**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 **FORM
        10-Q**
 
 
 (Mark
        One)
 
 x
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
                FOR
                  THE QUARTERLY PERIOD ENDED**MARCH 31, 2007,**ORo
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
                FOR
                  THE TRANSITION PERIOD FROM _______________ TO
                  _________________
 Commission
        file number **1-14369**
 
 **AMERICAN
        COMMUNITY PROPERTIES TRUST**
 (Exact
        name of registrant as specified in its charter)
 
 **MARYLAND**
                (State
                  or other jurisdiction of incorporation or organization)
              **52-2058165**
                (I.R.S.
                  Employer Identification No.)
 **222
        Smallwood Village Center**
 **St.
        Charles, Maryland 20602**
 (Address
        of principal executive offices)(Zip Code)
 **(301)
        843-8600**
 (Registrant's
        telephone number, including area code)
 
 **Not
        Applicable**
 (Former
        name, former address and former fiscal year, if changed since last
        report)
 
 Indicate
        by check mark whether the registrant: (1) has filed all reports required
        to be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
 
 Yes x   No o
 
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “an accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
        one):
  
   Large
        accelerated filer o   Accelerated
        filer o  Non-accelerated
        filer x
   
   Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
   Yes o No x
  
 
 
 
 **As
        of May 7, 2007, 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, 2007**
 **TABLE
        OF CONTENTS**
 PageNumber**PART
                  I**
              **FINANCIAL
                  INFORMATION**Item
                  1.
              Consolidated
                  Financial StatementsConsolidated
                  Statements of Income for the
                  Three Months Ended March 31, 2007 (Unaudited) and March 31, 2006
                  (Unaudited)
              3Consolidated
                  Balance Sheets as of March 31, 2007
                  (Unaudited) and December 31, 2006 (Audited)
              4Consolidated
                  Statement of Changes in
                  Shareholders' Equity for the Three Months Ended March 31, 2007
                  (Unaudited)
              5Consolidated
                  Statements of Cash Flows for
                  the Three Months Ended March 31, 2007 (Unaudited) and March 31,
                  2006
                  (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,
                  2007 and
                  2006
              18Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market
                  Risk
              26Item
                  4.
              Controls
                  and Procedures
              26**PART
                  II**
              **OTHER
                  INFORMATION**Item
                  1.
              Legal
                  Proceedings
              27Item
                  1A.
              Risk
                  Factors
              27Item
                  2
              Unregistered
                  Sales of Equity Securities and Use
                  of Proceeds
              27Item
                  3.
              Defaults
                  Upon Senior Securities
              27Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              27Item
                  5.
              Other
                  Information
              27Item
                  6.
              Exhibits
              27Signatures
              28
 
  ***-2-***
 ***Table
            of
            Contents***
 
  
 **AMERICAN
                  COMMUNITY PROPERTIES TRUST****CONSOLIDATED
                  STATEMENTS OF
                  INCOME****FOR
                  THE THREE MONTHS ENDED MARCH 31,**(In
                  thousands, except per share amounts)(Unaudited)**2007**
              
              **2006****Revenues**Rental property revenues
              $
              14,410
              
              
              $
              12,791Community development-land sales
              
              3,755
              
              
              
              3,944Homebuilding-home sales
              
              3,088
              
              
              
              4,025Management and other fees, substantially all from related
                  entities
              
              263
              
              
              
              290Reimbursement of expenses related to managed entities
              
              471
              
              
              
              572Total revenues
              
              21,987
              
              
              
              21,622**Expenses**Rental property operating expenses
              
              7,356
              
              
              
              6,188Cost of land sales
              
              2,916
              
              
              
              2,236Cost of home sales
              
              2,286
              
              
              
              3,034General, administrative, selling and marketing
              
              2,463
              
              
              
              2,432Depreciation and amortization
              
              2,184
              
              
              
              1,973Expenses reimbursed from managed entities
              
              471
              
              
              
              572Total expenses
              
              17,676
              
              
              
              16,435**Operating
                  income**
              
              **4,311**
              
              
              
              **5,187****Other
                  income (expense)**Interest and other income
              
              552
              
              
              
              129Equity in earnings from unconsolidated entities
              
              1,673
              
              
              
              170Interest expense
              
              (4,617
              )
              
              
              (3,501
              )Minority interest in consolidated entities
              
              (1,372
              )
              
              
              (1,065
              )**Income
                  before provision for income taxes**
              
              **547**
              
              
              
              **920****Provision
                  for income taxes**
              
              523
              
              
              
              419**Net
                  income**
              **$**
              **24**
              
              
              **$**
              **501****Earnings
                  per share****Basic and Diluted**
              **$**
              **0.00**
              
              
              **$**
              **0.10****Weighted
                  average shares outstanding****Basic and Diluted**
              
              **5,208**
              
              
              
              **5,198****Cash
                  dividends per share**
              **$**
              **0.10**
              
              
              **$**
              **0.53***The
                  accompanying notes are an integral part of these consolidated
                  statements.*
 
  ***-3-***
 ***Table
            of
            Contents***
 
  
 **AMERICAN
                  COMMUNITY PROPERTIES TRUST****CONSOLIDATED
                  BALANCE
                  SHEETS**(In
                  thousands, except share and per share amounts)**As
                  of March 31, 2007**
                **(Unaudited)**
              
              
              As
                  of December 31, 2006
                (Audited)**ASSETS****ASSETS:**Investments
                  in real estate:Operating real estate, net of accumulated depreciation
              
              **$**
              **166,821**
              
              
              $
              142,046of $144,541 and $142,458, respectivelyLand and development costs
              
              
              **71,368**
              
              
              
              67,993Condominiums under construction
              
              
              **7,075**
              
              
              
              9,265Rental projects under construction or development
              
              
              **311**
              
              
              
              24,143Investments in real estate, net
              
              
              **245,575**
              
              
              
              243,447Cash
                  and cash equivalents
              
              
              **33,081**
              
              
              
              27,459Restricted
                  cash and escrow deposits
              
              
              **21,067**
              
              
              
              19,677Investments
                  in unconsolidated real estate entities
              
              
              **6,578**
              
              
              
              6,591Receivable
                  from bond proceeds
              
              
              **13,736**
              
              
              
              13,710Accounts
                  receivable
              
              
              **2,310**
              
              
              
              4,320Deferred
                  tax assets
              
              
              **28,324**
              
              
              
              18,157Property
                  and equipment, net of accumulated depreciation
              
              
              **1,135**
              
              
              
              1,157Deferred
                  charges and other assets, net of amortization of$2,101 and $1,655 respectively
              
              
              **10,795**
              
              
              
              12,181**Total Assets**
              
              **$**
              **362,601**
              
              
              $
              346,699**LIABILITIES
                  AND SHAREHOLDERS' EQUITY****LIABILITIES:**Non-recourse
                  debt
              
              **$**
              **281,290**
              
              
              $
              270,720Recourse
                  debt
              
              
              **27,567**
              
              
              
              29,351Accounts
                  payable and accrued liabilities
              
              
              **22,230**
              
              
              
              24,191Deferred
                  income
              
              
              **3,606**
              
              
              
              3,591Accrued
                  current income tax liability
              
              
              **13,972**
              
              
              
              2,992**Total Liabilities**
              
              
              **348,665**
              
              
              
              330,845**SHAREHOLDERS'
                  EQUITY:**Common shares, $.01 par value, 10,000,000 shares
                authorized, 5,229,954 shares issued and outstanding as of
                March 31, 2007 and December 31, 2006
              
              
              **52**
              
              
              
              52Treasury stock, 67,709 shares at cost
              
              
              **(376**
              **)**
              
              
              (376
              )Additional paid-in capital
              
              
              **17,270**
              
              
              
              17,238Retained Deficit
              
              
              **(3,010**
              **)**
              
              
              (1,060
              )**Total Shareholders' Equity**
              
              
              **13,936**
              
              
              
              15,854**Total Liabilities and Shareholders' Equity**
              
              **$**
              **362,601**
              
              
              $
              346,699
 
 
 
  ***-4-***
 ***Table
            of
            Contents***
 
  
 **AMERICAN
                  COMMUNITY PROPERTIES TRUST****CONSOLIDATED
                  STATEMENTS OF CHANGES IN
                  SHAREHOLDERS' EQUITY**(In
                  thousands, except share amounts)**Common
                  Shares**
              
              
              
              **Additional****Par**
              
              **Treasury**
              
              
              **Paid-in**
              
              
              **Retained****Number**
              
              
              **Value**
              
              
              **Stock**
              
              
              **Capital**
              
              
              **Deficit**
              
              
              **Total**Balance
                  December 31, 2006 (Audited)
              
              
              5,229,954
              
              $
              52
              
              $
              (376)
              
              $
              17,238
              
              $
              (1,060
              )
              $
              15,854Net income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              24
              
              
              24Dividends paid
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (516
              )
              
              (516
              )Cumulative effect of change in accounting for FIN 48
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,458
              )
              
              (1,458
              )Amortization of Trustee Restricted Shares
              
              
              -
              
              
              -
              
              
              -
              
              
              32
              
              
              -
              
              
              32**Balance
                  March 31, 2007 (Unaudited)**
              
              
              **5,229,954**
              
              **$**
              **52**
              
              **$**
              **(376)**
              
              **$**
              **17,270**
              
              **$**
              **(3,010)**
              
              **$**
              **13,936***The accompanying notes are an integral part of those consolidated
                  statements.*
 
  ***-5-***
 ***Table
            of
            Contents***
 
  **AMERICAN
                  COMMUNITY PROPERTIES TRUST****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****FOR
                  THE THREE MONTHS ENDED MARCH 31,**(In
                  thousands)(Unaudited)**2007**
              
              2006**Cash
                  Flows from Operating Activities**Net income
              
              **$**
              **24**
              
              $
              501Adjustments to reconcile net income to net cash provided
                  byoperating activities:Depreciation and amortization
              
              
              **2,184**
              
              
              1,973Distribution to minority interests in excess of basis
              
              
              **1,648**
              
              
              1,043Benefit for deferred income taxes
              
              
              **(293**
              **)**
              
              (217
              )Equity in earnings-unconsolidated entities
              
              
              **(1,673**
              **)**
              
              (170
              )Distribution of earnings from unconsolidated entities
              
              
              **173**
              
              
              163Cost of land sales
              
              
              **2,916**
              
              
              2,236Cost of home sales
              
              
              **2,286**
              
              
              3,034Stock based compensation expense
              
              
              **(1**
              **)**
              
              195Amortization of deferred loan costs
              
              
              **292**
              
              
              139Changes in notes and accounts receivable
              
              
              **2,010**
              
              
              199Additions to community development assets
              
              
              **(5,661**
              **)**
              
              (3,351
              )Homebuilding-construction expenditures
              
              
              **(726**
              **)**
              
              (2,310
              )Deferred income-joint venture
              
              
              **15**
              
              
              100Changes in accounts payable, accrued liabilities
              
              
              **(2,280**
              **)**
              
              (1,948
              )Net cash provided by operating activities
              
              **$**
              **914**
              
              $
              1,587**Cash
                  Flows from Investing Activities**Investment in apartment construction
              
              
              **(56**
              **)**
              
              (3,464
              )Change in investments - unconsolidated entities
              
              
              **1,513**
              
              
              -Cash from newly consolidated properties
              
              
              **-**
              
              
              4,723Change in restricted cash
              
              
              **(1,390**
              **)**
              
              (721
              )Additions to rental operating properties, net
              
              
              **(2,997**
              **)**
              
              (1,119
              )Other assets
              
              
              **1,042**
              
              
              578Net cash used in investing activities
              
              **$**
              **(1,888**
              **)**
              $
              (3
              )**Cash
                  Flows from Financing Activities**Cash proceeds from debt financing
              
              
              **23,116**
              
              
              3,832Payment of debt
              
              
              **(17,032**
              **)**
              
              (4,801
              )County Bonds proceeds, net of undisbursed funds
              
              
              **2,676**
              
              
              180Payments of distributions to minority interests
              
              
              **(1,648**
              **)**
              
              (1,043
              )Dividends paid to shareholders
              
              
              **(516**
              **)**
              
              -Net cash provided by (used in) financing activities
              
              **$**
              **6,596**
              
              $
              (1,832
              )**Net
                  Increase (Decrease) in Cash and Cash Equivalents**
              
              
              **5,622**
              
              
              (248
              )**Cash
                  and Cash Equivalents, Beginning of Period**
              
              
              **27,459**
              
              
              21,156**Cash
                  and Cash Equivalents, End of Period**
              
              **$**
              **33,081**
              
              $
              20,908
 
  ***-6-***
 ***Table
            of
            Contents***
 
  **AMERICAN
        COMMUNITY PROPERTIES TRUST**
 **NOTES
        TO CONSOLIDATED FINANCIAL
        STATEMENTS**
 **MARCH
        31, 2007**
 (Unaudited)
 
 
 **(1)**
              **ORGANIZATION**
 
 American
        Community Properties Trust ("ACPT") is a self-managed holding company that
        is
        primarily engaged in the investment of rental properties, property management
        services, community development, and homebuilding. These operations are
        concentrated in the Washington, D.C. metropolitan area and Puerto Rico and
        are
        carried out through American Rental Properties Trust ("ARPT"), American Rental
        Management Company ("ARMC "), American Land Development U.S., Inc. ("ALD")
        and
        IGP Group Corp. ("IGP Group") and their subsidiaries.
 ACPT
        is
        taxed as a U.S. partnership and its taxable income flows through to its
        shareholders.  ACPT is subject to Puerto Rico taxes on IGP Group's taxable
        income, generating foreign tax credits that are passed through to ACPT's
        shareholders. An IRS regulation eliminating the pass through of these tax
        credits to ACPT’s shareholders has been proposed and is expected to become
        effective in 2007.  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 which are not variable interest entities as
        defined by FASB Interpretation No. 46 (revised December 2003) (“FIN 46 (R)”) in
        which it owns, directly or indirectly, a majority voting interest in the
        entity.
        In addition, 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:
 American
                  Housing Management Company
              
              Owings
                  Chase, LLCAmerican
                  Housing Properties L.P.
              
              Palmer
                  Apartments Associates Limited PartnershipSt.
                  Charles Community, LLC
              
              Prescott
                  Square, LLCInterstate
                  General Properties Limited Partnership, S.E.
              
              Sheffield
                  Greens Apartments, LLCLand
                  Development Associates S.E.
              
              Village
                  Lake Apartments, LLCLDA
                  Group, LLC
              
              Wakefield
                  Terrace Associates Limited PartnershipTorres
                  del Escorial, Inc.
              
              Wakefield
                  Third
                  Age Associates Limited PartnershipEscorial
                  Office
                  Building I, Inc.
              
              Alturas
                  del Senorial Associates Limited PartnershipInterstate
                  Commercial Properties, Inc.
              
              Bayamon
                  Garden Associates Limited PartnershipBannister
                  Associates Limited Partnership
              
              Carolina
                  Associates Limited Partnership S.E.Coachman's
                  Apartments, LLC
              
              Colinas
                  de San Juan Associates Limited PartnershipCrossland
                  Associates Limited Partnership
              
              Essex
                  Apartments Associates Limited PartnershipFox
                  Chase Apartments, LLC
              
              Huntington
                  Associates Limited PartnershipHeaden
                  House Associates Limited Partnership
              
              Jardines
                  de
                  Caparra Associates Limited PartnershipLancaster
                  Apartments Limited Partnership
              
              Monserrate
                  Associates Limited PartnershipMilford
                  Station I, LLC
              
              San
                  Anton Associates S.E.Milford
                  Station II, LLC
              
              Turabo
                  Limited Dividend PartnershipNew
                  Forest Apartments, LLC
              
              Valle
                  del Sol Associates Limited PartnershipNottingham
                  South, LLC
 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, 2006. The operating results for the three months ended
        March
        31, 2007, and 2006, are not necessarily indicative of the results that may
        be
        expected for the full year. Net income per share is calculated based on weighted
        average shares outstanding.
 
 **Use
        of Estimates**
 The
        preparation of financial statements in conformity with GAAP requires management
        to make estimates and assumptions that affect the amounts reported in the
        financial statements, and accompanying notes and disclosures. These estimates
        and assumptions are prepared using management's best judgment after considering
        past and current events and economic conditions. Actual results could differ
        from those estimates and assumptions.
 
 **Implementation
        of FIN 48**
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, “ *Accounting
        for Uncertainty in Income Taxes* ”
(“FIN
        48”). FIN 48 is an interpretation of FASB Statement No. 109, “ *Accounting
        for Income Taxes* ,”
and
        it
        seeks to reduce the diversity in practice associated with certain aspects
        of
        measurement and recognition in accounting for income taxes. In addition,
        FIN 48
        requires expanded disclosure with respect to the uncertainty in income taxes.
        The Company implemented FIN 48 as of January 1, 2007. See Note 7 for further
        discussions.
 
 **Cash
        Dividends**
 On
        February 28, 2007, the Board of Trustees declared a cash dividend of $0.10
        per
        share, payable on March 28, 2007, to shareholders of record on March 14,
        2007.
 
 **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, 2007
        and
        2006.
 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, 2007
        and
        2006.
 
 **Depreciable
        Assets and Depreciation**
 The
        Company's operating real estate is stated at cost and includes all costs
        related
        to acquisitions, development and construction. The Company makes assessments
        of
        the useful lives of our real estate assets for purposes of determining the
        amount of depreciation expense to reflect on our income statement on an annual
        basis. The assessments, all of which are judgmental determinations, are as
        follows:
 
 ·
            Buildings
                and improvements are depreciated over five to forty years using the
                straight-line or double declining balance
                methods,  ***-8-***
 ***Table
            of
            Contents***
 
  
 ·
            Furniture,
                fixtures and equipment are depreciated over five to seven years using
                the
                straight-line method, ·
            Leasehold
                improvements are capitalized and depreciated over the lesser of the
                life
                of the lease or their estimated useful life, ·
            Maintenance
                and other repair costs are charged to operations as
                incurred. 
 The
        table
        below presents the major classes of depreciable assets as of March 31, 2007
        and
        December 31, 2006 (in thousands):
 **March
                  31,**
              
              December
                  31,**2007**
              
              2006**(Unaudited)**
              
              (Audited)Building
              
              **$**
              **264,299**
              
              $
              240,264Building
                  improvements
              
              
              **8,429**
              
              
              8,022Equipment
              
              
              **13,134**
              
              
              12,569**285,862**
              
              
              260,855*Less:*Accumulated
                  depreciation
              
              
              **144,541**
              
              
              142,458**141,321**
              
              
              118,397Land
              
              
              **25,500**
              
              
              23,649Operating
                  properties, net
              
              **$**
              **166,821**
              
              $
              142,046
 
 
 *Other
        Property and Equipment*
 In
        addition, the Company owned other property and equipment of $1,135,000 and
        $1,157,000, net of accumulated depreciation of $2,156,000 and $2,101,000
        respectively, as of March 31, 2007 and December 31, 2006 respectively.
 
 *Depreciation*
 Total
        depreciation expense was $2,184,000 and $1,973,000 for the three months ended
        March 31, 2007 and 2006, respectively.
 
 **Impact
        of Recently Issued Accounting Standards**
 
 *SFAS
        157*
 In
        September 2006, the FASB issued SFAS 157, *Fair
        Value Measurements.* 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. SFAS 157 is effective
        for
        fiscal years beginning after November 15, 2007. We have not yet determined
        the
        impact that SFAS 157 will have on our financial statements.
 
 *EITF
        Issue No. 06-08, “Applicability of the Assessment of a Buyer’s Continuing
        Investment under FASB Statement No. 66 for Sales of
        Condominiums”*
 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 will require 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 will
        be
        effective for annual reporting periods beginning after March 15, 2007. The
        cumulative effect of applying EITF 06-08, if any, is to be reported as an
        adjustment to the opening balance of retained earnings in the year of adoption.
        We are evaluating the impact that EITF 06-08 may have, if any, 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.
  ***-9-***
 ***Table
            of
            Contents***
 
  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, 2007 and 2006 included
        Brookside Gardens Limited Partnership and Lakeside Apartments Limited
        Partnership 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
        $196,000 and $189,000 and for Lakeside of $170,000 and $172,000 as of March
        31
        2007 and December 31, 2006, 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.
 
 *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 in 2007.
 
 *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 and again in December 2006. Per the amended terms of
        the
        loan, both the Company and Lennar provided development completion guarantees.
        In
        the first quarter of 2007, the joint venture sold 14 lots to Lennar. As a
        result, the Company recognized $292,000 in deferred revenue, off-site fees
        and
        management fees and $93,000 of deferred costs.
  ***-10-***
 ***Table
            of
            Contents***
 
  The
        following table summarizes the financial data and principal activities of
        the
        unconsolidated real estate entities, which the Company accounts for under
        the
        equity method. The information is presented to segregate the apartment
        partnerships from the commercial partnerships as well as our 50% ownership
        interest in the land development joint venture, which are all accounted for
        as
“investments in unconsolidated real estate entities” on the balance
        sheet.
 LandDevelopmentApartment
                Commercial
                JointProperties
                Property
                
                Venture
                Total(in
                    thousands)
 **Summary
                    Financial Position:****Total Assets**March 31, 2007
                
                $
                5,116
                
                $
                28,133
                
                $
                12,763
                
                $
                46,012December 31, 2006
                
                
                5,142
                
                
                27,726
                
                
                12,154
                
                
                45,022**Total Non-Recourse Debt**March 31, 2007
                
                
                3,230
                
                
                22,960
                
                
                4,600
                
                
                30,790December 31, 2006
                
                
                3,244
                
                
                22,960
                
                
                3,476
                
                
                29,680**Total Other Liabilities**March 31, 2007
                
                
                1,269
                
                
                1,051
                
                
                1,229
                
                
                3,549December 31, 2006
                
                
                1,242
                
                
                722
                
                
                1,744
                
                
                3,708**Total Deficit/Equity**March 31, 2007
                
                
                617
                
                
                4,122
                
                
                6,934
                
                
                11,673December 31, 2006
                
                
                656
                
                
                4,044
                
                
                6,934
                
                
                11,634**Company's Investment, net (1)**March 31, 2007
                
                
                -
                
                
                4,750
                
                
                1,828
                
                
                6,578December 31, 2006
                
                
                -
                
                
                4,763
                
                
                1,828
                
                
                6,591**Summary
                    of Operations:****Total Revenue**Three Months Ended March 31, 2007
                
                $
                170
                
                $
                909
                
                $
                1,874
                
                $
                2,953Three Months Ended March 31, 2006
                
                
                199
                
                
                913
                
                
                -
                
                
                1,112**Net Income**Three Months Ended March 31, 2007
                
                
                (39
                )
                
                468
                
                
                -
                
                
                429Three Months Ended March 31, 2006
                
                
                (27
                )
                
                458
                
                
                -
                
                
                431**Company's recognition of equity in earnings**Three Months Ended March 31, 2007
                
                
                -
                
                
                173
                
                
                -
                
                
                173Three Months Ended March 31, 2006
                
                
                -
                
                
                170
                
                
                -
                
                
                170**Summary
                    of Cash Flows:****Cash flows from operating activities**Three Months Ended March 31, 2007
                
                $
                34
                
                $
                862
                
                $
                1,358
                
                $
                2,254Three Months Ended March 31, 2006
                
                
                53
                
                
                859
                
                
                (589
                )
                
                323**Company's share of cash flows from operating
                    activities**Three Months Ended March 31, 2007
                
                
                -
                
                
                390
                
                
                679
                
                
                1,069Three Months Ended March 31, 2006
                
                
                1
                
                
                389
                
                
                (295
                )
                
                95**Operating cash distributions**Three Months Ended March 31, 2007
                
                
                -
                
                
                411
                
                
                -
                
                
                411Three Months Ended March 31, 2006
                
                
                -
                
                
                359
                
                
                -
                
                
                359**Company's share of operating cash distributions**Three Months Ended March 31, 2007
                
                
                -
                
                
                186
                
                
                -
                
                
                186Three Months Ended March 31, 2006
                
                
                **-**
                
                
                163
                
                
                -
                
                
                163
 Notes:
 (1)
        Represents the
        Company's net investment, including assets and accrued liabilities in the
        consolidated balance sheet for unconsolidated
        real estate entities.
  ***-11-***
 ***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, 2007 and December 31, 2006 (in thousands):
 
 Maturity
              
              Interest
              
              Outstanding
                  as ofDates
              
              Rates
              
              **March
                  31,**
              
              December
                  31,From/To
              
              From/To
              
              **2007**
              
              2006**(Unaudited)**
              
              (Audited)**Recourse
                  Debt**Community
                  Development (a), ( b), (c)
              
              08-31-08/03-01-22
              
              4%/8%
              
              **$                  
                   27,396**
              
              $                   
                  24,694Investment
                  Properties (d)
              
              PAID
              
              PAID
              
              **-**
              
              4,473General
                  obligations (e)
              
              07-29-07/01-01-12
              
              Non-interestbearing/8.10%
              
              **171**
              
              184**Total
                  Recourse Debt**
              
              
              
              
              
              
              
              
              **27,567**
              
              
              29,351**Non-Recourse
                  Debt**Community
                  Development (f)
              
              
              11-23-07
              
              
              Non-interest
                  bearing
              
              
              **500**
              
              
              500Investment
                  Properties (g)
              
              
              04-30-09/08-01-47
              
              
              4.95%/10%
              
              **280,790**
              
              
              270,220**Total
                  Non-Recourse Debt**
              
              
              
              
              
              
              
              
              **281,290**
              
              
              270,720Total
                  debt
              
              
              
              
              
              
              **$               308,857**
              
              
              $                
                  300,071
 
 a)
            As
                of March 31, 2007, $24,796,000 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, 2007, the
                Company
                was in compliance with these financial covenants. However, 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 (7.36% at March 31, 2007) and matures
                on
                August 31, 2008. The outstanding balance of this facility on March
                31,
                2007, was $2,600,000. d)
            The
                outstanding recourse debt within the investment properties was comprised
                of a loan borrowed to finance the acquisition of our properties Village
                Lake and Coachman's in January 2003, as well as a two-year, $3,000,000
                recourse note that the Company obtained in June 2005.  Both of these
                loans were repaid in full in January
                2007. e)
            The
                general recourse debt outstanding as of March 31, 2007, is made up
                of
                various capital leases outstanding within our U.S. and Puerto Rico
                operations, as well as installment loans for vehicles and other
                miscellaneous equipment. f)
            In
                2005, the Company purchased 22 residential acres adjacent to the
                Sheffield
                Neighborhood for $1,000,000. The Company funded half of the purchase
                price
                with cash and signed a two-year note for $500,000 due in November
                2007.
                The Company plans to annex the land into the St. Charles master plan
                community. g)
            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, 2007, approximately $73,536,000 of this
                debt is
                secured by the Federal Housing Administration ("FHA") or the Maryland
                Housing Fund. The non-recourse debt related to the investment properties
                also includes a construction loan for Sheffield Greens Apartments
                LLC
                (Sheffield Greens). As of March 31, 2007, the balance of the construction
                loan was $25,167,000. The construction loan will convert to a 40
                year
                non-recourse permanent mortgage not later than September of
                2007. 
 The
        Company’s loans contain various financial, cross collateral, cross default,
        technical and restrictive provisions. As of March 31, 2007, the Company is
        in
        compliance with the financial covenants and the other provisions of its loan
        agreements.
 
 **(5)**
              **COMMITMENTS
                  AND CONTINGENT LIABILITIES**
 
 *Financial
        Commitments*
 Pursuant
        to an agreement reached between ACPT and the Charles County Commissioners
        in
        2002, the Company agreed to accelerate the construction of two major roadway
        links to the Charles County (the "County") road system. As part of the
        agreement,
 ***-12-***
 ***Table
            of
            Contents***
 
  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 to the County based on the full amount of the Bonds;
        as
        such, the Company recorded the full amount of the debt and a receivable from
        the
        County representing the remaining Bond proceeds to be advanced to the Company
        as
        major infrastructure development within the project occurs. As part of the
        agreement, the Company will pay the County a monthly payment equal to one-sixth
        of the semi-annual interest payments and one-twelfth of the annual principal
        payment. The County will also require ACPT to fund an escrow account from
        lot
        sales that will be used to repay these Bonds.
 In
        August
        2005, the Company signed a memorandum of understanding ("MOU") with the Charles
        County Commissioners regarding a land donation that is anticipated to house
        a
        planned minor league baseball stadium and entertainment complex. Under the
        terms
        of the MOU, the Company donated 42 acres of land in St. Charles to the County
        on
        December 31, 2005. The Company also agreed to expedite off-site utilities,
        storm-water management and road construction improvements that will serve
        the
        entertainment complex and future portions of St. Charles so that the
        improvements will be completed concurrently with the entertainment complex.
        In
        return, the County agreed to issue $7,000,000 of general obligation bonds
        to
        finance the infrastructure improvements. In March 2006, the County issued
        $4,000,000 of bonds for this project and in March 2007, the County issued
        an
        additional $3,000,000. The funds for this project will be repaid by ACPT
        over a
        15-year period. In addition, the County agreed to issue an additional 100
        school
        allocations a year to St. Charles commencing with the issuance of bonds.
 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, 2007, ACPT is guarantor of $28,263,000 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 October 2008.
 
 *Guarantees*
 ACPT
        and
        its subsidiaries typically provide guarantees for another subsidiary's loans.
        In
        many cases more than one company guarantees the same debt. Since all of these
        companies are consolidated, the debt or other financial commitment made by
        the
        subsidiaries to third parties and guaranteed by ACPT, is included within
        ACPT's
        consolidated financial statements. As of March 31, 2007, ACPT has guaranteed
        $24,796,000 of outstanding debt owed by its subsidiaries. IGP has guaranteed
        $2,600,000 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 other material changes to the legal proceedings previously
        disclosed in our Annual Report on Form 10-K for the year ended December 31,
        2006.
 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):
  ***-13-***
 ***Table
            of
            Contents***
 
  
 **CONSOLIDATED
                STATEMENT OF INCOME:**
              
              
              
              Three
                  Months EndedMarch
                  31,2007
              
              
              2006**Management
                and Other Fees**Unconsolidated subsidiaries with third party partners
              (A)
              
              $
              10
              
              
              $
              10Affiliates of J. Michael Wilson, CEO and Chairman
              
              
              
              43
              
              
              
              131$
              53
              
              
              $
              141**Rental
                  Property Revenues**
              (B)
              
              $
              **14**
              
              
              $
              -**Interest
                  and Other Income**Unconsolidated real estate entities with third party
                  partners
              $
              **2**
              
              
              $
              2**General
                  and Administrative Expense**Affiliates of J. Michael Wilson, CEO and Chairman
              (C1)
              
              $
              **-**
              
              
              $
              19Reserve additions and other write-offs-Unconsolidated real estate entities with third party
                  partners
              (A)
              
              
              **2**
              
              
              
              6Reimbursement to IBC for ACPT's share of J. Michael Wilson's
                  salary
              
              
              
              **98**
              
              
              
              94Reimbursement of administrative costs-Affiliates of J. Michael Wilson, CEO and Chairman
              
              
              
              **(6**
              **)**
              
              
              (3
              )Consulting FeesJames J. Wilson, IGC Chairman and Director
              (C2)
              
              
              **50**
              
              
              
              50Thomas J. Shafer, Trustee
              (C3)
              
              
              **15**
              
              
              
              15$
              **159**
              
              
              $
              181**BALANCE
                  SHEET:**
              
              
              
              **Balance**
              
              
              Balance**March
                  31,**
              
              
              December
                  31,**2007**
              
              
              2006**Other
                  Assets**Receivables
                  - All unsecured and due on demandAffiliate of J. Michael Wilson, CEO and Chairman
              
              
              $
              **6**
              
              
              $
              128
 
 (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.
 Effective
        April 30, 2006, ARMC’s management agreement with Chastleton Associates LP
        terminated due to the fact that the apartment property was sold to a third
        party. The property was previously owned by an affiliate. Management fees
        generated by this property accounted for less than 1% of the Company’s total
        revenue. The Company earned an agreed-upon management fee for administrative
        services through the end of the second quarter 2006.
 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.
 
 (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
  ***-14-***
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  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. 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)
            In
                2005, the Company rented executive office space and other property
                from an
                affiliate in the United States pursuant to a lease that expires in
                2010.
                In management’s opinion, all leases with affiliated persons were on terms
                at least as favorable as these generally available from unaffiliated
                persons for comparable property. Effective January 27, 2006, the
                office
                building was sold to a third party who assumed the Company’s lease
                agreements. 2)
            Represents
                fees paid to James J. Wilson pursuant to a consulting and retirement
                agreement. At Mr. Wilson's request, payments are made to
                IGC. 3)
            Represents
                fees paid to Thomas J. Shafer, a trustee, pursuant to a consulting
                agreement. 
 **Related
        Party Acquisitions**
 
 *El
        Monte*
 On
        April
        30, 2004, the Company purchased a 50% limited partnership interest in El
        Monte
        Properties S.E. ("El Monte") from Insular Properties Limited Partnership
        ("Insular") for $1,462,500. Insular is owned by the J. Michael Wilson Family.
        Per the terms of the agreement, the Company was responsible to fund $400,000
        of
        capital improvements and lease stabilization costs, and had a priority on
        cash
        distributions up to its advances plus accrued interest at 8%, investment
        and a
        13% cumulative preferred return on its investment. The purchase price was
        based
        on a third party appraisal of $16,500,000 dated April 22, 2003. The Company's
        limited partnership investment was accounted for under the equity method
        of
        accounting.
 In
        December 2004, a third party buyer purchased El Monte for $20,000,000 -
        $17,000,000 in cash and $3,000,000 in notes. The net cash proceeds from the
        sale
        of the real estate were distributed to the partners. As a result, the Company
        received $2,500,000 in cash and recognized $986,000 of income in 2004. El
        Monte
        distributed the note, $1,500,000, to the Company in January 2005. The note
        bears
        interest at a rate of prime plus 2% with a ceiling rate of 9% and matures
        on
        December 3, 2009. The note was payable in three installments, the first
        installment of $250,000 was due on December 3, 2007, the second installment
        of
        $250,000 was due on December 3, 2008 and the balance was due on December
        3,
        2009. 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, the Company recorded $1,500,000 as equity in earnings
        and $207,000 as interest income. As previously noted, the Company deferred
        revenue recognition on this note until the cash was received.
 
 **(7)**
              **INCOME
                  TAXES**
 
 We
        adopted the provisions of FIN 48 on January 1, 2007. As a result of the
        implementation of FIN 48, we recorded a $1,458,000 increase in the net liability
        for unrecognized tax positions, which was recorded as a cumulative effect
        of a
        change in accounting principle, reducing the opening balance of retained
        earnings on January 1, 2007. The total amount of unrecognized tax benefits
        as of
        January 1, 2007, was $13,544,000. Included in the balance at January 1, 2007,
        were $2,317,000 of tax positions that, if recognized, would affect the effective
        tax rate.
 In accordance with our accounting policy, we recognize accrued interest related
        to unrecognized tax benefits as a component of interest expense and penalties
        as
        a component of tax expense on the Consolidated Statements of Income. This
        policy
        did not change as a result of the adoption of FIN 48. Our Consolidated Statement
        of Income for the quarter ended March 31, 2007, and our Consolidated Balance
        Sheet as of that date included interest of $179,000 and $1,244,000, respectively
        and penalties of $58,000 and $655,000, 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, 2003
        through 2006 remain subject to examination. For Puerto Rico, the tax returns
        for
        the years ended December 31, 2002 through 2006 remain subject to examination.
        Within the next twelve months, the Company does not anticipate any payments
        related to settlement of any tax examinations. Additionally, as certain United
        States and Puerto Rico income tax returns will no longer be subject to
        examination, and as a result, there is a reasonable possibility that the
        amount
        of unrecognized tax benefits will decrease by $25,000.
 
 **(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
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            Contents***
 
  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 $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.
 Residential
        land sales to Lennar within our U.S. segment were $3,144,000 for the three
        months ended March 31, 2006 which represents 27% of the U.S. segment's revenue
        and 15% of our total consolidated revenue for the year. No other customers
        accounted for more than 10% of our consolidated revenue for the three months
        ended March 31, 2006.
 
  ***-16-***
 ***Table
            of
            Contents***
 
  The
        following presents the segment information for the three months ended March
        31,
        2007 and 2006 (in thousands):
 United
                
                Puerto
                
                Inter-States
                
                Rico
                
                Segment
                
                Total**Three
                    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**Three
                    Months Ended March 31, 2006 (Unaudited):**Rental
                    property revenues
                
                $
                7,547
                
                $
                5,244
                
                **$**
                **-**
                
                $
                12,791Rental
                    property operating expenses
                
                
                3,539
                
                
                2,649
                
                
                -
                
                
                6,188Land
                    sales revenue
                
                
                3,944
                
                
                -
                
                
                -
                
                
                3,944Cost
                    of land sales
                
                
                2,226
                
                
                10
                
                
                -
                
                
                2,236Home
                    sales revenue
                
                
                -
                
                
                4,025
                
                
                **-**
                
                
                4,025Cost
                    of home sales
                
                
                -
                
                
                3,034
                
                
                **-**
                
                
                3,034Management
                    and other fees
                
                
                141
                
                
                149
                
                
                -
                
                
                290General,
                    administrative, selling and marketing expense
                
                
                1,682
                
                
                750
                
                
                -
                
                
                2,432Depreciation
                    and amortization
                
                
                1,076
                
                
                897
                
                
                -
                
                
                1,973Operating
                    income
                
                
                3,109
                
                
                2,078
                
                
                -
                
                
                5,187Interest
                    income
                
                
                25
                
                
                45
                
                
                -
                
                
                70Equity
                    in earnings from unconsolidated entities
                
                
                -
                
                
                170
                
                
                **-**
                
                
                170Interest
                    expense
                
                
                1,933
                
                
                1,568
                
                
                -
                
                
                3,501Minority
                    interest in consolidated entities
                
                
                8
                
                
                1,057
                
                
                **-**
                
                
                1,065Income
                    before provision/(benefit) for income taxes
                
                
                1,195
                
                
                (275
                )
                
                -
                
                
                920Income
                    tax provision/(benefit)
                
                
                501
                
                
                (82
                )
                
                -
                
                
                419Net
                    income
                
                
                694
                
                
                (193
                )
                
                -
                
                
                501Gross
                    profit on land sale
                
                
                1,718
                
                
                (10
                )
                
                -
                
                
                1,708Gross
                    profit on home sales
                
                
                -
                
                
                991
                
                
                -
                
                
                991Total
                    assets
                
                
                187,029
                
                
                116,848
                
                
                (369
                )
                
                303,508Additions
                    to long lived assets
                
                
                3,980
                
                
                66
                
                
                -
                
                
                4,046
 
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 ***Table
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            Contents***
 
  
 **(9)**
              **SUBSEQUENT
                  EVENTS**
 
 *Cash
        Dividend*
 On
        May
        15, 2007, the Board of Trustees declared a $0.10 per share cash dividend
        on its
        common shares, payable on June 13, 2007, to shareholders of record as of
        May 30,
        2007.
 
 **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, 2006.
 
 **NEW
        ACCOUNTING PRONOUNCEMENTS AND CHANGE IN BASIS OF
        PRESENTATION**
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, “ *Accounting
        for Uncertainty in Income Taxes* ”
(“FIN
        48”). FIN 48 is an interpretation of FASB Statement No. 109, “ *Accounting
        for Income Taxes* ,”
and
        it
        seeks to reduce the diversity in practice associated with certain aspects
        of
        measurement and recognition in accounting for income taxes. In addition,
        FIN 48
        requires expanded disclosure with respect to the uncertainty in income taxes.
        We
        adopted the provisions of FIN 48 on January 1, 2007. As a result of the
        implementation of FIN 48, we recorded a $1,458,000 increase in the net liability
        for unrecognized tax positions, which was recorded as a cumulative effect
        of a
        change in accounting principle, reducing the opening balance of retained
        earnings on January 1, 2007. See Note 7 to the consolidated financial statements
        for further discussion.
  **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 2006 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, 2007, there were no material
        changes to our policies except as noted above related to the implementation
        of
        FIN 48.
 
 **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, 2007 (unaudited), with the results of operations of
        the
        Company for the three months ended March 31, 2006 (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, 2006.
 
 **Results
        of Operations - U.S. Operations:**
 For
        the
        three months ended March 31, 2007, our U.S. segment generated $2,211,000
        of
        operating income compared to $3,109,000 of operating income generated by
        the
        segment for the same period in 2006. 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, 2007, nineteen U.S. based apartment properties 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.
        The
        portion of net income attributable to the interests of the
  ***-18-***
 ***Table
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            Contents***
 
  outside
        owners of these properties and any losses and distributions in excess of
        the
        minority owners’ basis in those properties are reflected as minority interest
        expense.
 As
        of March 31, 2007, thirteen of the consolidated properties are market rent
        properties, allowing us to determine the appropriate rental rates. Even though
        we can determine the rents, a portion of our units at some of our market
        rent
        properties must be leased to tenants with low to moderate income. HUD subsidizes
        four of the properties and the two remaining properties are a mix of subsidized
        units and market rent units. HUD dictates the rents of the subsidized
        units.
 
 *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.
        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. Leasing efforts
        continue to be successful, with 78% of the total complex leased as of March
        31,
        2007.
 On
        April
        28, 2006, the Company acquired two apartment properties, Milford Station
        I LLC
        and Milford Station II LLC, in Baltimore, Maryland containing a combined
        total
        of 250 units for approximately $14,300,000. All of the acquired properties
        are
        operated as market rate properties.
 
 *Three
        months ended*
 For
        the
        three months ended March 31, 2007, rental property revenues increased $1,358,000
        or 18% to $8,905,000 compared to $7,547,000 for the three months ended March
        31,
        2006. The increase in rental revenues was primarily the result of additional
        revenues for Sheffield Greens Apartments, Milford Station I and Milford Station
        II which accounted for approximately $1,048,000 of the difference. The increase
        was also attributable to an overall 6% increase in rents between periods.
        These
        rental revenue increases were offset in part by an increase in our vacancy
        rate
        in the US, primarily resulting from the supply of new units to the area upon
        completion of the Sheffield Greens Apartments. Once the new units are absorbed,
        we believe occupancy at competing locations will return.
 Rental
        property operating expenses increased $1,086,000 or 31% for the first quarter
        of
        2007 to $4,625,000 compared to $3,539,000 for the first quarter of 2006.
        The
        overall increase in rental property operating expenses was primarily the
        result
        of additional expenses for Sheffield Greens Apartments, Milford Station I
        and
        Milford Station II, which accounted for approximately $639,000 of the
        difference. The remainder of the increase resulted from overall inflationary
        adjustments as well as specific increases in office and maintenance salaries,
        grounds and maintenance, rehabilitation and concessions awarded to
        residents.
  **Community
        Development - U.S. Operations:**
 Land
        sales revenue in any one period is affected by the mix of lot sizes and,
        to a
        greater extent, the mix between residential and commercial sales. In March
        2004,
        the Company executed an agreement with Lennar Corporation to sell 1,950
        residential lots (1,359 single family lots and 591 town home lots) in Fairway
        Village in St. Charles, Maryland. The agreement requires the homebuilder
        to
        provide $20,000,000 in letters of credit to secure the purchase of the lots
        and
        purchase 200 residential lots per year, provided that they are developed
        and
        available for delivery as defined by the development agreement. Based on
        200 lot
        sales per year, it is estimated that lot settlements will take place through
        2015. Sales are closed on a lot by lot basis at the time when the builder
        purchases the lot. The ultimate selling price per lot sold to Lennar may
        exceed
        the amount recognized at closing since the final lot price is equal to 30%
        of
        the base price of the home sold on the lot. Additional revenue exceeding
        the
        established take down price per lot will be recognized upon Lennar's settlement
        with the respective homebuyers. Residential lots can vary in size and location
        resulting in pricing differences. Gross margins of residential lots are fairly
        consistent within any given village in St. Charles. Commercial land is typically
        sold by contract that allows for a study period and delayed settlement until
        the
        purchaser obtains the necessary permits for development. The sales prices
        and
        gross margins for commercial parcels vary significantly depending on the
        location, size, extent of development and ultimate use. Commercial land sales
        are generally cyclical.
 Community
        development land sales revenue decreased $189,000 or 5% for the three months
        ended March 31, 2007 to $3,755,000 as compared to $3,944,000 for the three
        months ended March 31, 2006. The overall decrease was primarily the result
        of a
        decrease in the number of lots sold during the first quarter 2007 offset
        in part
        by an increase in the amount of commercial sales for the period as compared
        to
        the first quarter 2006. Further discussion of the components of this variance
        is
        as follows:
 
 *Residential
        Land Sales*
 For
        the
        three months ended March 31, 2007, we recognized $613,000 related to the
        delivery of 7 townhome lots to Lennar as compared to $2,551,000 related to
        20
        single family lots delivered in the first quarter of 2006. For the townhome
        lots
        delivered in 2007, we recognized as revenue the initial $85,000 per townhome
        lot
        plus water and sewer fees, road fees and other off-site fees. For the three
        months ended March 31, 2006, we delivered 20 single family lots to Lennar
        at an
        initial selling price of $125,000 per lot plus water and sewer fees, road
        fees
        and other off-site fees. As of March 31, 2007, 1,636 lots remained under
        contract to Lennar of which 157 single family lots and 46 townhome lots were
        developed and ready for delivery.
  ***-19-***
 ***Table
            of
            Contents***
 
  During
        the first quarter of 2007 and 2006, we also recognized $314,000 and $593,000,
        respectively, of additional revenue for lots that were previously sold to
        Lennar. This additional revenue is based on the final settlement price of
        the
        homes as provided by our agreement with Lennar.
 
 *Commercial
        Land Sales*
 For
        the
        three months ended March 31, 2007, we sold 5.78 commercial acres in St. Charles
        for $2,536,000 as compared to 2.65 acres for $593,000 for the three months
        ended
        March 31, 2006. As of March 31, 2007, our commercial sales backlog contained
        12.45 acres under contract for a total of $2,721,000.
 
 *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 June 2006. Per the amended terms of the loan, both the Company
        and
        Lennar provided development completion guarantees.
 In
        the
        first quarter of 2007, the joint venture delivered 14 lots to Lennar as compared
        to no lot deliveries for the first quarter 2006. Accordingly, for the three
        Months ended March 31, 2007, the Company recognized $292,000 in deferred
        revenue, off-site fees and management fees and $93,000 of deferred costs.
 
 *Gross
        Margin on Land Sales*
 The
        gross
        margin on land sales for the first quarter 2007 was 22% as compared to 44%
        for
        the first quarter of 2006. Gross margins differ from period to period depending
        on the mix of land sold. In the first quarter 2007 our commercial acres
        represented the majority of our land sales and these parcels had lower margins
        than our residential land sales. The gross margins on our residential land
        sales
        for the U.S. have remained relatively stable.
 
 *Customer
        Dependence*
 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. 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. Effective April 30, 2006, the
        Company’s management agreement with Chastleton Associates LP was also terminated
        upon the sale of the apartment property to a third party. These properties
        were
        previously owned by an affiliate. Management fees generated by each of these
        properties 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 that we purchased at the end of 2001
        and
        a fee for vehicles purchased by the Company for use on behalf of the properties.
        The cost of the computer system and vehicles are reflected within depreciation
        expense.
 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 2007 decreased $31,000 to $110,000 as compared
        to
        $141,000 for the first quarter 2006. These amounts only include 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.
  ***-20-***
 ***Table
            of
            Contents***
 
  General,
        administrative, selling and marketing costs incurred within our U.S. operations
        increased $65,000 to $1,747,000 for the three months ended March 31, 2007,
        compared to $1,682,000 for the same period of 2006. The 4% increase is primarily
        attributable to offsetting variances. We experienced increases in our consulting
        fees related to services provided for our FIN 48 implementation during the
        first
        quarter of 2007, as well as other increases in salaries and benefits. These
        increases were offset in party by decreases in the expense associated with
        our
        outstanding share incentive rights as a result of the fluctuation in share
        price
        for the respective periods. In addition we experienced a decrease in audit
        and
        accounting expenses as a result of the non-recurring work required in the
        first
        quarter of 2006 related to the closing agreement reached with the
        IRS.
 
 **Depreciation
        Expense - U.S. Operations:**
 Depreciation
        expense increased $195,000 to $1,271,000 for the first three months of 2007
        compared to $1,076,000 for the same period in 2006. The increase in depreciation
        is primarily the result of depreciation related to the acquisitions of Milford
        Station I and Milford Station II. In addition, as a result of the recent
        refinancings of several properties, the Company has made significant investments
        in capital improvements at these properties.
 
 **Interest
        Income - U.S. Operations:**
 Interest
        income increased $272,000 to $297,000 for the three months ended March 31,
        2007,
        as compared to $25,000 for the three months ended March 31, 2006. The increase
        was primarily attributable to interest income accrued on the undistributed
        bond
        proceeds held in escrow by Charles County. The Company reached a written
        agreement with the County regarding interest earned on amounts held in escrow
        by
        the County, but not yet drawn by the Company, whereby the Company is now
        able to
        accrue income on the related receivables.
 
 **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 2007 and 2006, the excess interest primarily relates
        to
        the interest incurred on the non-recourse debt from our investment properties
        as
        well as certain corporate recourse debt.
 Interest
        expense increased $1,133,000 for the first three months of 2007 to $3,066,000,
        as compared to $1,933,000 for the same period of 2006. The increase was
        primarily attributable to interest expense incurred at new properties, including
        Sheffield Greens Apartments, Milford Station I and Milford Station II. In
        addition, the refinancing of several apartment mortgages during the fourth
        quarter of 2006 and early first quarter 2007 increased interest expense at Fox
        Chase
        Apartments, LLC , New
        Forest Apartments, LLC , Coachman's
        Apartments LLC and Village
        Lake Apartments, LLC .
        Additionally, interest expense increased as a result of our implementation
        of
        FIN 48 for the first quarter 2007 and the presentation of accrued interest
        on
        uncertain tax positions as interest expense. Increases in interest expense
        were
        offset by the decrease related to the re-payment of certain recourse debt
        obligations during the first quarter 2007.
 For
        the
        three months ended March 31, 2007, $311,000 of interest cost was capitalized.
        During the same period in 2006, $377,000 of interest cost was
        capitalized.
 
 **Provision
        for Income Taxes - U.S. Operations:**
 The
        effective tax rates for the three months ended March 31, 2007, and March
        31,
        2006, were 13% and 42%, respectively. The statutory rate is 40%. The effective
        tax rate for 2007 differs from the statutory rate due to a relatively small
        net
        loss for the first quarter of 2007, the related benefit for which, was partially
        offset by accrued penalties on uncertain tax positions as part of the
        implementation of FIN 48.
 
 **Results
        of Operations - Puerto Rico Operations:**
 For
        the
        three months ended March 31, 2007, our Puerto Rico segment generated $2,100,000
        of operating income compared to $2,078,000 of operating income generated
        by the
        segment for the same period in 2006. Additional information and analysis
        of the
        Puerto Rico operations can be found below.
 
 **Rental
        Property Revenues and Operating Expenses - Puerto Rico
        Operations:**
 Our
        rental property revenues and expenses are generated primarily from the 12
        multifamily apartment properties located in the San Juan metropolitan area.
        In
        addition, the Company operates a commercial rental property in the community
        of
        Parque Escorial, known as Escorial Building One (“EBO”), in which it holds a
        100% ownership interest. EBO 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.
 Rental
        property revenues increased $261,000 to $5,505,000 for the three months ended
        March 31, 2007 compared to $5,244,000 for the same period of 2006. The increase
        for the first quarter of 2007 as compared to the first quarter 2006 was the
        result of overall rent increases for our HUD subsidized multifamily apartment
        properties of 3% and an increase of 2% for our commercial property,
        EBO.
  ***-21-***
 ***Table
            of
            Contents***
 
  
 Rental
        operating expenses increased $82,000 to $2,731,000 for the three months ended
        March 31, 2007 compared to $2,649,000 for the same period of 2006. The increase
        for the first quarter of 2007 was related to an overall inflationary increase
        of
        3%. In addition, we experienced above inflationary increases in utilities
        and
        repairs.
 
 **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,
        2007
        and 2006. There were no sales contracts in backlog at March 31,
        2007.
 
 **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 $937,000 for the three month period ended March 31, 2007,
        as
        compared to the three month period ended March 31, 2006. 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 12 units
        for the first quarter 2007 and 16 units for the first quarter 2006. The average
        selling price per unit was similar, approximately $257,000 and $ 252,000
        per
        unit respectively, generating aggregate revenues of $3,088,000 and $4,025,000,
        respectively. The gross margin for the three months ended March 31, 2007,
        and
        2006 were 26% and 25%, respectively. The slight increase in the gross profit
        margin is attributable to an increase in the sales revenue for the remaining
        project as a result of increased selling prices of the units the third and
        fourth buildings.
 As
        of
        March 31, 2007, only 38 units within the Torres project remain available
        for
        sale, of which we have received contracts for 8 of these units at an average
        selling price of $269,000 per unit. Each sales contract is backed by a $6,000
        deposit. For the three months ended March 31, 2007, the Company’s sales activity
        resulted in the execution of 8 contracts and the loss of 3 contracts that
        were
        cancelled.  For the same period in 2006, the Company had 23 new contracts
        and 11 canceled contracts. The Puerto Rico real estate market has slowed
        substantially since the second quarter of 2006. The reduction of new contracts
        and the reduced pace of sales has impacted the Company somewhat, but not
        to the
        same extent as the overall Puerto Rico market decline. The Company continues
        to
        believe that the remaining 38 units in Torres will sell during the year 2007
        and
        that its current pricing remains competitive.
  **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 5% or $34,000 to
        $716,000 during the three months ended March 31, 2007, as compared to $750,000
        for the same period of 2006. The decrease is primarily attributable to a
        reduction in the outstanding share incentive rights expense recorded as a
        result
        of a reduction in our share price that we experienced during the first three
        months of 2007, as well as decreases in legal expenses, car expenses, dues
        and
        subscriptions, and other miscellaneous expenses. These decreases were offset
        in
        part by increases in selling and marketing expenses incurred in the Torres
        project, as well as increases in audit and tax consulting, outside personnel
        services, postage, telephone, and other general and administrative
        expenses.
 
 **Interest
        Income - Puerto Rico Operations:**
 Interest
        income for the three months ended March 31, 2007 increased $170,000 to $215,000
        as compared to $45,000 for the same period of 2006. The increase is primarily
        attributable to the recognition of interest income on the El Monte note
        receivable. The note originated as part of the sale of the complex in December
        2004, at which point the Company determined that the cost recovery method
        of
        accounting was appropriate for gain recognition. Accordingly, the interest
        income on this note was also deferred until the interest payment was received,
        which occurred in January 2007.
  **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 increased $1,503,000 to $1,673,000
        during
        the three months ended March 31, 2007, compared to $170,000 during the same
        period of 2006. The increase was related to the payment in full of the
        $1,500,000 note receivable held by El Monte in January 2007. The note was
        received as part of the sale of the El Monte facility, at which point the
  ***-22-***
 ***Table
            of
            Contents***
 
  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.
 
 **Depreciation
        Expense - Puerto Rico Operations:**
 Depreciation
        expense for the three months ended March 31, 2007, and 2006, was $913,000
        and
        $897,000 respectively. The $16,000 increase is primarily attributable to
        the
        depreciation expense in the apartment properties due to the replacement of
        elevators in some apartment partnerships. In addition, the depreciation expense
        increased in the new office building and our corporate office furniture and
        leasehold improvements.
 
 **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, 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 Puerto Rico segment is applied. Any
        excess
        interest is reflected as interest expense. For 2007 and 2006, the excess
        interest primarily relates to the interest incurred on the non-recourse debt
        from our investment properties.
 Interest
        expense increased $13,000, less than 1%, for the first three months of 2007
        to
        $1,581,000, as compared to $1,568,000 for the same period of 2006.
 For
        the
        three months ended March 31, 2007, $39,000 of interest cost was capitalized.
        During the same period in 2006, $271,000 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 distributions and losses
        in
        excess of basis previously required to be recognized as our expense, we will
        be
        required to expense 100 percent of future distributions to minority partners
        and
        any subsequent losses.
 Minority
        interest for the three-month period ended March 31, 2007, increased $315,000
        to
        $1,372,000, as compared to $1,057,000 for the same period of 2006. The increase
        was primarily the result of a $400,000 distribution made to minority partners
        of
        one of our partnerships that was refinanced at the end of 2006. In addition,
        the
        Company made surplus cash distributions of $972,000 to the minority partners
        for
        the first quarter 2007 as compared to surplus cash distributions of $1,057,000
        for the same period 2006.
 
 **Provision
        for Income Taxes - Puerto Rico Operations:**
 The
        effective tax rate for the three months ended March 31, 2007 and 2006 were
        54%,
        and 30%, respectively. The statutory rate is 29%. The difference in the
        statutory tax rate and the effective tax rate for 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. The effective tax rate for the
        benefit
        for income taxes for the first quarter 2006 did not differ substantially
        from
        the statutory rate.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 *Summary
        of Cash Flows*
 As
        of
        March 31, 2007, the Company had cash and cash equivalents of $33,081,000
        and
        $21,067,000 in restricted cash. The following table sets forth the changes
        in
        the Company's cash flows ($ in thousands):
 
 Three
                  Months Ended March 31,**2007**
              
              2006Operating
                  Activities
              
              **$**
              **914**
              
              $
              1,587Investing
                  Activities
              
              
              **(1,888**
              **)**
              
              (3
              )Financing
                  Activities
              
              
              **6,596**
              
              
              (1,832
              )Net Decrease in Cash
              
              **$**
              **5,622**
              
              $
              (248
              )
 
 
  For
        the
        three months ended March 31, 2007, operating activities provided $914,000
        of
        cash flows compared to $1,587,000 of cash flows provided by operating activities
        for the three months ended March 31, 2006. The $673,000 decrease in cash
        flows
        from
   ***-23-***
 ***Table
            of
            Contents***
 
   operating
        activities for the first quarter of 2007 compared to the same period in 2006
        is
        primarily related to the phases of our community development and homebuilding
        activities. For the first quarter of 2007, additions to our community
        development assets were $2,310,000 in excess of the additions during the
        same
        period of 2006. The Company continues to invest a significant amount into
        infrastructure within St. Charles. This increase was offset by a decrease
        of
        $1,584,000 in our homebuilding expenditures for the three months ended March
        31,
        2007 as compared to the same period in 2006. As of March 31, 2007, the Torres
        project was substantially complete, whereas it was undergoing significant
        construction during the first quarter 2006. 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, 2007, net cash used in investing activities was
        $1,888,000 compared to $3,000 for the first quarter of 2006. 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 change
        in
        cash related to investing activities was primarily the result of adding 11
        additional properties to our consolidation as of January 1, 2006, under the
        new
        provisions of EITF-04-05, at which point we added $4,723,000 to the consolidated
        cash balance. In addition, the Company increased its investment in capital
        improvements for the first quarter of 2007 as compared to the first quarter
        2006. The $1,878,000 increase in capital improvements resulted from the
        refinancing of several apartment properties and re-investment of some of
        those
        proceeds into the related projects. These decreases were partially offset
        by the
        completion of Sheffield Greens Apartments in the first quarter of 2007,
        requiring the investment of only $56,000 for the first quarter of 2007 as
        compared to the investment of $3,464,000 for the first quarter 2006. In
        addition, the Company received $1,707,000 million in the first quarter of
        2007
        related to principal and accrued interest payments on the El Monte receivable.
 For
        the three months ended March 31, 2007, net cash provided by financing activities
        was $6,596,000 as compared to cash used in financing activities of $1,832,000
        for the three months ended March 31, 2006. The increase 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, as discussed in
        more detail below. In addition, the Company drew down on the Charles County
        bond
        escrow as construction of infrastructure within St. Charles continues. These
        additions were offset by increased distributions to minority interests and
        the
        timing of dividend payments to shareholders.
 
 *Contractual
        Financial Obligations*
 The
        following chart reflects our contractual financial obligations as of March
        31,
        2007:
 
 **Payments
                  Due By Period****Less Than**
              
              
              
              
              
              **After****Total**
              
              **1 Year**
              
              **1-3 Years**
              
              **4-5 Years**
              
              **5 Years**Recourse
                  debt-community developmentand homebuilding
              $
              27,396
              
              $
              1,376
              
              $
              7,077
              
              $
              3,349
              
              $
              15,594Capital
                  lease obligations
              
              171
              
              
              43
              
              
              99
              
              
              29
              
              
              -Total Recourse Debt
              
              27,567
              
              
              1,419
              
              
              7,176
              
              
              3,378
              
              
              15,594Non-recourse
                  debt-community development
              
              500
              
              
              500
              
              
              -
              
              
              -
              
              
              -Non-recourse
                  debt-investment properties
              
              280,790
              
              
              3,598
              
              
              19,051
              
              
              9,651
              
              
              248,490Total Non-Recourse Debt
              
              281,290
              
              
              4,098
              
              
              19,051
              
              
              9,651
              
              
              248,490Operating
                  lease obligations
              
              1,229
              
              
              360
              
              
              847
              
              
              22
              
              
              -Purchase
                  obligations
              
              35,408
              
              
              19,601
              
              
              15,553
              
              
              54
              
              
              200Total
                  contractual financial obligations
              $
              345,494
              
              $
              25,478
              
              $
              42,627
              
              $
              13,105
              
              $
              264,284
  Recourse
        Debt - U.S. Operations
 On
        April
        14, 2006, the Company closed a three year $14,000,000 revolving line of credit
        loan (“the Revolver”) secured by a first lien deed of trust on property located
        in St. Charles, MD.  The maximum amount of the loan at any one time is
        $14,000,000. The facility includes various sub-limits on a revolving basis
        for
        amounts to finance apartment project acquisitions and land development in
        St.
        Charles. The terms require certain financial covenants to be calculated annually
        as of December 31, including a tangible net worth to senior debt ratio for
        ALD
        and a minimum net worth test for ACPT. The Company was in compliance with
        these
        financial
  ***-24-***
 ***Table
            of
            Contents***
 
  covenants
        as of March 31, 2007. As of March 31, 2007, no amounts were outstanding on
        the
        Revolver. Management expects to fund development operations from current
        cash
        balances and operating cash flows rather than borrowings from the line of
        credit.
 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 anticipated to house
        a
        planned minor league baseball stadium and entertainment complex. Under the
        terms
        of the MOU, the Company donated 42 acres of land in St. Charles to the County
        on
        December 31, 2005. The Company also agreed to expedite off-site utilities,
        storm-water management and road construction improvements that will serve
        the
        entertainment complex and future portions of St. Charles so that the
        improvements will be completed concurrently with the entertainment complex.
        The
        County will be responsible for infrastructure improvements on the site of
        the
        complex. In return, the County agreed to issue $7,000,000 of general obligation
        bonds to finance the infrastructure improvements. In March 2006, $4,000,000
        of
        bonds were issued for this project, with an additional $3,000,000 issued
        in
        March 2007. 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.
 
 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 recourse debt.
         The homebuilding and land assets in Parque Escorial are unencumbered as of
        March 31, 2007. 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 (7.36% at March 31, 2007) and matures on August 31, 2008. The outstanding
        balance of this facility on March 31, 2007 was $2,600,000.
 
 Non-Recourse
        Debt - U.S. Operations
 As
        more
        fully described in Note 4 to our Consolidated Financial Statements included
        in
        this Form 10-Q, the non-recourse apartment properties' debt is collateralized
        by
        apartment projects.  As of March 31, 2007, approximately 45% of this debt
        is secured by the Federal Housing Administration ("FHA") or the Maryland
        Housing
        Fund.
 Non-recourse
        debt within our U.S. operations also includes a construction loan for a new
        apartment project in St. Charles. On August 11, 2005, Sheffield Greens
        Apartments, LLC ("Sheffield Greens"), a wholly owned subsidiary of the Company,
        obtained a non-recourse construction loan of $27,008,000 to fund the
        construction costs for a new apartment property in St. Charles' Fairway Village.
        The construction loan will mature in September 2007 and at such time will
        convert into a 40-year non-recourse permanent mortgage. The loan has a fixed
        interest rate of 5.47%, and requires interest-only payments during the
        construction phase followed by principal and interest payments until maturity.
        The loan is subject to a HUD regulatory agreement. The loan documents provide
        for covenants and events of default that are customary for mortgage loans
        insured by the Federal Housing Authority.
 On
        January 31, 2007, Coachman’s Apartments, LLC (“Coachman’s”), a majority-owned
        subsidiary of the Company, secured a non-recourse mortgage of $11,000,000.
        The
        ten-year loan, amortized over 30 years, has a fixed interest rate of 5.555%,
        requires principal and interest payments through maturity and a balloon payment
        at the maturity date, February 1, 2017. The prior mortgage of $6,020,000
        was
        repaid and the net proceeds from the refinancing will be used for overall
        apartment property improvements, the repayment of recourse debt, future
        development efforts and potential acquisitions.
 On
        February 1, 2007, Village Lake Apartments, LLC (“Village Lake”), a
        majority-owned subsidiary of the Company, secured a non-recourse mortgage
        of
        $9,300,000. The ten-year loan, amortized over 30 years, has a fixed interest
        rate of 5.72%, requires principal and interest payments through maturity
        and a
        balloon payment at the maturity date, February 1, 2017. The prior mortgage
        of
        $6,981,000 was repaid and the net proceeds from the refinancing will be used
        for
        overall apartment property improvements, the repayment of recourse debt,
        future
        development efforts and potential acquisitions.
  ***-25-***
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  In
        the
        fourth quarter of 2005, the Company purchased 22 residential acres adjacent
        to
        the Sheffield Neighborhood in St. Charles for $1,000,000. The Company paid
        $500,000 in cash and signed a two-year, non-interest bearing, non-recourse
        note,
        for $500,000 due in November 2007.
 
 Non-Recourse
        Debt - Puerto Rico Operations
 As
        more
        fully described in Note 4 to our Consolidated Financial Statements included
        in
        this Form 10-Q, the non-recourse debt is collateralized by the respective
        multifamily apartment project or commercial building.  As of March 31,
        2007, approximately 1% of this debt is secured by the Federal Housing
        Administration ("FHA"). There were no significant changes to our non-recourse
        debt obligations during the three months ended March 31, 2007.
 
 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. For the remainder of 2007 and into 2008, the Company plans
        to
        continue its development activity within the master planned communities in
        St.
        Charles and Puerto Rico and may commit to future contractual obligations
        at that
        time.
 
 *Liquidity
        Requirements*
 Our
        short-term liquidity requirements consist primarily of obligations under
        capital
        and operating leases, normal recurring operating expenses, regular debt service
        requirements, non-recurring expenditures and dividends to common shareholders.
        The Company has historically met its liquidity requirements from cash flow
        generated from residential and commercial land sales, home sales, property
        management fees, and rental property revenue. However, a significant reduction
        in the demand for real estate or a decline in the prices of real estate could
        adversely impact our cash flows. Anticipated cash flow from operations, existing
        loans, refinanced or extended loans, and new financing are expected to meet
        our
        financial commitments for the year. However, there are no assurances that
        these
        funds will be generated.
 We
        are
        actively seeking additions to our multifamily apartment property portfolio
        and
        our real estate holdings. We are currently pursuing various opportunities
        to
        purchase additional multifamily apartment properties in the Baltimore, Maryland
        and Washington, D.C. areas. Future acquisitions may be financed through a
        combination of Company equity, third party equity and market rate mortgages.
        For
        the remainder of 2007 and into 2008, we may seek additional development loans
        and permanent mortgages for continued development and expansion of St. Charles
        and Parque Escorial and other potential rental property opportunities.
 The
        Company will evaluate and determine on a continuing basis, depending upon
        market
        conditions and the outcome of events described under the section titled
        "Forward-Looking Statements," the most efficient use of the Company's capital,
        including acquisitions and dispositions, purchasing, refinancing, exchanging
        or
        retiring certain of the Company's outstanding debt obligations, distributions
        to
        shareholders and its existing contractual obligations.
 
 **ITEM
                  3.**
              **QUANTITATIVE
                  AND QUALITATIVE DISCLOSURES ABOUT MARKET
                  RISK**
 
 The
        Company is exposed to certain financial market risks, the most predominant
        being
        fluctuations in interest rates. Interest rate fluctuations are monitored
        by the
        Company's management as an integral part of the Company's overall risk
        management program, which recognizes the unpredictability of financial markets
        and seeks to reduce the potentially adverse effect on the Company's results
        of
        operations.
 As
        of
        March 31, 2007, there have been no material changes in the Company's financial
        market risk since December 31, 2006 as discussed in the Company's Annual
        Report
        on Form 10-K.
 
 **ITEM
                  4.**
              **CONTROLS
                  AND PROCEDURES**
 
 **Evaluation
        of Disclosure Controls and Procedures**
 In
        connection with the preparation of this Form 10-Q, as of March 31, 2007,
        an
        evaluation was performed under the supervision and with the participation
        of the
        Company's management, including the CEO and CFO, of the effectiveness of
        the
        design and operation of our disclosure controls and procedures as defined
        in
        Rule 13a-15(e) under the Exchange Act. In performing this evaluation, management
        reviewed the selection, application and monitoring of our historical accounting
        policies. Based on that evaluation, the CEO and CFO concluded that these
        disclosure controls and procedures, because of the material weakness in internal
        control discussed below, were not effective in ensuring that the information
        required to be disclosed in our reports filed with the SEC is recorded,
        processed, summarized and reported on a timely basis.
  ***-26-***
 ***Table
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            Contents***
 
  During
        the preparation of the Company's 2004 tax returns in the fourth quarter 2005,
        the Company became aware that certain intercompany interest income was subject
        to U.S. withholding tax when the interest was paid and certain income from
        its
        Puerto Rico operations could be treated as income of ACPT even though it
        was not
        distributed to ACPT. The Company determined that neither the obligation to
        pay
        the withholding tax or exposure related to the tax status had been previously
        accrued. Accordingly, the Company announced on November 15, 2005, that the
        Company would restate financial statements for the periods covered in its
        Form
        10-K for the fiscal year ended December 31, 2004 and the Forms 10-Q for the
        first two quarters of fiscal 2005 to correct previously reported amounts
        related
        to these income tax matters.
 The
        Company determined the accounting errors referenced above indicated a material
        weakness in internal controls with respect to accounting for income taxes. 
A material weakness in internal control is a significant deficiency, or
        combination of significant deficiencies, that results in more than a remote
        likelihood that a material misstatement of the financial statements would
        not be
        prevented or detected on a timely basis by the Company.  The Company has
        implemented controls and procedures designed to remediate this material
        weakness. These controls and procedures include hiring a new Director of
        Tax who
        will help manage the tax compliance and tax accounting process, retaining
        international tax advisors to provide the Company with updates related to
        changes in international tax laws impacting the Company, providing in-house
        tax
        professionals and senior financial management with additional training to
        enhance their awareness of potential international tax matters and
        implementation of other additional control procedures related to accounting
        for
        income taxes. In order to remediate the material weakness, management must
        ensure that these new controls and procedures are operating effectively and
        fully address the risks giving rise to the material weakness. Management
        believes that once sufficient evidence of the operating effectiveness of
        these
        controls exists, the material weakness will be fully remediated.
 
 **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.
 
 **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,
        2006.
 
 **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
  ***-27-***
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            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, 2007
              By:
              /s/
                  J. Michael WilsonJ.
                  Michael Wilson
                Chairman
                  and Chief Executive OfficerDated:
                  May 15, 2007
              By:
              /s/
                  Cynthia L. HedrickCynthia
                  L. Hedrick
                Chief
                  Financial OfficerDated:
                  May 15, 2007
              By:
              /s/
                  Matthew M. MartinMatthew
                  M. Martin
                Chief
                  Accounting Officer
                 *-28-*