home sales, currently sourced
from the Puerto Rico segment, are impacted by the local real estate
market.  The Company settled nine units during the first quarter of
2008 as compared to 12 units closed during the same period of
2007.  As of March 31, 2008, 12 completed units remain within
inventory, of which we currently have two units under contract.  At
the current sales pace, the Company anticipates that the remaining units will
sell out during 2008.  We believe that our current pricing remains
competitive.


On a
consolidated basis, the Company reported a net loss of $1,193,000 for the three
months ended March 31, 2008.  The net loss includes a $404,000 benefit
for income taxes, resulting in a consolidated effective tax rate of
approximately 25%.  The consolidated effective rate was impacted by
accrued penalties on uncertain tax positions and certain nondeductible permanent
items.  For further discussion of these items, see the provision for
income taxes discussion within the United States and Puerto Rico segment
discussion.


Please
refer to the Results of Operations section of Management’s Discussion and
Analysis for additional details surrounding the results of each of our operating
segments.





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 2007 Annual Report on Form 10-K for a discussion of critical
accounting policies, which include sales, profit recognition and cost
capitalization, investment in unconsolidated real estate entities, impairment of
long-lived assets, depreciation of investments in real estate, income taxes and
contingencies.  For the three months ended March 31, 2008, there were
no material changes to our policies.





RESULTS
OF OPERATIONS


The
following discussion is based on the consolidated financial statements of the
Company. It compares the results of operations of the Company for the three
months ended March 31, 2008 (unaudited), with the results of operations of the
Company for the three months ended March 31, 2007
(unaudited).  Historically, the Company’s financial results have been
significantly affected by the cyclical nature of the real estate
industry.  Accordingly, the Company’s historical financial statements
may not be indicative of future results. This discussion should be read in
conjunction with the accompanying consolidated financial statements and notes
included elsewhere in this report and within our Annual Report on Form 10-K for
the year ended December 31, 2007.





Results
of Operations - U.S. Operations:


For the
three months ended March 31, 2008, our U.S. segment generated $1,541,000 of
operating income compared to $2,211,000 of operating income generated by the
segment for the same period in 2007. Additional information and analysis of the
U.S. operations can be found below.





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


As of
March 31, 2008, nineteen U.S. based apartment properties, representing 3,256
units, in which we hold an ownership interest qualified for the consolidation
method of accounting.  The rules of consolidation require that we
include within our financial statements the consolidated apartment properties'
total revenue and operating expenses.


As of
March 31, 2008, thirteen of the consolidated properties were market rent
properties, representing 1,856 units, allowing us to determine the appropriate
rental rates.  Even though we can determine the rents, 54 of our units
at one of our market rent properties must be leased to tenants with low to
moderate income. HUD subsidizes three of the properties representing 836 units
and the three remaining properties are a mix of 137 subsidized units and 427
market rent units. HUD dictates the rents of the subsidized units.





Apartment
Construction and Acquisitions


On
January 31, 2007, we completed our newest addition to our rental apartment
properties in St. Charles' Fairway Village, the Sheffield Greens Apartments
(“Sheffield Greens”).  The 252-unit apartment project consists of
nine, 3-story buildings and offers 1 and 2 bedroom units ranging in size from
800 to 1,400 square feet.  Construction activities were started in the
fourth quarter of 2005 and leasing efforts began in the first quarter of 2006.
The first five buildings became available for occupancy during the fourth
quarter of 2006 and the final four buildings were ready for occupancy in January
2007.  Leasing efforts have been successful and the property was
approximately 92% occupied as of March 31, 2008.





-19-
 Table of Contents


Three
months ended


For the
three months ended March 31, 2008, rental property revenues increased $894,000
or 10% to $9,799,000 compared to $8,905,000 for the three months ended March 31,
2007.  The increase in rental revenues was primarily the result of
additional revenues for Sheffield Greens Apartments which accounted for
approximately $596,000 of the difference.  The increase was also
attributable to an overall 4% increase in rents between
periods.  These rental revenue increases were offset in part by an
increase in the vacancy rate at certain multifamily apartment properties in St.
Charles and Baltimore.  Management has implemented incentives to
address the vacancy issues at these properties.


Rental
property operating expenses decreased $51,000 or 1% for the first quarter of
2008 to $4,574,000 compared to $4,625,000 for the first quarter of
2007.  The overall decrease in rental property operating expenses was
the result of cost cutting measures implemented at the end of 2007 and into
2008.  The cost cutting measures resulted in decreased operating
expenses for comparable properties of $197,000 or 5%.  The decreases
were experienced primarily within security, snow removal, rehabilitation
expenses and management salaries.  Offsetting the noted decreases were
increased operating expenses for Sheffield Greens Apartments of $152,000 as the
complex was not yet completed during the first quarter of 2007 and only
partially occupied and increases in property taxes of $71,000 for comparable
properties.





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 Development and Purchase Agreements with Lennar Corporation
(the “Lennar Agreements”) to develop and sell 1,950 residential lots (1,359
single-family lots and 591 town home lots) in Fairway Village in St. Charles,
Maryland.  The Lennar Agreements requires the homebuilder to provide
$20,000,000 in letters of credit to secure the purchase of the lots. As security
for the Company’s obligation to develop the lots, a junior lien was placed on
the residential portion of Fairway Village.  The agreements require
Lennar to purchase 200 residential lots per year, provided that they are
developed and available for delivery as defined by the Development
Agreement.  For each lot sold in Fairway Village, the Company must
deposit $10,300 in an escrow account to fund the principal payments due to
Charles County, at which time the lots are released from the junior
lien.  As of March 31, 2008, 1,499 lots remained under the provisions
of the Lennar Agreements.  In December 2007, the Company agreed to an
amendment to the Lennar Agreements which temporarily reduce the final lot price
for 100 lots (51 lots purchased by Lennar in December 2007 and 49 to be
purchased by June 1, 2008) from 30% to 22.5% of the base price of the home sold
on the lot, with guaranteed minimum prices of $78,000 per single family lot and
$68,000 per townhome lot.


Sales are
closed on a lot by lot basis at the time when the builder purchases the
lot.  The final selling price per lot sold to Lennar may exceed the
guaranteed minimum price recognized at closing since the final lot price is
based on a percentage of the base price of the home sold on the lot, but not
less than the guaranteed minimum price.  Additional revenue exceeding
the guaranteed minimum take down price per lot will be recognized upon Lennar's
settlement with the respective homebuyers.


Residential
lots vary in size and location resulting in pricing differences. Gross margins
are calculated based on the total estimated sales values based on current sales
prices for all remaining lots within a neighborhood as compared to the total
estimated costs.


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 generally cyclical.


Community
development land sales revenue decreased $2,709,000 or 72% for the three months
ended March 31, 2008 to $1,046,000 as compared to $3,755,000 for the three
months ended March 31, 2007.  The overall decrease was primarily the
result of a decrease in commercial settlements for the first quarter 2008 as
compared to the first quarter of 2007.  Further discussion of the
components of this variance is as follows:





Residential
Land Sales


For the
three months ended March 31, 2008, we recognized $807,000 related to the
delivery of eight townhome lots and three single family lots to Lennar as
compared to $613,000 related to 7 townhome lots delivered in the first quarter
of 2007.  For the lots delivered in 2008, we recognized as revenue the
minimum guaranteed price of $68,000 per townhome lot and $78,000 per single
family lot, plus water and sewer fees, road fees and other off-site
fees.  For the three months ended March 31, 2007, we delivered 7
townhome lots to Lennar at an initial selling price of $85,000 per lot plus
water and sewer fees, road fees and other off-site fees.  As of March
31, 2008, 1,499 lots remained under contract to Lennar, of which 118 single
family lots were developed and ready for delivery.


The
Company recognizes additional revenue based on a percentage of the final
settlement price of the home sold by Lennar to the homebuyer, to the extent
greater than the guaranteed minimum price, as provided by our agreement with
Lennar.  During the first quarter of 2008 we did not recognize any
additional revenue for lots that were previously sold to Lennar. For the first
quarter of 2007, the Company recognized $314,000 of additional revenue for lots
that were previously sold to Lennar.





Commercial
Land Sales


For the
three months ended March 31, 2008, we sold 0.99 commercial acres in St. Charles
for $184,000.  This compares to 5.78 commercial acres in St. Charles
for $2,536,000 for the three months ended March 31, 2007.  As of March
31, 2008, our commercial sales backlog contained 83.96 acres under contract for
a total of $14,545,000.





-20-
 Table of Contents


St.
Charles Active Adult Community, LLC - Land 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.  The Company manages 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 September
2006, again in December 2006, and again in October 2007.  Most
recently, the development loan was modified to provide a one-year delay in
development of the project, as to date, lot development has outpaced
sales.  Per the terms of the loan, both the Company and Lennar
provided development completion guarantees.


In the
first quarter of 2008, the joint venture did not deliver any lots to
Lennar.  However, in the first quarter of 2007, the joint venture
delivered 14 lots to Lennar.  Accordingly, for the three Months ended
March 31, 2007, the Company recognized $292,000 in deferred revenue and off-site
fees and $93,000 of deferred costs.





Gross
Margin on Land Sales


The gross
margin on land sales for the first quarter 2008 was 14% as compared to 22% for
the first quarter of 2007.  Gross margins differ from period to period
depending on the mix of land sold as well as volume of sales available to absorb
certain period costs.  In the first quarter 2008, gross margins on
residential land sales were 28%, reflecting the downturn in the real estate
market and the reduced pricing granted to Lennar during 2007.  In
addition, for the first quarter of 2008, period costs represented an increased
percentage of overall sales revenues.  For the first quarter 2007,
gross margins on our residential land sales were 49%, however, our commercial
acres represented the majority of our land sales for the first quarter 2007 and
these parcels had lower margins than our residential land sales.





Customer
Dependence


Residential
land sales to Lennar within our U.S. segment were $807,000 for the three months
ended March 31, 2008, which represents 7% of the U.S. segment's revenue and 4%
of our total year-to-date consolidated revenue.  No customers
accounted for more than 10% of our consolidated revenue for the three months
ended March 31, 2008.  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.





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.  Effective February 28, 2007, the
Company’s management agreement with G.L. Limited Partnership was terminated upon
the sale of the apartment property to a third party.  Management fees
generated by this property accounted for less than 1% of the Company’s total
revenue.


We
receive an additional fee from the properties that we manage for their use of
the property management computer system and a fee for vehicles purchased by the
Company for use on behalf of the properties. The costs of the computer system
and vehicles are reflected within depreciation expense.


The
Company manages the project development of the joint venture with Lennar for a
market rate fee pursuant to a management agreement.  These fees are
based on the cost of the project and a prorated share is earned when each lot is
sold.


Management
fees for the first quarter of 2008 decreased $72,000 to $38,000 as compared to
$110,000 for the first quarter 2007 primarily as a result of the reduction in
number of lots delivered by the joint venture in the first quarter of 2008
compared to the same period 2007.  Management fees presented on the
consolidated income statements include only the fees earned from the
non-controlled properties; the fees earned from the controlled properties are
eliminated in consolidation.





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 properties located in St. Charles, Maryland, our properties located in the
Baltimore, Maryland area and the property in Virginia and, to a lesser extent,
the other properties that we manage. Our unconsolidated and managed-only
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
increased $456,000 or 26% to $2,203,000 for the three months ended March 31,
2008, compared to $1,747,000 for the same period of 2007.  The
increase is primarily attributable to fees associated with an evaluation of a
recapitalization of the Company of $378,000 with no comparable amounts spend
last year.  Other increases relate to $150,000 additional expenses
recorded for the executive retention agreements executed in the 3rd quarter of
2007.  These increases were partially offset by a reduction in bonus
and related expenses accruals between periods.  A significant portion
of the bonuses accrued in the first quarter 2007 were reversed in the fourth
quarter of 2007 upon the decision not to grant annual bonuses to executive
management and, as such, no bonuses were accrued in the first quarter of 2008
compared to $119,000 accrued in the first quarter of 2007.


-21-
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Depreciation
Expense - U.S. Operations:


Depreciation
expense increased $391,000 to $1,662,000 for the first three months of 2008
compared to $1,271,000 for the same period in 2007.  The increase in
depreciation is primarily the result of depreciation related to the addition of
Sheffield Greens Apartments.  In addition, as a result of several
refinancings, the Company has made significant investments in capital
improvements at these properties.





Interest
Income – U.S. Operations:


Interest
income decreased $174,000 to $123,000 for the three months ended March 31, 2008,
as compared to $297,000 for the three months ended March 31,
2007.  The undistributed bond proceeds held by the County were used to
fund development costs as the major roads neared completion, resulting in a
reduction of interest income earned on these funds.





Interest
Expense - U.S. Operations:


The
Company considers interest expense on all U.S. debt available for capitalization
to the extent of average qualifying assets for the period.  Interest
specific to the construction of qualifying assets, represented primarily by our
recourse debt, is first considered for capitalization.  To the extent
qualifying assets exceed debt specifically identified, a weighted average rate
including all other debt of the U.S. segment is applied.  Any excess
interest is reflected as interest expense.  For 2008 and 2007, the
excess interest primarily relates to the interest incurred on the non-recourse
debt from our investment properties.


Interest
expense decreased $303,000 for the first three months of 2008 to $2,763,000, as
compared to $3,066,000 for the same period of 2007.  The decrease was
primarily attributable to an increase in qualifying assets eligible for interest
capitalization as new Apartment and Condominium projects begin in Fairway
Village’s Gleneagles section, the construction of an office building within
O’Donnell Lake Restaurant Park, and significant assets are added as the Company
nears completion of the County Road projects.  For the three months
ended March 31, 2008, $700,000 of interest cost was
capitalized.  During the same period in 2007, $311,000 of interest
cost was capitalized.





Provision
for Income Taxes – U.S. Operations:


The
effective tax rates for the three months ended March 31, 2008, and March 31,
2007, were 22% and 13%, respectively.  The statutory rate is
40%.  The effective tax rates for 2008 and 2007 differ from the
statutory rate due to relatively small net losses reported for both quarters,
the related benefit for which, were partially offset by accrued penalties on
uncertain tax positions.





Results
of Operations - Puerto Rico Operations:


For the
three months ended March 31, 2008, our Puerto Rico segment generated $1,911,000
of operating income compared to $2,100,000 of operating income generated by the
segment for the same period in 2007.  Additional information and
analysis of the Puerto Rico operations can be found below.





Rental
Property Revenues and Operating Expenses - Puerto Rico Operations:


As of
March 31, 2008, nine Puerto Rico-based apartment properties, representing twelve
apartment complexes totaling 2,653 units, in which we hold an ownership interest
(“Puerto Rico Apartments”) qualified for the consolidation method of
accounting.  The rules of consolidation require that we include within
our financial statements the consolidated apartment properties' total revenue
and operating expenses. As of March 31, 2008, all of the Puerto Rico Apartments
were HUD subsidized projects with rental rates governed by HUD.


Our
Puerto Rico rental property portfolio also includes the operations of a
commercial rental property in the community of Parque Escorial, known as
Escorial Building One.  The company constructed and holds a 100%
ownership interest in Escorial Building One, which commenced operations in
September 2005.  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.  The building is currently 38% leased with letters of intent
for an additional 42% as of March 31, 2008.


Rental
property revenues increased $95,000 or 2% to $5,600,000 for the three months
ended March 31, 2008 compared to $5,505,000 for the same period of
2007.  The increase for the first quarter of 2008 as compared to the
first quarter 2007 was the result of overall rent increases for our HUD
subsidized multifamily apartment properties of 2% while commercial revenues
decreased by $20,000 or 16% due to the loss of a tenant between
periods.


Rental
operating expenses increased $39,000 or 1% to $2,770,000 for the three months
ended March 31, 2008 compared to $2,731,000 for the same period of
2007.  The nominal increase for the first quarter of 2008 was related
to an overall inflationary increases offset in part by efforts to control or
reduce expenses.





Community
Development - Puerto Rico Operations:


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


There was
no community development land sales during the three months ended March 31, 2008
and 2007.  There were no sales contracts in backlog at March 31,
2008.





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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
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 onsite
sales office to pre-qualified homebuyers.


Homebuilding revenues decreased
$844,000 for the three-month period ended March 31, 2008, as compared to the
three month period ended March 31, 2007.  The decrease in revenues was
primarily driven by a decrease in the number of units sold during the respective
period.  Within the Torres project, the Company closed nine units for
the first quarter 2008 and 12 units for the first quarter 2007.  The
average selling price per unit was similar, approximately $249,000 and $ 257,000
per unit respectively, generating aggregate revenues of $2,244,000 and
$3,088,000, respectively.  The gross margin for the three months ended
March 31, 2008 and 2007 were 23% and 26%, respectively.  The decrease
in the gross profit margin is attributable to a reduction in the number of
penthouses units sold during the first quarter of 2008 as compared to the same
period of 2007.


As of
March 31, 2008, only 12 units within the Torres project remain available for
sale, of which we have received contracts for two of these units at an average
selling price of $245,000 per unit.  As part of a promotional
campaign, effective January 2008, each sales contract is backed by a $3,000
deposit as opposed to the $6,000 deposit previously required.  For the
three months ended March 31, 2008, the Company’s sales activity resulted in the
execution of 10 contracts and no cancellations during the period.  For the
same period in 2007, the Company had eight new contracts and three canceled
contracts.  The Company continues to believe that the remaining 12
units in Torres will sell during 2008 and that its current pricing remains
competitive.





Management and Other fees – Puerto
Rico Operations:


Management
fees presented on the consolidated income statements include only the fees
earned from the non-controlled properties; the fees earned from the controlled
properties are eliminated in consolidation.  We recognize monthly fees
from our management of four non-owned apartment properties and four home-owner
associations operating in Parque Escorial.  Management and other fees
increased $4,000 or 3% to $157,000 for the first quarter of 2008 as compared to
$153,000 the first quarter of 2007.  The increase in our management
fees primarily resulted from increases in the annual rents in the non-owned
apartment properties.





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 our corporate office is in our office
building, Escorial Office Building One, rent expense and parking expenses are
eliminated in consolidation.


General,
administrative, selling and marketing expenses decreased 7% or $48,000 to
$668,000 during the three months ended March 31, 2008, as compared to $716,000
for the same period of 2007.  The decrease is primarily attributable
to a reduction in bonus and related payroll tax accruals between
periods.  For the first quarter 2008, a $5,000 bonus and related
payroll tax accrual was made as compared to a $31,000 accrual made in the first
quarter of 2007.  Further, the Company experienced a decrease in legal
expenses due to a $13,000 refund received from an insurance company for legal
services paid by the Company during 2007.





Depreciation
and Amortization Expense – Puerto Rico Operations:


Depreciation
and amortization expense for the three months ended March 31, 2008 increased
$22,000 or 2% to $935,000 as compared to $913,000 for the year ended December
31, 2007.  The increase in depreciation expense resulted from
improvements completed in our multifamily apartment properties after the first
quarter of 2007.





Interest
Income – Puerto Rico Operations:


Interest
income for the three months ended March 31, 2008 decreased $151,000 to $64,000
as compared to $215,000 for the same period of 2007.  The decrease is
primarily attributable to the recognition of non-recurring interest income on
the El Monte note receivable in the first quarter of 2007 with no comparable
amounts for the first quarter of 2008.





Equity
in Earnings from Unconsolidated Entities – Puerto Rico Operations:


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 from unconsolidated entities decreased $1,505,000 to $168,000 during
the three months ended March 31, 2008, compared to $1,673,000 during the same
period of 2007.  The increase was related to the payment in full of
the $1,500,000 note receivable held by El Monte in January 2007, with no
comparable amounts received in the first quarter of 2008.  The note
was received as part of the sale of the El Monte facility, at which point the
Company determined that the cost recovery method of accounting was appropriate
for gain recognition.  Accordingly, revenue was deferred until
collection of the note receivable, which occurred in January 2007.





-23-
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Interest
Expense – Puerto Rico Operations:


The
Company considers interest expense on all Puerto Rico debt available for
capitalization to the extent of average qualifying assets for the
period.  Interest specific to the construction of qualifying assets is
first considered for capitalization.  To the extent qualifying assets
exceed debt specifically identified a weighted average rate including all other
debt of the Puerto Rico segment is applied.  Any excess interest is
reflected as interest expense.  For 2008 and 2007, the excess interest
primarily relates to the interest incurred on the non-recourse debt from our
investment properties.


Interest
expense decreased $98,000 or 6% for the first three months of 2008 to
$1,483,000, as compared to $1,581,000 for the same period of
2007.  The decrease in interest expense is attributable to a decrease
in inter-segment interest expense due to the repayment of the note in February
2008 and the normal reduction of interest expense in the mortgages of the
apartments and commercial properties due to the reduction of the outstanding
principal balances.


For the
three months ended March 31, 2008, $41,000 of interest cost was
capitalized.  During the same period in 2007, $39,000 of interest cost
was capitalized.





Minority
Interest in Consolidated Entities – Puerto Rico Operations:


The
Company 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.  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 accumulated distributions and losses in excess
of the minority partners’ 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 three months ended March 31, 2008, decreased $217,000 to
$1,155,000, as compared to $1,372,000 for the same period of
2007.  The decrease was primarily the result of a non-recurring
$400,000 refinancing distribution made to minority partners of one of our
partnerships in the first quarter of 2007.  This decrease was
partially offset by an increase in surplus cash distributions to minority
partners during the first quarter 2008 as compared to the first quarter
2007.





Provision
for Income Taxes – Puerto Rico Operations:


The
effective tax rate for the three months ended March 31, 2008 and 2007 were 33%,
and 54%, respectively.  The statutory rate is 29%.  The
reconciling items from the effective tax rate and the statutory rate have
opposite effects on the two different quarters as a result of incurring a loss
in the first quarter 2008 and income in the first quarter 2007.  The
difference in the statutory tax rate and the effective tax rate for the pre-tax
loss in the three months ended March 31, 2008, was primarily due to tax exempt
income offset in part by the double taxation on the earnings of our wholly owned
corporate subsidiary, ICP, and deferred items for which no current benefit may
be recognized.  The difference in the statutory tax rate and the
effective tax rate for the pre-tax income in the three months ended March 31,
2007, was primarily due to the double taxation on the earnings of our wholly
owned corporate subsidiary, ICP.  As a result of a non-recurring gain
related to its investment in El Monte, ICP’s current taxes payable and ACPT’s
related deferred tax liability on the ICP undistributed earnings experienced a
considerable increase during the quarter.





LIQUIDITY
AND CAPITAL RESOURCES





Summary
of Cash Flows


As of
March 31, 2008, the Company had cash and cash equivalents of $22,209,000 and
$20,198,000 in restricted cash.  The following table sets forth the
changes in the Company's cash flows ($ in thousands):





Three
      Months Ended March 31,2008
            
            
            2007Operating
      Activities
            
            $
            (3,820
            )
            
            $
            914Investing
      Activities
            
            
            (221
            )
            
            
            (1,888
            )Financing
      Activities
            
            
            1,338
            
            
            
            6,596Net
      (Decrease) Increase in Cash
            
            $
            (2,703
            )
            
            $
            5,622




-24-
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For the
three months ended March 31, 2008, operating activities used $3,820,000 of cash
flows compared to $914,000 of cash flows provided by operating activities for
the three months ended March 31, 2007.  The $4,734,000 decrease in
cash flows from operating activities for the first quarter of 2008 compared to
the same period in 2007 was primarily related to decreased sales activities
combined with increased additions to community development assets.  As
previously discussed under Results of Operations, community development land
sales and home sales decreased by $2,709,000 and $844,000, respectively for the
first quarter 2008 as compared to the same period for 2007.  Additions
to community development assets were $6,491,000 for the first quarter 2008,
$830,000 in excess of additions for the same period of 2007.  From
period to period, cash flow from operating activities is also impacted by
changes in our net income, as discussed more fully above under "Results of
Operations," as well as changes in our receivables and payables.


For the
quarter ended March 31, 2008, net cash used in investing activities was $221,000
compared to $1,888,000 for the first quarter of 2007.  Cash provided
by or used in investing activities generally relates to increases in our
investment portfolio through acquisition, development or construction of rental
properties and land held for future use, net of returns on our investments. The
$1,667,000 decrease in cash used in investing activities generally relates to a
decrease in capital improvements to our multifamily apartment
properties.  For the first quarter of 2008, we made capital
improvements totaling $759,000 to our multifamily apartment properties,
$2,238,000 less than the same period of 2007.  In the first quarter of
2007, the Company increased its investment in capital improvements as a result
of the refinancing of several apartment properties and re-investment of some of
those proceeds into the related projects.


For the
three months ended March 31, 2008, net cash provided by financing activities was
$1,338,000 as compared to $6,596,000 for the three months ended March 31,
2007.  The $5,258,000 decrease in cash provided by financing
activities was primarily the result of the refinancing of the mortgages of two
apartment properties, Village Lake Apartments, LLC and Coachman’s Apartments,
LLC during the first quarter of 2007, with no comparable refinancings in the
first quarter of 2008.  Partially offsetting the decrease in cash used
in financing activities was a $621,000 increase in draws received from the
Charles County bond escrow as the construction of infrastructure within St.
Charles continues, a $527,000 decrease in cash distributions to minority
partners and a $516,000 decrease in dividends paid to shareholders, a result of
the suspension of dividend payments in the forth quarter of 2007.





Contractual
Financial Obligations





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 issued in three
installments with the final $6,000,000 installment issued in March 2006. 
The Bonds bear interest rates ranging from 4% to 8%, for a blended lifetime rate
for total Bonds issued to date of 5.1%, and call for semi-annual interest
payments and annual principal payments and mature in fifteen
years.  Under the terms of bond repayment agreements between the
Company and the County, the Company is obligated to pay interest and principal
on the full amount of the Bonds; as such, the Company recorded the full amount
of the debt and a receivable from the County representing the undisbursed Bond
proceeds to be advanced to the Company as major infrastructure development
within the project occurs.  As part of the agreement, the Company will
pay the County a monthly payment equal to one-sixth of the semi-annual interest
payments and one-twelfth of the annual principal payment due on the
Bonds.  The County also requires ACPT to fund an escrow account from
lot sales that will be used to repay this obligation.


In August
2005, the Company signed a memorandum of understanding ("MOU") with the Charles
County Commissioners regarding a land donation that is now the site of a minor
league baseball stadium and entertainment complex which opened in May of
2008.  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 general obligation bonds to finance the infrastructure
improvements.  In March 2006, $4,000,000 of bonds were issued for this
project, with an additional $3,000,000 issued in both March 2007 and March
2008.  The funds provided by the County 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.


In
December 2006, the Company reached an agreement with Charles County whereby the
Company receives interest payments on any undistributed bond proceeds held in
escrow by the County.  The agreement covers the period from July 1,
2005, through the last draw made by the Company. For the three months ended
March 31, 2008 and 2007, the Company recognized $32,000 and $152,000 of interest
income on these escrowed funds, respectively.





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Recourse Debt - Puerto Rico
Operations


Substantially
all of the Company's 490 acres of community development land assets in Parque El
Comandante within the Puerto Rico segment are encumbered by a recourse revolving
line of credit facility of $15,000,000 available to fund development costs of a
project in which the Company plans to develop a planned community in Canovanas,
Puerto Rico, to fund acquisitions and/or investments mainly in real estate
ventures, to fund transaction costs and expenses, to fund future payments of
interest under the line of credit and to fund any future working capital needs
of the Company.  The line of credit bears interest at a fluctuating
rate equivalent to the LIBOR Rate plus 200 basis points (6.70% at March 31,
2008) and matures on August 31, 2008.  The outstanding balance of this
facility on March 31, 2008, was $1,725,000.  The Company has requested
an extension of the maturity date of this facility through 2010 which is under
review by the bank. The homebuilding and land assets in Parque Escorial are
unencumbered as of March 31, 2008.





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 March 31, 2008, approximately 38% of this debt
is secured by the Federal Housing Administration ("FHA") or the Maryland Housing
Fund.  There were no significant changes to our non-recourse debt
obligations for our U.S. operations during the three months ended March 31,
2008.





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 debt is collateralized by the respective
multifamily apartment project or commercial building.  As of March 31,
2008, approximately 1% of this debt is secured by the Federal Housing
Administration ("FHA").


As of
March 31, 2008, the Company was in technical default of the minimum debt service
coverage ratios and minimum fixed charge coverage for the Escorial Office
Building I, Inc. (“EOB”) non-recourse mortgage of $8,469,000.  The
Company received a default waiver from the lender related to the first quarter
2008.  To prevent any further default, IGP provided a fixed charge and
debt service guaranty, whereby IGP will contribute capital in cash in such
amounts required to cause EOB to comply with the financial
covenants.  The guarantee will remain in full force until EOB has
complied with the financial covenants for four consecutive
quarters.  The Company does not expect the funding of this guarantee
to have a material impact on its liquidity and cash flows.  There were
no other significant changes to our non-recourse debt obligations for our Puerto
Rico operations during the three months ended March 31,
2008.
  Purchase Obligations and
Other Contractual Obligations


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


In
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
expenditures such as improvements at our investment properties, the construction
of the new projects in St. Charles, costs associated with our 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 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. For
the remainder of 2008 and into 2009, 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.


As of
March 31, 2008, the Company has $15,827,000 recorded as accrued income tax
liabilities and $3,149,000 as accrued interest on unpaid income tax liabilities
related to uncertain tax positions as required by the provisions of FIN
48.  We are unable to reasonably estimate the ultimate amount or
timing of settlement of these liabilities.





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Liquidity
Requirements


Our
short-term liquidity requirements consist primarily of obligations under capital
and operating leases, normal recurring operating expenses, regular debt service
requirements, investments in community development, non-recurring expenditures
and certain strategic planning expenditures.  The Company has
historically met its liquidity requirements from cash flow generated from
residential and commercial land sales, home sales, property management fees,
rental property revenue, and financings.


Pursuant
to agreements with the Charles County Commissioners, the Company is committed to
completing $18.4 million of infrastructure. The Company anticipates the
completion of several of these projects in 2008 which will open up access to
future villages and satisfy certain obligations to the Charles County
Commissioners.  The Company anticipates total development spending
related to these infrastructure projects of $5,691,000 for the next twelve
months.  As of March 31, 2008, $4,560,000 of undisbursed County bond
proceeds remains available to fund select portions of this
development.  The County issued another $3,000,000 bond in March of
2008, of which $2,581,000 is expected to fund development over the next twelve
months.   In addition to county committed development,
approximately $7,200,000 of project development is currently under contract,
$6,400,000 of which is expected to be incurred over the next 12
months.  These project costs and the difference between the cost of
County projects and any bond proceeds available to fund related expenditures
will be funded out of cash flow and/or our $14,000,000 revolving credit
facility.  We currently have contracts in place for an additional
$408,000 of planning and development costs in Puerto Rico of which $152,000 is
expected to be incurred over the next twelve months.  Our $15,000,000
credit facility will be used to fund these expenditures.  Further, we
may seek additional development loans and permanent mortgages for continued
development and expansion of other parts of St. Charles and Parque Escorial,
potential opportunities in Florida and other potential rental property
opportunities.


Management
has noted a current reduction in the demand for residential real estate in the
St. Charles and Parque Escorial markets.  Should this reduced demand
result in a significant decline in the prices of real estate in the St. Charles
and Parque Escorial markets or defaults on our sales contracts, it could
adversely impact our cash flows.  Although Lennar is contractually
obligated to take 200 lots per year, the market is not currently sufficient to
absorb this sales pace.  Accordingly, Lennar’s management requested
and the Company granted a reduction of the 200 lot requirement for
2007.  In addition, the Company agreed to a temporary price reduction
to 22.5% of the selling price of the home for 100 lots, 49 of which Lennar
agreed purchase prior to June 1, 2008.  Should Lennar not comply
with their obligations pursuant our amended contract or there be a reduced
demand for our commercial property our cash flow would be adversely
impacted.


As a
result of our existing commitments and the downturn in the residential real
estate market, management expects to use its resources conservatively in 2008
and 2009.  As such, the Board of Trustees elected not to award 2007
bonuses to executive management or declare a dividend to our shareholders for
the first quarter 2008. Anticipated cash flow from operations, existing loans,
refinanced or extended loans, and new financing are expected to meet our
financial commitments for the next 12 months. However, there are no assurances
that these funds will be generated.


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





ITEM
      4.
            CONTROLS AND
PROCEDURES





Evaluation
of Disclosure Controls and Procedures


In
connection with the preparation of this Form 10-Q, as of March 31, 2008, 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, as of March
31, 2008, these disclosure controls and procedures were effective and designed
to ensure that the information required to be disclosed in our reports filed
with the SEC is recorded, processed, summarized and reported on a timely
basis.





Changes
in Internal Control Over Financial Reporting


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





PART
      II
            OTHER
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.





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 Table of Contents


ITEM
      1A.
            RISK FACTORS





There has
been no material change in the Company’s risk factors from those outlined in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2007.





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





None.





ITEM
      3.
            DEFAULTS UPON SENIOR
  SECURITIES





None.





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





None.





ITEM
      5.
            OTHER INFORMATION





None.




ITEM
      6.
            EXHIBITS





(A)
            Exhibits31.1
            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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 Table 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:  May
      15, 2008
            By:
            /s/
      J. Michael WilsonJ.
      Michael Wilson
              Chairman
      and Chief Executive OfficerDated:  May
      15, 2008
            By:
            /s/
      Cynthia L. HedrickCynthia
      L. Hedrick
              Chief
      Financial OfficerDated:  May
      15, 2008
            By:
            /s/
      Matthew M. MartinMatthew
      M. Martin
              Chief
      Accounting Officer




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